Claire Fallows examines the government’s bid to boost house building by lightening the planning obligation load on developers
The viability of development is threatened by the burden of compliance with section 106 planning obligations and conditions on planning permissions securing infrastructure, together with the requirement to pay community infrastructure levy (CIL). The current government continues to take bold steps in an attempt to speed up the grant of permissions, minimise the financial burden placed on new development and increase the affordability of new homes.
Pooling contributions
The government supports the use of CIL to pool funds towards infrastructure from more than one development. Once CIL is in place, authorities generally publish a list setting out infrastructure types or projects to be funded by their levy. Section 106 obligations cannot then be relied on to fund or provide infrastructure on that list. Conditions cannot be imposed on permissions requiring highways agreements to fund or provide such infrastructure.
The ability to rely on local planning policies or guidance to collect pooled funds through planning obligations is shortly to be severely limited. From 6 April 2015 (or from the date of adoption of CIL if earlier), up to five planning obligations entered into on or after 6 April 2010 can be used to fund or provide a certain project or a type of infrastructure (excluding obligations requiring highway agreements to be entered into). Any additional obligations may not be relied on as a reason to grant permission.
The restriction will raise issues to be addressed, particularly on strategic sites and in circumstances where infrastructure to be funded by CIL is needed to unlock development. It is likely that a more flexible relationship between CIL and planning obligations would be a better way forward.
Small-scale developments
CIL cannot be used to fund affordable housing, which remains to be secured by planning obligation or condition and is negotiated on a case-by-case basis. As from November 2014, the government changed its planning practice guidance to require that, save on rural exception sites, developments of 10 or fewer units with an aggregate gross floorspace of up to 1,000m2 should not fund affordable housing or contribute to pooled funds arising from tariff-style policies. In certain rural areas, authorities may apply a lower threshold of five units or fewer and should only seek financial contributions (rather than on-site affordable provision) for sites of six to 10 units, payable after completion. No affordable housing or tariff-style contributions should be sought from residential annexes or home extensions.
The new rules are proving controversial with planning authorities. Rural authorities and highly developed urban authorities where much new housing stock comes through small sites are particularly vulnerable.
Vacant building credit
At the same time, the government introduced new guidance that applies if a vacant building is brought back into lawful use or is to be demolished and replaced by a new building. In calculating any affordable housing contribution, a credit should be awarded equivalent to the existing gross floorspace of such buildings. Only the increase in floorspace is therefore taken into account in calculating contributions. This will apply unless the building has been “abandoned” – a term which is governed by case law.
Again, the rules have not found favour with authorities reliant on development of brownfield sites. There are, for example, fears that developers will seek early vacant possession of buildings to benefit from the credit.
Compliance with statutory requirements
It is well known that CIL Regulation 122 requires planning obligations to be necessary to make development acceptable in planning terms, as well as directly and fairly related in scale and kind to the proposed development. Otherwise, those obligations cannot be relied on as a reason for granting planning permission.
The application of these tests is, however, highly subjective. Recent case law established that the payment of standardised monitoring fees is unlikely to comply with Regulation 122. Despite this, the early signs are that often under-resourced authorities are continuing to seek payment of monitoring fees across a variety of schemes. By way of further example, planning practice guidance highlights that public art is clearly not necessary to make development acceptable.
Further, there are many appeal decisions where the decision maker has found that proposed obligations fail to comply with the Regulation 122 tests when considered on a case-by-case basis. In particular, obligations based on tariff-style policies are frequently held to fall foul of the tests and are disapplied.
Negotiation of obligations
The negotiation of a workable planning obligation and set of conditions holds up the grant of many planning permissions, particularly on larger strategic sites. Frequently, the authority’s initial “shopping list” for obligations will be lengthy and simply unaffordable. Reaching agreement as to what infrastructure complies with Regulation 122 and can be viably supported takes time. Developers may choose to accept requests for planning obligations considered unreasonable or unnecessary simply to ensure that consent is issued and development can proceed.
Once an obligation is completed, options for developers are currently limited. As a general rule, planning obligations cannot be appealed for five years and the legal hurdle for obtaining their release or modification is set relatively high. Obligations securing affordable housing may be subject to appeal earlier if they render a scheme unviable, but the take-up of that appeal route is relatively modest. This is perhaps due to the uncertainty as to what inspectors will consider to be viable and the limitations of the procedure for larger, phased schemes, as the original obligations will reapply after three years.
The government recently issued a consultation on speeding up negotiations, including consideration of potential dispute resolution mechanisms. A further option for unlocking stalled discussions would be welcome.
For strategic sites in particular, however, the complexity of the task should not be underestimated. Authorities are concerned to ensure that development delivers appropriate infrastructure to support future communities. Landowners will not be motivated to sell land without receiving a fair share of the uplift and developers must make a profit. The government is right to increase the options available to help the conclusion of negotiations as speedily as possible, but the outcome must be a workable compromise for all concerned.
Claire Fallows is a partner and head of planning at Charles Russell Speechlys LLP
