A landmark High Court ruling that the government remove planning practice guidance exempting small developments from affordable housing obligations will impact many schemes' viability and could alter the way ministers approach policy changes in the future. New planning guidance that exempts small sites from affordable housing obligations has been scrapped following a landmark High Court judgment. 

Mr Justice Holgate’s ruling, issued after a judicial review made by two councils in the south east, forced the immediate deletion of text in regard to the exemption for small sites – as well as the vacant building credit (VBC) – from the national online planning practice guidance (PPG). The removal of the guidance, added only at the end of last year, will have huge ramifications for applications currently in progress. It could mean that ministers alter the way they make changes to the planning system in the future.

The removal of guidance that prevented councils in most areas from requesting affordable housing contributions for applications of ten homes or fewer will impact "countless" schemes across England, said Jeremy Gardiner, regional director at consultancy WYG. "The immediate implication is that the ruling has undermined the financial viability of a large number of prospective housing developments," he said. "It will affect every scheme of fewer than ten dwellings that had assumed there would be no affordable housing element. You can assume that there will be schemes like that coming forward in every planning authority." 

Applications with section 106 agreements that are subject to review mechanisms may also be affected, as well as outline permissions where applicants are required to submit to a viability case at the reserved matters stage, according to Matthew Spilsbury, associate director at consultancy Turley. "There’s a risk that schemes that initially looked viable are suddenly going to take an additional hit on affordable housing," he said. "There are definitely going to be some deliverability issues. There might have to be some compromise." 

Trevor Ivory, head of planning at law firm DLA Piper, said the ruling will have an "immediate impact" on any developer in the process of making an application and negotiating obligations. "If section 106 obligations are under negotiation, local authorities may look to amend what they have been seeking," he said. Ivory added that local authorities or third parties may seek to mount legal challenges over permissions that have recently been granted with reduced section 106 packages. 

Gardiner suggested that options open to applicants with schemes affected by the ruling are to seek to revisit agreements with landowners or enter into negotiations with local authorities over section 106 packages. But he added: "That will take months to work through. It may mean that a reconfigured scheme can proceed, but it may mean that a scheme will stall altogether." 

The impact is also likely to affect local plan-making and Community Infrastructure Levy (CIL) schedules. Niall Blackie, senior partner at Midlands law firm FBC Manby Bowdler, said development plans in some areas will have been produced based on the quashed guidance. "They will need to be unscrambled and if they are adopted obvious questions then arise as to them no longer being consistent with national policy," he said. 

Some Councils may be pleased with the judgment. Sam Ryan, a director at consultancy Turley, pointed to Shropshire Council’s emerging plan, which she said relies heavily on windfall and small sites. The plan had been challenged on how it would deliver sufficient affordable housing under the quashed guidance, she said. She added: "Now it has been removed, the council will say it can rely on windfall sites."

Notwithstanding the above, the removal of the VBC, that gave developers the chance to offset floor area of empty buildings that had either been converted or developed for residential use against section 106 affordable housing obligations, will create both winners and losers, so says Spilsbury. Local authorities in high-value areas will probably be pleased by the deletion of the guidance as it is not likely to damage the delivery of projects, he says. But he adds that some councils will be less happy as the credit had unlocked "challenging" brownfield sites that had "suddenly become viable" after its introduction.

Responding to the High Court ruling, the Department for Communities and Local Government (DCLG) expressed its disappointment and said it would seek permission to appeal. But Ricketts said this prospect could create uncertainty and delay the progress of development. He said developers who negotiated draft section 106 deals on the basis of the VBC may wait for the appeal’s outcome before concluding discussions. Applicants affected by the removal of the ten-unit threshold may seek to do the same, he added. Ivory agreed, saying: "There is a risk that people with these sites may well decide to sit on them." 

Ricketts said the ruling "tells the secretary of state in capital letters that PPG is not a place for substantive changes to government policies". He added: "There are lessons for the way in which the government approaches the next round of changes to the planning system about complying with appropriate legal principles on consultation and then for the responses to consultation to be taken into account by the government conscientiously." 

Ivory added that, since the introduction of the PPG, there has been a "blurring between policy and guidance". He said: "I am concerned that policy is being announced by way of changes to the guidance. This case doesn’t quite tackle that point, but does seem to move in the direction of demonstrating the need for clarity." 

Mike Kiely, chairman of the board of the Planning Officers Society, said the ruling was a "shot across the bows of the DCLG". He added that the judgment makes clear that consultation responses should be examined "diligently" and given due response. "It’s not a tick-box exercise", Kiely said.

article by 7 August 2015 by Jamie Carpenter of Plannig Resource Magazine shared by Jonathan Braddick Architect Devon