The Government has begun a drive to build on brownfield land by offering councils a share of a £200million fund to create ten housing zones. 

Prime minister David Cameron recently renewed the government’s focus by saying, if re-elected, he would sell public brownfield land to build 100,000 new homes. There is now enormous pressure on councils to identify locations for housing development and to have five-year plans for housing in place.

Brownfield development has been relatively more costly for developers, and viability issues have made it difficult to prioritise brownfield development in the past. A number of publications have examined how to remove obstacles to development of previously used land. This led the to the Department for Communities and Local Government (DCLG) carrying out a consultation on planning contributions (and planning performance) which ran from March to May 2014. The published response and the recent Autumn Statement confirmed that the Government would now introduce a 'Vacant Building Credit', to further incentivise brownfield development.

What is the Vacant Building Credit (VBC)?

Where a vacant building is brought back into any lawful use, or is demolished to be replaced by a new building, the developer should be offered a financial credit equivalent to the existing gross floor space of relevant vacant buildings when the Local Planning Authority calculates any affordable housing contribution. Affordable housing requirements in Local Plans would thus only be applicable to any increase in floor space.

Where has the idea come from?

The DCLG has now published its response to the planning contributions aspect of its consultation, Planning performance and planning contributions, which closed in May 2014 (the Consultation). DCLG responded to the planning performance aspect in June 2014. The consultation had sought views on excluding buildings brought back into use from section 106 affordable housing requirements.

The Consultation states that the VBC is a clear incentive to promote brownfield development and is intended to reflect the often higher costs of brownfield development. The mechanism to introduce the change suggested in the consultation was an amendment to national policy so that Local Authorities should consider that section 106 affordable housing contributions should not be applied to buildings brought back into any use, other than proportionately for any increase in floor space.

What is the process for determining the vacant building credit?

The national Planning Practice Guidance (PPG) was revised on 28 November 2014 to reflect the Ministerial Statement which announced the introduction of the VBC as part of the Autumn Statement.

The relevant paragraphs of the national PPG (021-023) provide that where there is an overall increase in floor space in the proposed development, the Local Planning Authority should calculate the amount of affordable housing contributions required from the development as set out in their Local Plan. A ‘credit’ should then be applied which is the "equivalent of the gross floor space of any relevant vacant buildings" being brought back into use or demolished as part of the scheme and deducted from the overall affordable housing contribution calculation. The VBC applies where the building has not been 'abandoned'.

What are the issues?

There is a lack of clarity on how the VBC will be calculated.  Firstly, it is unclear how gross floor space is intended to be calculated, particularly on planning application for dwellings where fees are based on number of units, not floor space. Paragraph 022 of the national guidance specifically requires authorities to give a credit from the overall Local Plan calculation. This is likely to mean that where VBC applies, housing will need to be calculated by gross floor space, rather than numbers of dwellings, in order to apply the offset on future applications as well as on applications to vary existing permissions.

Secondly, the national PPG does not state if there is a period of time for which building(s) must have been vacant before the credit applies. In response to our enquiries the Department has confirmed that there is no time limit that applies to the amount of time the building has been vacant – as long as the building is vacant (and has not been abandoned), the VBC may be applied. The use of the term 'abandoned' also introduces another level of uncertainty. Abandonment of a use is a court led concept which often creates confusion. The case law suggest that there are four key factors in applying an objective test of abandonment; the physical condition of the building, whether there had been an intervening use, the period of non-use and the owner's intentions. The High Court decision in Hughes v Secretary of State for the Environment indicated that poor physical condition could be a factor to be overridden if it was shown that there was intention to reoccupy. This was reversed by the Court of Appeal where it was found that it was necessary to have regard to all relevant circumstances and wrong to elevate the intentions of owners to a paramount status or to subordinate other relevant considerations to intention. Any judgment on this matter remains a matter of fact and degree and cases have shown that the time which has to elapse after cessation of use for "abandonment" to have occurred is extremely variable. Use of the term in relation to calculation of the VBC is therefore likely to make calculation of the VBC site specific.

Finally, developers of sites which already have permissions in place with affordable housing obligations and vacant buildings on site may well be considering if they are able to make immediate requests to vary the affordable housing provisions on existing permissions, or make fresh applications to take advantage of the guidance.

Kevin Gibbs, partner, comments:

"It remains to be seen how the credit will be applied in practice and how successful it will be in bringing vacant buildings and brownfield sites into use, and indeed if the Department will issue any further guidance to clarify calculation of the credit."

The other changes to national PPG made by the Government are:

  • For sites of 10-units or less, and which have a maximum combined gross floor space of 1000square metres, affordable housing and tariff style contributions should not be sought. This will also apply to all residential annexes and extensions.
  • For designated rural areas under section 157 of the Housing Act 1985, which includes National Parks and Areas of Outstanding Natural Beauty where restrictions on market disposals can be introduced to limit disposals to parties who do not live or work in the area, authorities may choose to implement a lower threshold of 5-units or less, beneath which affordable housing and tariff style contributions should not be sought. This will also apply to all residential annexes and extensions. Within these designated areas, if the 5-unit threshold is implemented then payment of affordable housing and tariff style contributions on developments of between 6 to 10 units should also be sought as a cash payment only and be commuted until after completion of units within the development.
  • These changes in national planning policy will not apply to Rural Exception Sites which, subject to the local area demonstrating sufficient need, remain available to support the delivery of affordable homes for local people. However, affordable housing and tariff style contributions should not be sought in relation to residential annexes and extensions.