In this article John Pugh-Smith looks at the recent judgment in R (West Berkshire DC & Reading BC) v SSCLG in which the planning policy to exempt small developments from affordable housing contributions and the vacant building credit (VBC) had been formulated and instituted was declared unlawful and reflects on the necessary outworkings of the judgment.

It is rare for the judiciary to interfere with Government powers to institute policy. However, the High Court has now so done in the recent and much awaited decision on 31st July 2015 in R (West Berkshire District Council and Reading Borough Council) v Secretary of State for Communities and Local Government [2015] EWHC 2222 (Admin) with Mr Justice Holgate taking the view that the changes made by the Government had been too significant and inconsistent with other Government planning policy and objectives reflected in local plans (noting that these plans have primacy over national policy in the planning system) to have simply been introduced by amending policy guidance and should have been done through primary legislation.

The Affordable Housing Threshold Challenge

Like a number of planning authorities (LPAs) West Berks DC and Reading Council had been faced for the past nine months with less affordable housing requirements resulting from the changed paragraphs of the Planning Practice Guidance (‘PPG’) with paras. 012 to 020) having the effect of preventing authorities from seeking affordable housing requirements for development of 10 dwellings or fewer (five dwellings in designated rural areas), or a maximum gross floor space of 1,000sqm. The PPG changes also provided for a vacant building credit (VBC) to be applied equivalent to the gross floorspace of vacant buildings renewed or demolished as part of the development and deducted from the overall affordable housing contribution (PPG paras. 021 to 023).

The Councils argued that the policy had profound consequences for LPAs in discharging their responsibilities under the planning system for the provision of affordable housing and listed a substantial number of concerns. Introduced in a written ministerial statement on 28 November 2014 (and subsequently revised on 27 February and 26 March 2015) (‘the WMS’), would have the general effect of significantly reducing the amount of affordable housing across the country by more than 20 per cent (estimated) (equating to an annual value of £693m based on 2011/12 figures). The Councils also claimed the policy would have a particular impact in their areas (West Berks a loss of 23.5% of affordable housing units; Reading 15% of expected annual affordable housing completions). They also contended that, in some instances, the new policy would result in providing a windfall to landowners and/ or developers.

Their grounds of challenge were that the SSCLG had failed to take into account material considerations, that the policy was inconsistent with the statutory scheme, that the consultation process was unfair, failure to comply with the public sector equality duty (PSED), and that the decision to introduce the exemptions from affordable housing requirements was irrational.

In his lengthy judgment (62 pp) Mr Justice Holgate sets out a detailed analysis of the system for the delivery of housing and particularly the provision of affordable housing. He starts in 1992 when PPG3 and Circular 06/98 both imposed a threshold of 25 dwellings or 1ha. before affordable housing obligations could be sought . He then records the change in 2006 when PPS 3 gave a 15 dwelling indicative minimum size was imposed followed by its complete removal by the NPPF in 2012 until the most recent guidance in November 2014. He notes that the earlier national policies simply gave “criteria” or “indicative thresholds” which LPAs were to take into account when formulating local plan policies and were consistent with the statutory framework and sought to give guidance to and “influence” individual LPAs when drawing up policies in their local plans for affordable housing requirements appropriate to their respective areas.

In contrast, the Judge observes that the substance of the new PPG policy is “materially different”. Whereas previous policies had provided a framework within which LPAs had some discretion in that they could adopt the same thresholds or justify alternative approaches based on local circumstances the new national policy “does not purport to give guidance to LPAs which should be considered alongside local plan policies. Rather it gives thresholds below which affordable housing (and tariff style contributions) should not be sought when any planning application for housing development in England is determined. Those thresholds are to be applied directly, and with immediate effect, in the determination of planning applications, notwithstanding any local plan policy inconsistent therewith. To that extent the policy has been drawn up so as to displace adopted local plan policies on affordable housing requirements.”(para.126).

He goes on to state that the WMS had not been formulated so as to be taken into account alongside local plan policies in development control decisions or as guidance when new local plan policies come to be formulated: “The Written Ministerial Statement does not envisage that LPAs may prepare, justify and adopt local policies departing therefrom. Furthermore, the policy did not allow any transitional period within which adopted local plan policies would continue to be given full weight or primacy, or for LPAs to consider whether their local plan policies should be revised in the light of new national guidance.” (para.129).

He concludes that the new national policy is inconsistent with the statutory scheme (Ground 2) because its aim, and the language chosen, purported to confer exemptions in each and every case where affordable housing requirements in an adopted local plan policy are inconsistent with the national thresholds. It was unlawful because, in effect, the purported effect is to override relevant policies in the statutory development plan in so far as they are inconsistent with the national policy.

The Councils also argued that the Government had failed to give sufficient reasons for the proposal so as to allow intelligent consideration and responses to be given. Whilst the Judge gave weight to the fact that the new policy was justified by the “disproportionate burden” on small-scale developers and sites. He made clear that the rationale for the new policy had not been properly defined. In particular he highlighted that insufficient evidence and explanation had been provided by DCLG on what the “disproportionate burden” was that it was thought the proposed policy would address, in consequence of which it had not been possible for the consultees to properly respond to the consultation. Accordingly, it had been unfair (Ground 3).

The Judge further noted that there was no dispute in these proceedings that one effect of the policy would be to reduce the amount of land available to meet affordable housing needs, with the consequence that LPAs affected would face arguments that their local plans are out of date, the presumption in favour of sustainable development in NPPF para.14 could then apply and more land would need to be released in their areas, including greenfield sites. He also found that the main benefits and disbenefits of the proposed policy were “obviously material” to the SSCLG’s decision whether or not to adopt the new policy noting that had they not been then the policy would have been adopted on a whim and that would have been arbitrary. He found that there was no evidence to suggest that an exercise to consider the adverse effects on land supply were carried out before the adoption of the policy and therefore the Councils also succeeded on this ground (Ground 1).

The Councils also succeeded in relation to their fourth ground with the Judge finding that the material before the Court concerning the assessment to comply with the Public Sector Equality Duty (PSED), carried out in order to support the policy stance already taken in November 2014, had not been undertaken with a sufficiently open mind.

In addition, a challenge to the policy exemption from local tariff-based contributions also succeeded for the reasons given in respect of Grounds 2 and 3.

The Vacant Building Credit Challenge

This measure was suggested by Minsters in about December 2013. The Councils submitted that there had been no evidence that Ministers or the DCLG had had any information to justify either the need for the vacant building credit (VBC) or its impact. They also argued that the credit would reduce the amount of affordable housing which Reading would be able to secure from sites not excluded under the smaller sites exemption. The SSCLG, however, argued that the policy was intended to incentivise brownfield development and had been properly consulted on; that although the new affordable housing policies, including VBC might “result in some local reductions in affordable housing” the DCLGt’s assessment showed that “this is a minor element”. Moreover, over the next Parliament more affordable housing would be built than during any equivalent period in the last 20 years. However, the Judge held that the challenge against the VBC policy must succeed noting that, before the decision to adopt the vacant building measure had been made, no consideration had been given to the lack of information on the impact of this policy change. The challenge against this policy therefore also succeeded for the reasons given under Grounds 1, 2 and 3.

The Relief

Such findings, ordinarily, would require the quashing of the WMS. However, due to Article 9 of the Bill of Rights 1689 a decision to quash the WMS could potentially involve the judiciary questioning “proceedings in Parliament”. Therefore, so as to avoid such a finding the Judge delivered a declaration that the policies in the WMS “must not be treated as a material consideration in development management and development plan procedures and decisions or in the exercise of powers and duties under the Planning Acts more generally”.

The Outworkings (so far)

Following the judgment, on Saturday 1 August 2015, a new paragraph (030) was added to the PPG which now states:

“Please note that paragraphs 012-023 of the guidance on planning obligations will be removed following the judgment in R (on the application of West Berkshire District Council and Reading Borough Council) v Secretary of State for Communities and Local Government [2015] EWHC 2222 (Admin).”

The paragraphs 012 to 020 relate to the policy challenged in this case; paragraphs 021 to 023 relate to the VBC.

The DCLG also stated publically that it was “disappointed with the judgment” and intended to appeal the decision. At the time of writing, it is understood that both permission to appeal and an expedited hearing have been sought but the likely hearing date before the Court of Appeal is not yet known.

Pending further DCLG clarification, which now seems unlikely until the Court of Appeal has ruled, there is already uncertainty and the likelihood of real harm.; for we now have a position where we have applicants, who have acquired land and/or undertaken development economic appraisals upon one set of assumptions but are now faced with the reverse. We also have LPAs at different stages of plan-making and decision-taking. Some LPAs have draft but not yet finalised plans with blanket immunity, which may now require re-writing with others now requiring affordable housing provision on schemes of ten homes or fewer will face appeals on this issue. Equally, those CIL charging authorities which responded to the PPG update by raising their levy rate for small schemes upon the assumption that they would not have to contribute affordable housing may now have to reverse this move, including asking for suspension of their examinations. Meanwhile, the Planning Inspectorate has been confronting a massive 46 per cent year-on-year increase in appeals lodged against the failure by LPAs to determine minor residential applications, reportedly partially caused by town halls’ reluctance to determine minor housing applications until the outcome of the High Court case was known.

Reflections

After yet another judicial “bruising” from such robust policy changes taken in the name of his predecessor it would be wise if the current Secretary of State now takes a more measured approach to tackling the problems and costs associated with brownfield and small-scale development However, as the manner of its formulation has been so roundly condemned Greg Clarke should not simply leave matters to take their course to the Courts, all the more so following the Chancellor’s robust July Budget announcements in “Fixing the Foundations”. Indeed, if the Government wishes to continue with the previously stated aim in the WMS he will still need to act proactively, and, swiftly, probably by introducing specific legislation. Meanwhile, current applicants, and, those with developing strategies based on the old policy guidance are being left in a serious muddle, as are the LPAs trying to administer the process. Who said that the “silly season” was just the Summer holiday period?