A recent High Court decision has quashed government guidance issued in November 2014 that exempted developments of small sites and those bringing vacant buildings back into use from affordable housing contributions. This could have serious implications for development of these types of sites going forward.

On 31 July 2015 the High Court handed down judgment in the case of West Berkshire District Council and another v Department of Communities and Local Government [2015] EWHC 2222 (Admin) quashing changes to the National Planning Practice Guidance (NPPG) introduced in November 2014.

The case involved West Berkshire District Council and Reading Borough Council challenging the decisions of the Secretary of State to make alterations to the NPPG regarding affordable housing contributions.

On 28 November 2014 the then Minister of State for Housing and Planning, Brandon Lewis, released a Written Ministerial Statement which included the following:-

  1. sites of 10 units or less which have a maximum combined gross floorspace of 1000sqm should not be subject to affordable housing tariff style contributions (including residential annexes and extensions).
  2. a financial credit, equivalent to the existing gross floorspace of any vacant buildings brought back into any lawful use  or demolished or redevelopment, should be deducted from the calculation of any affordable housing contribution sought from the relevant development schemes.  This will not have applied to vacant buildings which have been abandoned.

As a result of the above changes, the NPPG was amended.  In respect of the vacant building credit referred to in (b) above (“the Credit”), Paragraph 21 stated:-

National policy provides an incentive for ground floor development on sites containing vacant buildings.  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 floorspace of relevant vacant buildings when the local planning authority calculates any affordable housing contribution which will be sought.  Affordable housing contributions may be required for any increase in floorspace.

We understand that a number of developers were utilising the Credit for sites where viability was an issue.

The Grounds of Challenge

This policy change was challenged on five grounds as follows:-

  1. the Secretary of State failed to take into account material considerations;
  2. the national policy was inconsistent with the statutory scheme and its purposes;
  3. the consultation process carried out by the Secretary of State was unfair;
  4. in deciding to adopt the new national policy the Secretary of State failed to comply with the public sector equality duty in Section 149 of the Equality Act 2010; and
  5. the decision to introduce the new national exemptions from affordable housing requirements was irrational.

The majority of the judgment dealt with the issues surrounding the level of affordable housing requirements and new thresholds.  However, what is of more interest are the implications the judgment has on the application of the Credit.

The Decision

In giving his judgment, Mr Justice Holgate held that the challenge to the policy change succeeded on Grounds 1-4 (it should be noted that Ground 5 was not discussed at length as it did not add anything of substance to the Grounds already accepted.)

Holgate J stated that the decision to introduce the Credit was made before any there was any consideration to the lack of information on the impact of the policy. At paragraph 92 he stated that:

"The vacant building credit will itself cause additional shortfalls in the supply of housing land for affordable housing. An urban authority such as Reading is largely dependent upon previously developed land for nearly all its new development. Its local plan policies have been adopted on the basis that affordable housing will be provided on land in general, including previously developed land, subject to any viability considerations. The credit will reduce the amount of affordable housing which Reading will be able to secure from sites not excluded under the smaller sites exemption"

On a wider level, this policy change was not compatible with the existing statutory framework as it was introduced with immediate effect and with no guidance as to how it was to apply and interact with existing local policy.

The Implications

The removal of Paragraphs 12-23 of the NPPG means that the Credit can no longer be applied. Moreover, the court held that the Written Ministerial Statement that introduced the credit must not be treated as a material consideration in decision making and plan making.  In practice, this poses serious issues for sites going through the development process that were relying on the Credit. Developers that intended to use the Credit to make certain sites viable, by reducing the amount of any affordable housing contributions, will no longer be able to do so. The financial implications, particularly in certain boroughs of London, are therefore considerable as development costs will increase.

The London Borough of Islington also brought challenge to the policy changes but permission to be joined to these proceedings was refused. A decision is awaited in respect of that challenge. The DCLG has stated that it is to re-issue guidance but there is commentary that they also intend to appeal the decision.  We therefore await with interest to see how Parliament addresses the issue on its return in the Autumn.

The current position is that the Credit can no longer be applied. We will continue to monitor the position and provide further updates in due course.