Changes to calculating Affordable Housing contributions- A Helping Hand to smaller developers?
Thu 26 Feb 2015
In November 2014 the Government amended the National Planning Practice Guidance (NPPG) to include a proposal that a financial credit should be applied to affordable housing contributions where buildings are brought back into use or demolished in order to allow redevelopment. But how far do these amendments help the smaller developer?
In a Ministerial Statement of 28 November 2014 the Minister of State for Housing and Planning, Brandon Lewis, addressed the House of Commons setting out the Government’s support for small scale developers, custom and self-builders. The main aim of this support was declared to “help hard-working people get the home they want by reducing disproportionate burdens on developer contributions.” This help arrives following an initial consultation in March 2014 which received over 300 hundred responses. As a result of these responses the Government has proposed, and introduced, four main changes to the NPPG as follows:
1.Sites of 10-units or less which have a maximum combined gross floor space of 1,000m2 should not be subject to affordable housing and tariff style contributions (including residential annexes and extensions).
2.For designated rural areas under section 157 of the Housing Act 1985 (including National Parks and Areas of Outstanding Natural Beauty) authorities may choose to implement a lower 5-unit threshold, beneath which affordable housing and tariff style contributions should not be sought (including residential annexes and extensions). Where this threshold is introduced, tariff style contributions on developments of between 6 and 10 units should also only be sought as a cash payment and should be commuted until after completion of units within the development.
3.These changes in national planning policy will not apply to Rural Exception Sites which, subject to the local area demonstrating sufficient need, remain available to support the delivery of affordable homes for local people. However, affordable housing and tariff style contributions should not be sought in relation to residential annexes and extensions.
4.A financial credit, equivalent to the existing gross floorspace of any vacant buildings brought back into any lawful use or demolished for redevelopment, should be deducted from the calculation of any affordable housing contributions sought from relevant development schemes. This will not however apply to vacant buildings which have been abandoned.
So just how far do these amendments help the small developer?
The ‘credit’ against affordable housing contributions is designed to help all developers regardless of how many units they propose to develop on a site. Its purpose is not therefore to stop a developer from having to pay any contributions pursuant to a Section 106 obligation, but is instead aimed at encouraging developers to look at and seek to bring vacant and brownfield sites back into lawful use provided it is for lawful use. The ‘credit’ mechanism achieves this by effectively not charging for a contribution equal to the value of the existing gross floorspace of the vacant building.
However the provisions go beyond just allowing a developer the ability to claim a ‘credit’ against any affordable housing contributions. Instead the guidance on a blanket “no affordable housing contributions for sites of 10-units or less” allows those smaller developers to feel confident in assessing and seeking a greater number of development opportunities. Often these smaller sites will appear less desirable to the largest developers because they are not aligned to the scale of project required by their business model, so it is important that the smallest developers are encouraged to utilise these smaller development sites.
Mr Lewis stated in his address that the Government estimates that these changes will save on average £15,000.00 in Section 106 housing contributions per new dwelling in England. What’s more, the viability of these smaller developments is increased by the reduction in time required to negotiate Section 106 housing contributions on these smaller sites.
But what about the pooling of planning obligation contributions?
Local authorities often seek to ‘pool’ planning obligation payments made pursuant to Section 106 Agreements in order to provide infrastructure for a wider area. The aim of these payments is generally to mitigate the impact of development on local infrastructure by securing funds to be applied to improving or increasing the provision of said infrastructure. These payments should only be sought though where they are:
1. Necessary to make the development acceptable in planning terms;
2. Directly related to the development; and
3. Fair and reasonably related in scale and kind.
The changes to the NPPG states that these payments should not be sought to contribute to pooled funding ‘pots’ with the intention of providing general infrastructure to the wider area in cases where the 10-unit (or 5-units for rural areas) threshold applies.
The NPPG does however make if perfectly clear that site specific planning obligations may still be required to be met where it is necessary to make a development acceptable in planning terms (such as for improving road access and street lighting). It is only in relation to those 10-unit or less developments where the requirement to contribute to affordable housing or to pooled funding pots for wider area infrastructure should not be sought.
The new provisions of the NPPG assist both smaller developers and larger developers alike by providing each with a mechanism in which to claim back a ‘credit’ where vacant buildings are brought back into lawful use or where buildings are demolished for redevelopment. The provisions go further in their assistance to the smaller developers though by encouraging them to develop the smallest of sites by making them economically more viable.