Draft Affordable Housing SPD
Representation ID: 28600
The Appendix should acknowledge that the amount of financial contribution payable is itself subject to viability.
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.
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.
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.
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.
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'.
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.
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.
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.
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.
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.
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.
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.