3.36

Cambridge City Council, Affordable Housing SPD representation
Please accept this letter as formal representation to the Affordable Housing SPD consultation on behalf of Brookgate Ltd. The representations made have also been lodged via the online consultation portal against each of the paragraph numbers cited below.
Viability Comments
Paragraphs 3.27 - 3.40 inclusive of the Draft Affordable Housing SPD relate to viability of schemes. Bidwells have reviewed these paragraphs and welcome and agree with most of the text contained within.
We do however have significant concerns regarding paragraph 3.37 which states that in the instance where a planning permission is granted and the scheme delivers affordable housing and planning gain payments at a lower level than policy targets, the council intend to apply a post-development review to identify whether the Council could receive retrospective payments based on improved scheme viability through an "overage" arrangement. This is an unacceptable burden on the developer and contrary to established practice and guidance and we comment in detail on this against the relevant SPD paragraphs.
Paragraph 3.28
The paragraph refers to the position that likely development costs to be incurred in delivering a proposed development should be anticipated and reflected in the price that the developer pays for land. We agree with the principle of this statement, but the paragraph needs to continue to recognise that regardless of the residual land value of a scheme, land will only come forward if the landowner receives a competitive return as required under NPPF paragraph 173.
Paragraph 3.29
The paragraph refers to the costs that can be included in the development appraisal and states that the price paid for land may not be a determining factor if too much has been paid or historic land values or developer profit margins are being protected at the expense of required planning contributions.
We agree that it is not the role of the planning system to underwrite the risk of a developer making a bad purchase decision and that values for land should normally be based on current land value rather than historic value. However, (and it may be semantics), it must be the case that a developer protecting a profit margin is reasonable providing that profit margin itself is also reasonable; otherwise there would be a significant impediment to development coming forward and a system that does not seek to significantly boost the supply of housing as required by NPPF paragraph 47.
It would be unreasonable (and hinder the prospects of development coming forward) to expect the developer to accept a lower than normal level of profit in light of the burden of planning obligations and this is supported by paragraph 173 of the NPPF. The principle of both developers and landowners receiving competitive returns is enshrined in policy and is at the heart of development viability. Therefore we maintain that in order for development to happen a developer must receive a reasonable level of profit and this profit must be protected through a reduction in planning obligations to a level where development becomes viable and deliverable.
Paragraph 3.30
The paragraph states that the Council may consider a reduced level of contributions in the event that the applicant can demonstrate that the scheme cannot make a fully compliant level of contributions and remain viable. In our view, scheme viability is a material consideration for every application and therefore the Council should always consider a reduction in planning contributions in order to comply with NPPF paragraph 173 to ensure that schemes are deliverable.
The Council should be more accepting that viability is an important material consideration. If viability is an issue on a scheme and is a common ground matter between the parties then the Council, to be NPPF compliant, must go beyond the position that it 'may' consider reduced contribution, and rather adopt a position that it 'will'.
Paragraph 3.31
The paragraph refers to the use of the Homes and Communities Agency's development appraisal tool or equivalent well-recognised appraisal tool to be agreed with the council in advance of the assessment. We welcome the Council's willingness to accept alternative appraisal tools, as in our view, and years of experience, the HCA development appraisal may not be appropriate for all schemes.
We welcome the council's acceptance that the residual land value of a proposed scheme should be compared against a benchmark or threshold land value which may be market value, existing use value or alternative use value. This is in-line with guidance from the RICS on benchmark or threshold land values which in turn is consistent with the NPPF requirements of competitive returns for both developers and landowners.
Paragraph 3.32
The paragraph refers to the inclusion of costs which are only necessary or essential for the development and we agree that this is appropriate, but the example of underground parking is questionable (just as one example). A development that is in a constrained but important location could demand underground parking for the significant benefit of 'tidying away' vehicles and services, to the clear public benefit of a more resolved design that better responds to its environment. The paragraph should remove the examples of additional benefits as these are better to be assessed on a case-by-case basis taking into account the constraints of each development on their own merit.

Paragraph 3.34
The paragraph is largely agreed with, although the Council should include that a minimum of three fee quotations for viability review will be sought to demonstrate to the applicant that they are obtaining best value. Furthermore we agree with the Council's intention to retain commercially sensitive information in confidence but also accept that key issues and outcomes and conclusions may need to be made available to elected members when they are considering the planning application.
Paragraph 3.35
The level of planning obligations (affordable housing contribution) will be what the development can afford, and remain viable and deliverable. In this scenario it would not be acceptable to refuse the planning application.
Paragraph 3.36
The paragraph confirms that the Council will negotiate a reduced level of planning obligations and affordable housing if it is proved that full policy requirements would render an otherwise well designed and acceptable scheme unviable. We welcome this position which recognises that schemes bring a range of benefits other than affordable housing and these should be considered in the round.
Paragraph 3.37
The paragraph states that if on the initial viability assessment a scheme is demonstrated as being incapable of meeting the full policy requirement the council will require the Section 106 legal agreement to include an "overage position" whereby the council can capture some of any uplift that is realised once the scheme has been delivered.
We strongly oppose the council's proposal for an overage provision if a scheme fails on initial assessment to deliver the full policy target level of affordable housing and planning gain. Our view is shared by the RICS who in their guidance note GN 94/2012 "Financial Viability in Planning" state that overage arrangements are not considered appropriate as development risk at the time of implementation of a planning permission cannot be accounted in respect of the inevitable uncertainty of undertaking a development or individual phase.
The introduction of a retrospective overage provision also undermines the basis of a competitive return as envisaged by the NPPF by introducing abnormal uncertainty following implementation of the development. The implication of this is that funders would be potentially unlikely to fund schemes where such certainty exists.
The introduction of a retrospective "overage" provision would therefore constitute an unacceptable burden of risk on the developer and must be removed from the SPD.
A developer should be supported for trying to deliver a high quality scheme where viability is an issue. The Council's overage approach will introduce uncertainty and will certainly hinder development from otherwise coming forward and not meet the Council's duty to 'significantly boost the supply of housing' (NPPF paragraph 47).

Paragraph 3.40 refers to reductions to affordable housing secured under a Section 106BA application being available for a period of 3 years. The paragraph then goes on to state that the council will require an overage provision along the lines of that discussed in 3.37 for such developments.
For the reasons we have set out against 3.37 we cannot support this overage provision. We believe that it would constitute poor policy as it is not in accordance with the requirement for generating competitive returns for developers and landowners set out in paragraph 173 of the NPPF and furthermore it is not supported by RICS Guidance Note GN 2012. We therefore urge the Council to remove this unreasonable requirement for overage that would bring about uncertainty and hinder development coming forward.
Paragraph 26 of Section 106 Affordable Housing Requirements; Review and Appeal (DCLG, April 2013) makes clear that when Section 106 BC (an appeal to the a Section BA application to vary the amount of affordable housing to a permitted scheme) is successful that a three year period will be applied by the inspector, thereafter the three year period '[the decision] will include provisions to reapply the requirements of the original agreement for the part of the site that remains uncommenced'. There is no provision for overage or even that this is implied as being an option.
The Council's pursuing of an overage clause is not consistent with Government guidance and is not founded on Government guidance. It will strongly act against boosting the supply of housing and to positively seek opportunities to meet the development needs of the area; both are requirements of the NPPF.
General Comments
Paragraph 2.11 (aparthotels)
The paragraph at its bullet-point two restates the emerging Local Plan Policy 77 position that aparthotels and serviced apartments will be treated as residential and that affordable housing will be sought as part of any such proposal.
This is strongly objected to. The point of principle is ultimately with emerging Policy 77, which has received objection to it and it will continue to do so through the Local Plan examination.
Aparthotels do not provide residential accommodation as a C3 use, they are clearly a C1 use providing short term accommodation without any significant element of care; subject to the nature of the aparthotel it could be sui generis akin to a C1 use, but certainly not C3. The Town and Country Planning (Use Classes) Order 1987 (03/2005) at paragraph 59 explicitly states aparthotels as being classified as C1:Hotels
Matters for a s106 must comply with the tests set out by CiL regulation 122:
 necessary to make the development acceptable in planning terms;
 directly related to the development; and
 fairly and reasonably related in scale and kind to the development.
An affordable homes contribution for an aparthotel cannot meet these tests; the affordable homes element would not be mitigating for any perceivable harm; the affordable homes element cannot be necessary or directly related to the development. Emerging Policy 77 does not seek any affordable homes mitigation for hotel accommodation, which is also short-term accommodation. It is not a matter for discretion by the Local Planning Authority, it is a matter founded in the CiL regulations that must be complied with.
A policy position that demands affordable housing is provided as an integral part of an aparthotel will demonstrate the juxtaposition of the two uses. The affordable homes being places of permanent residence as a stark contrast against aparthotels that will inherently provide for a short-term and transient population.

The SPD cannot formalise a matter of principle that is a controversial and opposed part of an emerging Local Plan that is still to be subject to examination.
Paragraph 3.11 (outline stage)
The SPD requires applications to define the affordable homes percentage at the outline stage. The percentage should be indicative as per the dwelling mix, location, tenure mix, dwelling types and sizes; matters that paragraph 3.11 already set out to be indicative. These indicative matters all serve to have an impact on development value and viability, which in turn could impact on the affordable component that the development can afford.
Paragraph 6.11 (business related housing)
It is not appropriate to default business related housing to become affordable housing. The housing may be of a design, location or layout that does not lend itself to be affordable housing. Such housing would normally need to be constructed to a certain standard, minimum size and life time homes compliant which the employment related housing may not be.
The guidance must allow for the development to be treated no less favourably than a new residential development; therefore, an off-site financial contribution should be an option which the SPD makes clear is an acceptable way of dealing with the affordable homes issue for schemes of less than ten units.
Paragraph 6.14 (aparthotels)
Please see the principal objection to paragraph 2.11 that explains that a requirement for an affordable housing contribution as part of aparthotels does not meet the necessary tests and must be deleted.
Appendix 2 A2.2 (off site payment viability)
The Appendix should acknowledge that the amount of financial contribution payable is itself subject to viability.

Considerations

Much of the draft SPD can be supported, however in a few instances the approach proposed in the SPD is likely to differ from that likely to be followed in South Cambridgeshire when our own Affordable Housing SPD is reviewed later this year because they are not consistent with the NPPF or otherwise appropriate. The proposed representations are intended to help to ensure that a common approach is followed across the two districts to financial contributions, and to assist the general refinement of the wording of the SPD.

A link to the draft SPD is provided at the background papers section of this report.

Proposed Response

Welcome and support the Affordable Housing SPD subject to the following representations and comments.

SPD Paragraphs:

2.4 The NPPF sets out Government policy rather than guidance. Practice guidance is provided in the NPPG.

2.11 Specialist Housing - Where group homes are provided we would question whether it is viable or feasible to require an affordable contribution within the scheme.

3.3 The SPD should be more explicit about the partnership working arrangements with SCDC on major developments regarding lettings. This would help reinforce the message that the two authorities work closely together on spatial planning matters.

3.36 Should there be a cap on the overage to prevent the effective affordable housing provision ever being the equivalent of more than the 40% affordable housing provision required by the policy at the time of determination of a planning application?

4.5 Should this paragraph also allow affordable housing to come forward in advance of the market housing? This was quite a common occurrence nationally and locally in the depths of the recession and should not be hampered by the SPD.

Section 5 Building Design Within the Building Design section there is no mention of a minimum standard relating to the Code for Sustainable Homes, although there is reference within paragraph 8.9 in the Implementation and Monitoring section which lists the standard affordable housing clauses that form part of the Section 106 agreement. It is not clear therefore whether the SPD is seeking a minimum level.

Section 7 Occupancy Within this section, reference should be made to allocations through the sub-regional Home-Link Choice Based Lettings scheme.

Calculation of Financial Contributions (Appendix 2)

The NPPF at paragraph 50 states that affordable housing should be provided on site, unless off-site provision or a financial contribution of broadly equivalent value can be robustly justified. Because the subject of this statement is the affordable housing that has not been provided on site, this must mean that the financial contribution must be of broadly equivalent value to the affordable housing that has not been provided on site.

However the approach followed in the draft Cambridge SPD is different. In summary it calculates the market value of the affordable housing (using either the value of the land or of the housing floor space depending on the scale of the development) and requires a percentage of this as a financial contribution. This approach is not considered to be consistent with the 'broadly equivalent value' test of the NPPF which relates to the value of the foregone on site affordable housing.

Paragraph 50 of the NPPF goes on to say that 'Such policies should be sufficiently flexible to take account of changing market conditions over time'. However the SPD does not explain what review mechanism is in place for the calculation of financial contributions and whether they will be updated on an annual basis.

The consultation SPD goes in to a lot of detail in terms of commuted sum calculation but appears to be inconsistent in terms of sections:
(i) How to calculate an affordable housing contribution for proposals of 2 to 9 dwellings; and
(ii) How to calculate an affordable housing contribution for 10 or more dwellings (top-up financial contributions where use of the affordable housing policy percentage produces fractions of units).

The first method considers a commuted sum based on the whole development floorspace whereas when working out the commuted sum for the fraction of units in section (ii), it is based on a percentage of 'unit type that would have been allocated for affordable housing'.

Not only is this inconsistent but it also leads to a problem - what if the developer disputes which unit should be provided as affordable housing? Furthermore why is the fraction not based on the total remaining floor area as per the first method?

Appendix 6 Paragraph 10 Affordable housing mix

This section should include a table showing the housing mix which would currently best meet the housing needs of households on the Cambridge housing needs register. In contrast to such a table derived from actual needs, table 12 of the SPD provides a housing mix for affordable housing derived from SHMA data which has to be mathematically 'dampened' to yield a credible mix which reduces the number of 4 and 3 bedroom properties and includes a greater proportion of one and two bedroom properties.

The proposed mix only makes provision for 20% 1 bedroom properties despite issues such as the spare bedroom subsidy (also known as the bedroom tax) which can make larger properties difficult to let to households in the most housing need and would appear to not take full account of evidence in the SHMA that the projected increase in household types to 2031 in Cambridge will be concentrated in smaller households (Table 3 of Chapter 14 of the SHMA).

Housing colleagues and the s106 officer have contributed to the preparation of the Council's response to the draft Affordable Housing SPD.