On 19 May 2016, the Department for Communities and Local Government reinstated its guidance on affordable housing contribution exemptions for small sites following the judgment of the Court of Appeal in R (West Berkshire District Council and Reading Borough Council) v. Secretary of State for Communities and Local Government [2016] EWCA. The initial challenge to its policy and subsequent appeal has been described by ministers as “a total waste of taxpayers’ money”.

Parts of the Planning Practice Guidance (“PPG”) limiting the affordable housing requirements for small developments were removed on 31 July 2015, following the High Court’s decision to uphold West Berkshire’s challenge of the policy. PPG stated that “small sites” – those with 10 units or less and a combined gross floor space of under 1,000 square meters or 5 units or less in certain rural areas – should not be required to contribute towards affordable housing. Also removed, and subsequently reinstated on 19 May, was the vacant building credit (which reduces an affordable housing contribution, where disused buildings are redeveloped or brought back into use).

The High Court initially found that the exemptions were “incompatible” with the National Planning Policy Framework. In a written ministerial statement dated 28 November 2014, the Minister for Housing and Planning referred to the “disproportionate burden of developer contributions on small scale developers” as justification for the introduction of the two policies which were designed to make smaller developments financially viable in order to assist the Government’s pledge to increase house building. Overturning the High Court judgment, the Court of Appeal found that the Government’s policy position was consistent with the statutory planning regime, and that the Secretary of State had taken into account the necessary material considerations following adequate consultations and having properly assessed the impact of the proposals in line with the Equality Act 2010.

Whilst allowing the appeal on all four grounds, the Court of Appeal made clear that although the Secretary of State can lawfully express his policy (and his preference) in unequivocal terms, that does not mean that the policy must be applied as rigidly. The principle that a decision taker has an unfettered discretion to exercise their planning judgment remains intact – a local planning authority can depart from the Secretary of State’s policy where material considerations, such as local circumstances and the evidence base, support a different approach.

The written ministerial statement did not need to spell out that it was not to be applied without flexibility or that it was to be properly treated as a material consideration in the normal way: these matters are a given.

We are now, once again, in a position whereby developments of under 10 units (and totalling under 1,000 square meters of combined gross floor space) will not trigger the requirement to enter into a section 106 obligation to provide an affordable housing contribution. Authorities may still seek other obligations where they meet the statutory tests and are necessary to make a development acceptable in planning terms.

As before, vacant building credit will be applied as a financial credit to offset against any obligation to pay affordable housing contributions. The floor space of any relevant disused buildings on the site will be credited against the total floor space of the new development when calculating the value of any contributions to be made. Contributions may still be required for any net increase in floor space.

It should be remembered in relation to developments of any size that in the event that affordable housing contributions would render the development financially unviable, developers can negotiate with local planning authorities for exemption from the contribution.