Appealing affordable housing requirements: making development viable
19 November 2014
One of the biggest financial burdens on development is the requirement to provide affordable housing. We look at a recent example of an appeal lodged to reduce the affordable housing required in order to unlock development.
Rules introduced in 2013 allow those with an interest in land to submit an application to the local planning authority seeking the reduction or removal of affordable housing requirements contained in section 106 obligations.
On the first of any such applications, the authority must deal with it so as to make the development economically viable. If the application is refused or not determined, an appeal can be submitted to the Planning Inspectorate.
In September 2014, an Inspector allowed an appeal to reduce the affordable housing requirement for two outline permissions for development in Lydney, Gloucestershire, including up to 1,082 dwellings, employment and a neighbourhood centre.
The section 106 agreements required 20% and 30% affordable housing for the two permissions respectively, split between intermediate, shared ownership and social rent.
The following issues arose:
There was little demand for intermediate and shared ownership units. The Council did not want to increase the proportion of such units to improve viability.
A secondary education contribution was no longer required. This was taken into account even though the Appellant would have to apply separately for the section 106 agreement to be modified accordingly.
The Appellant and District Valuer on behalf of the Council supplied different residual valuations based on cash flow. By the end of the hearing, a benchmark land value and the blended value of affordable housing based on social rent had been agreed. The difference between the parties on construction costs, fees, contingencies and abnormals was immaterial at £11,000 per unit. Sales values and rates were disputed and determined by the Inspector.
The Appellant proposed to build a lower density scheme than anticipated of up to 950 dwellings, but no detailed plans were available. The Appellant suggested that the section 106 agreement could limit the number of dwellings. As this fell outside the legal scope to vary the section 106 agreement and would conflict with the conditions, the Inspector did not accept the lower number.
The Council argued that, due to the improving market, a profit level of 17.5% would be reasonable. The Inspector accepted the Appellant’s request for 20% as the scheme was not in a prime location on the edge of a major town and would be carried out over a relatively long time period.
The Inspector held that a requirement for 14.1% affordable housing was viable. As per the statutory requirement, the modification relates only to those parts of the development commenced within a three year period from the date of the decision.
The decision is an example of how the mechanism can be used to help reduce affordable housing requirements for phased schemes, although the site specific circumstances will be carefully considered.
This article was written by Claire Fallows.
For more information please contact Claire on +44 (0)20 7427 1046 or email@example.com