The statutory provisions1 that enable developers in England to apply to the appropriate authority to modify or discharge planning obligations which contain affordable housing requirements that result in the development not being economically viable are set to come to an end on 30 April 2016.
As a result of the modification procedure, developers are currently able to amend affordable housing requirements in line with market conditions so as to bring about developments that would otherwise not come forward. This pro-growth acknowledgement by the government was widely accepted by the development industry which took advantage of the streamlined process, and maybe more importantly, the ability to appeal to the Planning Inspectorate for independent determination in the event of refusal or non-determination by the authority.
To date, the modification procedures have been embraced and have resulted in the majority of decisions reducing affordable housing requirements. For the first time last week, the provisions were considered by the High Court as a result of an earlier decision by the Secretary of State to remove an affordable housing contribution relating to 332 residential units in Chatham Quays2.
The statutory provisions that provided the ability to modify affordable housing planning obligations also contained a ‘sunset’ clause which would repeal the relevant sections at the end of 30 April 20163. Whilst the statute provides the ability for the Secretary of State to substitute a later date and/or make transitional or transitory provision or saving relating to any repeal4, no such provisions have been made.
As such, under the current statute, the ability to not only apply for modification, but also for any live application to be determined would fall away, potentially leaving a black hole for applications already making their way through the system.
Government volte farce on extension
As the modification procedure was successfully being used to help unlock development and bring forward much needed housing, the government explicitly commited to extending the sunset clause as part of the Spending Review and Autumn Statement5, stipulating that it will:
“bring forward proposals for a more standardised approach to viability assessments, and extend the ability to appeal against unviable section 106 agreements to 2018”
However, this commitment was only to be found at the top of page 126 of the 147 page document. This scant reference towards the back of the document could have been a sign of potential uncertainty as to whether ministers considered this to be a worthwhile move.
Having spoken to a DCLG earlier today, it has confirmed the position widely referred to in Planning6, that the government will not be extending the 30 April deadline. Whilst no information was forthcoming about transitional provisions, it stated that provided applications are submitted to the appropriate authority before the deadline, a subsequent appeal to the Secretary of State will still generally be considered. However, when pressed to clarify what is meant by ‘generally’, DCLG stated that there may be ‘any other reason’ as to why it could not be determined, such as an invalid application.
Landowners and developers with viability concerns on sites with the benefit of planning permission that are subject to affordable housing requirements should move quickly to prepare and submit applications before the 30 April 2016 deadline.
An application under section 106BA can be made at any time after the original agreement is signed and should be made in writing, but there is no prescribed form. The application must be based on economic viability and cannot take into account other aspects of the planning permission; the process addresses affordable housing requirements only. The application should contain a revised affordable housing proposal, based on prevailing viability, and should be supported by relevant viability evidence. The test for viability is that:
“the evidence indicates that the current cost of building out the entire site (at today’s prices) is at a level that would enable the developer to sell all the market units on the site (in today’s market) at a rate of build out evidenced by the developer, and make a competitive return to a willing developer and a willing landowner”7
It is important to note that the powers did not replace the pre-existing method of renegotiating section 106 agreements under section 106A of the Town and Country Planning Act 1990. As such, a planning obligation can still be modified at any time by agreement between the parties or, following the expiry of 5 years since the section 106 obligation was entered into, by application to the relevant authority. Although a local planning authority does have discretion as to whether to entertain an application prior to the expiry of the ‘relevant period'8. In order to succeed on an application under section 106A, the applicant must demonstrate that either the obligations no longer serves a useful purpose and therefore should be discharged, or that the obligations continues to serve a useful purpose but would serve that purpose equally well if it had effect subject to modifications9.