The High Court has declared a key policy in the mayor of London’s planning guidance on affordable housing ‘unlawful’ – but what does that mean in practice? Matthew White explains the impact of the decision
In R (on the application of McCarthy and Stone Retirement Lifest yles Ltd and others) v Mayor of London (on behalf of the Greater London Authority) [2018] EWHC 1202 (Admin); [2018] PLSCS 99, Ouseley J declared that a key part of the mayor’s supplementary planning guidance, Homes for Londoners: Affordable Housing and Viability (the SPG), is unlawful.
The SPG was adopted in August 2017 and sets out a new approach to the determination of the proportion of affordable housing to be provided by developers. It contains a “threshold approach” to viability, whereby the amount of viability information to be provided by developers differs depending on the level of affordable housing proposed. In a significant departure from the approach taken by previous mayors, applications that (i) meet or exceed 35% affordable housing provision without public subsidy, (ii) provide affordable housing on site, (iii) meet the mayor’s specified tenure mix, and (iv) meet other planning requirements and obligations to the satisfaction of the local planning authority and the mayor where relevant, are no longer required to submit any viability information.
Where these threshold requirements are not met, applicants are required to submit detailed viability information to justify the amount of affordable housing proposed. In addition, paragraph 10 of the SPG states that:
“Early and late viability reviews will be applied to all schemes that do not meet the threshold in order to ensure that affordable housing contributions are increased if viability improves over time.”
These viability reviews are secured by planning obligations. A reappraisal mechanism ensures that any increases in the value of the proposed development from the date planning permission is granted to specific stages in the development programme are captured and converted into increased affordable housing provision.
An “early stage review” is triggered where an agreed level of progress on implementing the planning permission has not been reached after two years, or as agreed with the local planning authority and the mayor on a site-by-site basis. A “late stage review” is applied once 75% of homes are sold, or at an alternative point agreed by the local planning authority.
The SPG is related to policies in the London Plan which aim to maximise affordable housing provision in London. Policy 3.12 of the Plan states that negotiations should take account of, inter alia “the implications of phased development including provisions for re-appraising the viability of schemes prior to implementation (‘contingent obligations’)”.
Contingent obligations are defined in the glossary of the London Plan as “mechanisms for the re-appraisal of viability prior to the implementation of schemes in whole or in part which are likely to take many years to implement”.
The challenge to the SPG
The claimants contended that the SPG was unlawful because: (1) it constituted policy which should only be in the London Plan, and was also inconsistent with that plan; (2) the SPG is a “plan or programme” that required a strategic environmental assessment, which had not been undertaken; and (3) it was produced without due regard to the mayor’s public sector equality duty under section 149 of the Equality Act 2010.
Ouseley J held that the SPG was inconsistent with the London Plan, but rejected all other grounds. His judgment was reached on a particularly narrow basis. He held that conflict with development plan policy does not of itself make supplementary guidance unlawful. However, in the present case the mayor had promulgated the SPG on the basis that it was consistent with the London Plan. In so far as the SPG was in fact in conflict with the London Plan, the mayor had misdirected himself as to the meaning and effect of either the plan or the SPG and so had failed to have regard to a material consideration.
The conflict with the London Plan arose from the introduction in the SPG of a late stage review to single phase sites, where the plan only envisaged those for phased developments. Ouseley J held that this was contrary to the definition of “contingent obligation,” which envisages re-appraisal only when related to the likely length of time a development may take, or against the risk of a delayed start. The judge said:
“This is quite inconsistent with reappraisals regardless of the actual or expected duration of implementation. It is also quite inconsistent with reappraisal, let alone two regardless of time, on every site… It is not consistent with an obligation to consider ‘the specific circumstances of individual sites’.’’
Ouseley J added that the London Plan requires some justification for a review mechanism by reference to the time taken to develop, but that the SPG had removed that. In the key paragraph of his judgment, the judge states that the London Plan permits the imposition of a requirement for reappraisal “only where, in general, the timescale or scale of development means that it is likely to take many years to complete a phase or the whole [of that development]”.
The judge concluded that the SPG is not consistent with the London Plan in that one respect and is to that extent not lawful.
The impact
Following submissions by both sides on the appropriate remedy for this inconsistency, an order was made by Ouseley J on 29 May 2018 declaring that the last sentence of paragraph 10 of the SPG cited above (and any other passages containing the same point) is unlawful because the mayor promulgated it as consistent with the London Plan, when, on the true interpretation of the plan, that part of the SPG is inconsistent with it: late stage viability reappraisals are only permitted by the London Plan prior to implementation of schemes which are likely to take many years to implement.
Ouseley J stated that an order quashing the SPG would not have been appropriate; a declaration was appropriate so that the position is known without reading and interpreting all of the judgment. Both parties in the proceedings were content to confine the declaration to late-stage viability reappraisals.
The SPG therefore remains in force without amendment, but is subject to the court’s declaration that the relevant sections are unlawful and cannot therefore be taken into consideration by local planning authorities or by the mayor in planning decisions.
This creates an opening for any developer promoting a development that will not “take many years to complete” to resist the imposition of a late stage review, even where less than 35 per cent affordable housing is proposed.
“Many years” is not defined in the London Plan, nor in Ouseley J’s judgment or order, but the Oxford English Dictionary defines many as “a great number of”. This suggests that, on any reasonable interpretation, a development that will take, say, fewer than six years to complete should not automatically be subject to a late stage review.
This window will, however, be short-lived. The mayor has the ability to correct the inconsistency through his promotion of the new London Plan. A draft plan was published in December 2017 and will be the subject of an examination in public later this year. The mayor will then prepare a revised plan which is expected to be adopted in late 2019. It can be expected that the revised plan will remove the conflict with the SPG so that late stage reviews can again be required on every development that does not meet the 35% threshold.
In the meantime, developers and their advisers with applications going through the planning process may seek to resist the imposition of a late stage review imposed in reliance on the SPG where the development in question will not take many (or “a great number of”) years to complete.
Matthew White is a partner and head of planning at Herbert Smith Freehills LLP
