Blyth Valley appealed against a ruling that quashed its bid to introduce a 30 per cent affordable housing policy. The quashing resulted from an application made under section 113(3) Planning and Compulsory Purchase Act 2004 (the 2004 Act) by three housing developers, the respondents to the appeal.

In 2006, as part of a development plan, the local authority developed a document called core strategy. The core strategy had contained an affordable housing target for new housing developments of at least 30 per cent. The target was based on a housing needs survey (HNS) which had been carried out on behalf of the local authority in 2004. The HNS used a broad meaning of affordable housing which included low-cost housing. Not long before the core strategy was submitted to the planning inspector new national planning policy guidance (PPS3) was issued. PPS3 used a narrower definition of affordable housing which did not include low-cost housing and was therefore more onerous on developers. It also required that “economic viability” should be taken into account in setting targets for affordable housing.

The inspector found that the local authority’s core strategy was sound and conformed with PPS3. He also found that the HNS remained a credible evidence base for the affordable housing policy. The respondent housing developers applied to quash the decision of the inspector, pursuant to section 113(3) of the 2004 Act. The judge found that that local authority had failed to carry out a proper assessment of the economic viability of its affordable housing target in accordance with PPS3.

Blyth Valley appealed against the decision. The issue was whether it had been open to the inspector on the evidence before him to find that the local authority’s policy complied with PPS3 and was "sound" within the meaning of section 20(5)(b) of the 2004 Act and the Secretary of State’s guidance.

The appeal was dismissed. The Court of Appeal held that the process leading to the adoption of the affordable housing policy had been legally flawed. It was a crucial requirement of PPS3 that an economic viability assessment of the affordable housing target was undertaken. The local authority’s core strategy did not comply with this requirement and it followed that the inspector had erred in his finding that it did. The inspector had failed to recognise that 2004 HNS used the earlier and broader meaning of affordable housing, whereas the core strategy adopted the new meaning, which was narrower and more onerous for developers. Therefore, it was not open to him to find that the HNS provided a credible evidence base for the affordable housing policy.