The Growth and Infrastructure Act 2013 (GIA) received Royal Assent on 25 April 2013. The act amends the planning system and sets out a series of practical reforms with the aim of reducing 'red tape' that hinders investment in infrastructure. Planning Minister Nick Boles said: “These new laws will reform our economy so it can boost investment, growth and jobs by streamlining a lot of confusing and overlapping red tape".
The amendments to Section 106 Town and Country Planning Act 1990 (TCPA) have been anticipated for some time and the GIA sets out the procedural steps for developers who want to revisit affordable housing requirements which were negotiated in more favourable economic conditions on viability grounds.
This will be of interest to our Registered Provider clients both in relation to their own mixed tenure schemes, where the levels of private sale or rent are restricted making viability difficult; and where there is an ongoing relationship with private developers who may be looking to reduce the number of affordable units within potential schemes, thereby reducing the expected number of affordable units available.
The GIA inserts new sections (106BA) into the TCPA which introduce new application and appeal procedures for the review of planning obligations which relate specifically to the provision of affordable housing.
When making the application, the developer should submit a revised affordable housing proposal, based on prevailing viability and supported by relevant viability evidence. The test for viability is outlined in Department for Communities and Local Government (DCLG) guidance. The developer should produce evidence that the cost of the build-out of the entire site, at today's prices, is at a level that would enable the developer to sell all the units on the site, in today's market, and make a competitive return for a willing developer and a willing landowner.
The developer's revised affordable housing proposal should still deliver the maximum level of affordable housing consistent with viability and an optimum mix of provision. If the local planning authority disagrees with the revised proposal for affordable housing, the new legislation now provides for the developer to appeal directly to the Secretary of State. A successful appeal will result in the affordable housing requirement being revised.
In making an application to the local planning authority or appeal to the Secretary of State, the developer should, in line with DCLG guidance, submit 'clear, up-to-date and appropriate evidence'. Such evidence takes the form of an 'open book' review of the original viability appraisal and should clearly demonstrate, by reference to evidence, that the proposals in the Section 106 agreement are not economically viable in current market conditions. At appeal, if the developer is unable to proceed on an open book basis, general evidence of changes in costs and values since the grant of permission can be submitted. However, developers should be wary of adopting an approach that fails to provide sufficient evidence for a robust and objective decision on viability. Developers will be wary that, at appeal stage, the local planning authority can also submit its own evidence as to the viability of the developer's revised proposals.
Developers who do appeal should bear in mind that, if an application to review affordable housing obligations is successful, the obligations are revised for a period of three years only, starting on the date when the appellant is notified of the appeal decision.
Powers to negotiate Section 106 agreements on a voluntary basis are not affected by the new procedures and so developers are still free to enter into negotiations with planning authorities to amend and vary agreements. The new application and appeal procedures will only assess the viability of affordable housing requirements and cannot be used on other grounds.