Summary: The draft new London Plan, issued for consultation in December 2017, will ultimately become part of each Borough’s Development Plan. Planning applications for schemes will have to be determined in accordance with it, unless material considerations indicate otherwise. Its policies heavily influence what new development in London can be delivered, where and how viably.

The draft Plan is ambitious in many respects, but it is the affordable housing policies which arguably are the most radical policy change for twenty years in London planning. The clear move away from the deal-making approach under previous Mayors, to the new “Threshold Approach” poses interesting questions as to how the new policy will be applied in practice, whether it will translate into increased affordable housing delivery, the effect it will have on the property market and the extent to which it will influence outcomes at appeal.

This article examines these questions and follows BLP’s successful seminar on 18 January 2018 in which panellists Rupert Warren QC (Landmark Chambers), John Dickie (London First), Tom Dobson (Quod), Elizabeth Mason (CBRE), Christian Drage, Giles Pink and Sheridan Treger (BLP) shared their insights on the draft London Plan.

Sticks and carrots

The draft Plan mirrors the “Threshold Approach” to viability which developers have been familiar with since the publication of the Affordable Housing and Viability Supplementary Planning Guidance in August 2017:

  • The “Fast Track Route” means no requirement to provide a viability statement for proposals that offer 35% affordable housing (with some exceptions);
  • Otherwise there is a “Viability Tested Route”. This requires detailed viability evidence in a “standardised and accessible format, which will be “scrutinised” to ascertain “the maximum level of affordable housing”.

The new policy will create a more challenging environment for developers at the Mayoral level but also locally, given the political direction of travel in some Boroughs.

The move away from a deal making approach will make it harder for Borough case officers to do a deal “splitting the difference”, even if they are minded to. Committees may expect Boroughs to have pushed for a percentage derived from developers’ own spreadsheets, which are expected to be made public so that anyone can alter the inputs, with no hidden formulae. This transparency is also likely to make some Committees more cautious about accepting anything less than 35%. It is expected that the trend of developers using generic industry figures rather than sensitive business information will continue.

The “real deal”?

In reality limited numbers of major planning applications are likely to be eligible for just a 35% offer to get onto the Fast-Track. 50% is required for public sector and ex-industrial land, and the draft Plan encourages Boroughs to apply a localised affordable housing threshold which exceeds 35% “where possible” in Opportunity Areas. Detailed viability information can still be required at any stage where the decision-maker is not satisfied that other development plan requirements are being met (even outside of affordable housing discussions).

Effects on delivery?

This is a clear effort to tackle the housing crisis but it remains unclear what the impact on delivery will be. These higher fixed affordable housing requirements will sit alongside increased levels of the Community Infrastructure Levy, and there is no sign of other local plan obligations (and their concomitant costs) being scaled back.

The Threshold Approach creates unintended incentives for some schemes to under deliver. Historically developers were willing to take a view and offer affordable housing over and above their viability assessed figure to secure an expedited planning approval. Schemes unlikely to get onto the Fast-Track will now, however, have nothing to lose tactically by starting discussions from the lowest base plausible and simply follow the logic of their viability assessments.

But the Threshold Approach may also unlock and expedite other schemes willing and able to offer 35%. Schemes contentious at a local level because of some particular issue like height, density or use may be called-in and granted by the Mayor to send a message about the benefits of the Threshold Approach (to a potential sigh of relief by the Borough in question). Funders, especially from abroad, may feel more comfortable about backing schemes where they can avoid years of wrangling over affordable housing or avoid appeals over other planning concerns by conforming with the draft Plan’s affordable housing aspirations.

In the short term there could potentially be fewer planning permissions coming forward, but those that do will offer higher levels of affordable housing. Schemes unable to reach 35% may be withdrawn from planning or held back. The view at the GLA may well be that this is a price worth paying to achieve a sea change in the longer term.

Developers who need to revise a scheme years on since its original planning permission are exploring reserved matters or section 73 applications and accepting sub-optimal developments rather than risking the Threshold Approach. Working existing consents this way will become much harder. Draft Plan policies explicitly apply the Viability Tested Route to scheme variations that would trigger this scrutiny had the original permission been applied for now.

Effects on the market for development sites?

The critical issue for landowners is the extent to which the new policy will impact on land values. Some, but not all, landowners are already being pragmatic and adjusting their value expectations. Only time will tell how many others will hold onto sites and await a different policy and political context to release them into the market.

The preference in the SPG, cross-referred to in the draft Plan, is for viability assessments to be based on existing use value plus (EUV+) as an incentive to the landowner to part with their land. The EUV+ approach to determining the benchmark land value is based on the current use value of a site plus an appropriate site premium. The approach is designed to identify the uplift in value arising from the grant of planning permission by enabling a comparison with the value of the site without planning permission. However, some developers and landowners argue that the real market would never release land at such low values, and decision-makers should therefore look to comparable prices paid which, in turn, would unavoidably result in a lower affordable housing offer. However, it will be interesting to see whether any evidence is submitted in response to the consultation that the EUV+ approach might chill the London property market.

All about timing

As it stands the National Planning Policy Framework (NPPF), a key material consideration in planning decisions, requires local plans not to subject schemes to such policy burdens that they threaten development being carried out viably. Government is expected to introduce a number of key changes to the NPPF over the coming months as part of the Government’s commitment to speeding up new housing delivery across the whole of the UK.

Nobody knows at this stage exactly how the NPPF will change but it must, to some degree, include a reaction one way or the other to the Mayor’s Threshold Approach. It is not inconceivable that the changes to the NPPF will be made by the time that the draft London Plan is subject to its Examination in Public (EiP) by an independent Planning Inspector appointed by the Secretary of State, slated for Autumn 2018.

Developers choosing the Viability Tested Route will face the uncertainty that the publication and progression of the revised NPPF (and its timing) will also influence outcomes at appeals before the draft London Plan is published in final form.

As it stands the Threshold Approach is embodied in Supplementary Planning Guidance only and the draft Plan is emerging rather than adopted policy, where much remains up for debate in the EiP. So many Inspectors might now give greater weight to the imperative in existing national policy that in the end the viability of a scheme is the paramount consideration rather than a particular target to maximise affordable housing. We will have to wait and see whether the revised NPPF and what occurs in the EiP changes that.