Ring in the new? – planning update

In Planning for Housing, published in Real Estate. Reconsidered last month, we took a look at ongoing Government initiatives designed to tackle the housing crisis, and also the problems faced by high streets and town centres. Throughout we noted that whether and how various initiatives would be progressed depended on the result of the General Election. Now that we have a Conservative majority in Parliament, and understand the new Government’s priorities through their election manifesto (see our blog post of 27 November 2019) and the Queen’s Speech of 19 December 2019 (and the accompanying Background Briefing Notes), we have a clearer idea of what to expect in planning over the coming months. On the whole, it seems to be a case of progressing with initiatives already announced (although not necessarily widely publicised) with continued focus on housing, the environment and thriving centres. Here is a brief overview:

Planning reform

The Government has confirmed its continued intention to publish a Planning Green Paper, with the aim of making the planning process “clearer, more accessible and more certain for all users … also address[ing] resourcing and performance in Planning Departments”. Arguably a familiar objective for successive administrations, achieving these goals has proved difficult. There is relatively little more information on the detail of what the Green Paper will contain, although it may include CPO reform. We expect publication in the next few months.

Environment Bill

In our blog post of 11 November 2019 we reported on the Environment Bill 2019-2020, abandoned following the dissolution of Parliament prior to the General Election. The Government has confirmed that the Bill will be reintroduced largely in similar terms, including provisions on mandatory biodiversity net gain (see Mandatory Biodiversity Net Gain in Real Estate. Reconsidered), tightened air quality controls and the establishment of the Office for Environmental Protection (OEP). With environmental protection a high priority for the Government, this should be expected soon.

Housing

Housing need, affordable housing, Starter Homes and “First Homes”

Continuing the drive of previous governments towards increasing housing supply, the Government is committed to building at least a million new homes this Parliament with hundreds of thousands of new homes promised through renewal of the Affordable Homes Programme.

The previous Government promised that regulations to implement the statutory framework for Starter Homes introduced by the Housing and Planning Act 2016 would be introduced in 2019, and that regulations to exempt Starter Homes from the Community Infrastructure Levy (CIL) would be laid before Parliament. Recent announcements have been silent on whether the Government plans to continue with this, although we can expect that they will. However, the Government has announced another affordable homes initiative, “First Homes”, on which they will consult shortly. First Homes is intended to “provide homes for local people and key workers at a discount of at least 30 per cent”, funded by developers and secured through a covenant with the discount secured for perpetuity. The Government also intends to introduce “a new, reformed Shared Ownership model” to help shared owners buy more, and eventually all, of their property.

Also worth mentioning is that the Housing Delivery Test for November 2019 is still awaited, as is a promised review of the standard method for calculating housing need. These were due before the end of last year, so should be expected soon.

Permitted development and Future Homes Standard

Towards the end of 2019, the previous Government confirmed that it intended to introduce permitted development (PD) rights enabling upwards extensions of certain buildings in existing commercial and residential use to deliver new homes, and to allow the demolition of commercial buildings for rebuilding as residential units. There seems to be no reason not to expect secondary legislation implementing this to be published for consultation soon, in which case the promised review of residential PD rights “in respect of the quality standard of homes delivered”, announced in March 2019 in response to valid concerns regarding the design and quality of housing delivered pursuant to PD rights, may also be delivered.

To deal with concerns over PD rights the previous Government also intended to “develop a ‘Future Homes Standard’ for all new homes with a view, subject to consultation, to introducing the standard by 2025”. We wait to see whether this will be delivered.

Diversification guidance

Alongside the 2019 Spring Statement the previous Government promised additional planning guidance to encourage the diversification of large sites to encourage quicker build out rates, in response to findings of the Independent Review of Build Out Rates led by Oliver Letwin. It is not yet clear whether the current Government intends to pursue this.

Design

The final report of the Building Better, Building Beautiful Commission (BBBBC) was due to be published last month (see our blog post of 12 July 2019 on the BBBBC interim report). The previous Government committed to consult on a new “National Model Design Code” which would take the final report into account. We can probably still expect this consultation once the report is published.

Infrastructure

The Government has announced a £10bn Single Housing Infrastructure Fund to provide the infrastructure necessary to support residential development, building on previous infrastructure funding. Bearing in mind the Government’s manifesto commitment that infrastructure must be delivered ahead of new housing developments being occupied, which could impact viability, it will be interesting to see more detail on how this will be implemented.

Also, in its election manifesto the Conservative Party promised a £100 billion investment into infrastructure such as roads and rail, Northern Powerhouse Rail and the restoration of many of the Beeching lines. The Government has confirmed that it will publish the National Infrastructure Strategy (NIS) alongside the Spring Budget on 11 March 2020, together with its long overdue response to the National Infrastructure Commission’s National Infrastructure Assessment (due by July 2019), and that legislation to implement the NIS will be introduced “in due course”.

Devolution

The Conservative election manifesto proposed an English Devolution White Paper in 2020. Interestingly, this was not mentioned in the Queen’s Speech or the Background Briefing Notes. However, in a speech to the Local Government Association on 7 January 2020, Local Government Minister Luke Hall confirmed that the Government will “publish an ‘English devolution white paper’, aiming for full devolution, so that every part of the country has the power to shape its own future”. We wait to see when this will be brought forward and what “full devolution” will mean in practice. How the combination of devolution and infrastructure investment may impact development on a regional basis is worthy of further consideration.

Conclusion

All in all, rather than ringing in change the new Government seems to be on track to continue progress with the aims and initiatives of preceding administrations, with the exception perhaps of English devolution which has the potential to see a significant shift of influence from central to local government. It will be interesting to see how the various initiatives play out, and whether they bring the desired results.

For further information please contact:

Fiona Sawyer
Fiona Sawyer
Professional support lawyer, planning, London
+44 20 7466 2674
Matthew White
Matthew White
Partner and Head of UK planning, London
+44 20 7466 2461

Residential Leasehold up for grabs – change is coming, get ready!

The report of the Parliamentary committee on residential leasehold reform has been published containing strong recommendations, many of them radical, and some where it is not at all clear how they could work in practice.  Nevertheless, this is likely to be the future and a good commercial conclusion may be to assume that this will be the direction of things, and then to “adapt and survive”, and, preferably, prosper.

Mixed use and pure residential schemes may be affected by reform, in terms of investment value of existing portfolios, the ability to finance development or acquisition, and indeed the very legal basis upon which residential flat owners will hold their properties.  The motivation of Parliament is to right the anomalous way in which residential homes, particularly flats, are owned and managed.  This, despite the fact that there have been rafts of legislation, enacted over the last 50 years, that were meant to give leasehold house and flat owners far stronger rights and control over the properties they owned.  Other countries around the world have a “condominium” land holding system for flats, viewed as much less problematic than the UK system where a landlord keeps a role as property owner even when all the flats in a building are sold.  This motivated the creation of the law of Commonhold here, which although already on the statute books has had little or no impact on the way in which homes are owned.  The Parliamentary committee asked itself the valid question as to where things currently are.

A no-choice Commonhold revival?  Banishment of Ground Rents, potentially without proper compensation to landlords? In this “deep dive” article by head of Real Estate Dispute Resolution at HSF, Matthew Bonye sets out how the laws are currently framed, what is thought to be wrong with them, what Parliament wants to do, and then he tells you what he really thinks about it all.

Click here to read on

Author: Matthew Bonye, Partner and head of real estate dispute resolution, London

For more information please contact:

Matthew Bonye
Matthew Bonye
Partner and head of real estate dispute resolution, London
+44 20 7466 2162

Agreements with Registered Providers: 5 Top Tips

For developers bringing forward any residential development, the affordable housing package will be one of the most important elements of ensuring a scheme actually gets consent – particularly in the current political and policy environment. But while it is easy to focus only on those crucial headlines – number of units, tenure, and size – it is important to keep an eye on what comes after planning permission. Most of the time, this will mean doing a deal with a registered provider, which will have its own preferences as to how the deal should be structured and how the units will be managed. Here are our top 5 points for developers to be aware of.

1. Think carefully about section 106 restrictions …

One of the top priorities of the local planning authority will be to ensure that the affordable housing package is adequately secured in a section 106 agreement. While every agreement is different, they all generally contain two key things.

First, a requirement to build the affordable housing units and sell the freehold or a lease (usually at least 125 years) to a registered provider. This will typically be drafted in the form of what is known as a “Grampian” restriction: a requirement to do something (ie build and sell affordable housing units) before you do something else (ie occupy your valuable market housing).

Second, there will be a restriction stating that the units to be provided as affordable housing cannot be occupied for anything other than the tenure set out in the agreement.

How these provisions are drafted is hugely important. An improperly drafted Grampian restriction, or one which doesn’t take into account the circumstances and programme of the scheme, could unreasonably prevent or delay the most valuable parts of the development from being occupied – therefore impacting on sales, funding and, ultimately, viability.

2. … and then make sure you pass them down

If the section 106 agreement obliges you as the developer to do something in relation to affordable housing – eg to maintain the housing in a particular tenure, or to keep the service charge low – you will want to pass this obligation down to the registered provider. The transaction documents should therefore be back to back with the section 106 so nothing falls through the gaps.

This will involve an analysis of whether it is appropriate for you as developer or the registered provider, or both parties, to fulfil the relevant obligations taking account of the respective land interests and rights.

You will need to pay particular attention to what could go wrong to prevent any restriction being lifted on the market homes – like, what would happen if the registered provider you are selling to goes insolvent, or ceases to be recognised as a registered provider? All these issues will need to be thought about and catered for in the transaction documents.

3. Think carefully about where the affordable units sit within the estate management structure

The registered provider’s preference will typically be to take all of the affordable units in a single transfer or a single block lease. A developer may prefer to retain control over the common areas within the block. This will ensure the provision of services and recovery of service charge is consistent across the estate (but see point 4 below). If the registered provider accepts that approach, it may seek greater control over the management company responsible for the block (eg through shares in the management company and voting rights) but whether this is acceptable to a developer will depend on the number of units and their configuration within the block.

4. Test whether the estate service charge works for the affordable units

The registered provider will be very keen to ensure that the service charge for the affordable units is as low as possible – particularly given that some tenures involve rent caps that are inclusive of service charge (there may also be specific covenants regarding service charge within the section 106 agreement). In the service charge provisions in the lease, the registered provider will seek to reduce the developer’s discretion as to which services are provided and will want wide consultation rights. Depending on the nature of the development, the registered provider may want certain non-essential service charge items excluded (for example the costs of concierge services or an on-site gym), but please note that this may cause reputational issues for the developer as highlighted in recent news articles where affordable tenants have not been able to utilise all of the amenities provided at new development sites.

5. Think about utility supplies to affordable units

It is likely that a registered provider will require that its tenants enter into direct supply agreements with the utilities providers rather than have utilities charged through the service charge (which would put the credit risk on the registered provider as the direct tenant of the developer). Again, you will need to think through carefully how utility services are procured and managed for the affordable units and how this ties in with utility arrangements for the wider estate.

In summary there are lots of issues to be thought through when dealing with a registered provider and reaching agreement with a registered provider on the disposal of the affordable units will require careful consideration. As such, we recommend that solicitors are instructed at an early stage to ensure that the transaction documents deal with the requirements of the section 106 agreement and are consistent with the developer’s plans for the remainder of the estate.

For further information please contact:

David Evans
David Evans
Senior Associate, Real Estate, London
+44 20 7466 7480
Annika Holden
Annika Holden
Associate (Australia), Planning, London
+44 20 7466 2882
Julian Pollock
Julian Pollock
Partner, Real Estate, London
+44 20 7466 2682
Matthew White
Matthew White
Partner and Head of UK planning practice, London
+44 20 7466 2461

 

Affordable Housing Back to Basics: What do the new NPPF and Draft London Plan modifications mean for affordable housing?

This blog post explores how the meaning of affordable housing has evolved following the publication of the revised National Planning Policy Framework (“NPPF”) on 24 July 2018 and the Draft New London Plan showing Minor Suggested Changes on 13 August 2018. This is part of our ‘back to basics’ affordable housing series and is intended to supersede entry 1 in the series. Continue reading

Revised National Planning Policy Framework—will it fix the housing market?

This article was first published on Lexis®PSL Planning on 9 August 2018.

Will the government’s new planning rulebook deliver on its promises? Robert Walton, barrister at Landmark Chambers, says the new National Planning Policy Framework (NPPF) is a step in the right direction and should result in more houses. Matthew White, partner and head of the planning team in Herbert Smith Freehills LLP’s London office, predicts that, by itself, the revised NPPF will not streamline the planning process, nor close the gap between planning permissions and housing delivery. Continue reading

Impact of revised National Planning Policy Framework

The revised National Planning Policy Framework (NPPF) was published on 24 July 2018. This post considers what difference it will make – in terms of the impact on developers, whether the government’s aims will be achieved and how soon its effects might be seen.

Impact on developers

On the whole, policies in the revised NPPF are more restrictive. Tighter controls over design standards, green belt boundaries, developer contributions and viability appraisals, stronger protection for the environment and the introduction of the “agent of change” principle to new development all provide little incentive to bring forward development.

A welcome change, however, is that LPAs should now take a more flexible approach to daylight and sunlight issues.

The new standardised methodology for calculating housing need, which takes effect immediately, represents a significant change for residential development. It will provide more certainty on housing requirements in each LPA’s area, generally with an increase in housing targets. Local authorities’ success in delivering against these targets will be assessed by the new Housing Delivery Test. From November 2018 local plans will be deemed out of date if the LPA fails to deliver 25% of its housing target as assessed by the new standardised methodology; this threshold will increase in subsequent years to 45% of the target from November 2019 and 75% of the target from November 2020. If local plans are deemed out of date the presumption in favour of sustainable development will be brought into play, increasing the likelihood that planning permission will be granted. Continue reading

Reasons to be cheerful

It is good practice for a local planning authority to give reasons for the grant of planning permission. Failure to give adequate reasons may be serious enough to justify quashing the permission.

There is a statutory duty to give reasons for the grant of permission for EIA development.  However, even if it is not EIA development, reasons will need to be given where the grant of permission does not follow the planning officer’s recommendation; where the development would not comply with planning policy; and where there is significant public interest in the proposals. The law on the duty to give reasons was summarised and confirmed recently in a Supreme Court case, Dover District Council v CPRE Kent (2017) UKSC 79.

1. Background

2. Supreme Court

3. Comment

 

1. Background

The Dover case related to a planning application for a large residential development in an area of outstanding natural beauty (AONB). Before the local authority granted permission, the planning officer’s report had made several recommendations, including reducing the number of residential units, to reduce the harm caused to the AONB. The report stated that this would preserve scheme viability and retain the economic benefits of the development, which helped to provide the finely balanced exceptional justification needed for causing harm to the AONB. The officer’s report also recommended implementation as a ‘single comprehensive scheme’ to secure those economic benefits (including a hotel and conference centre) and conditions or planning obligations to achieve this.

Planning permission was granted by the local authority without following these recommendations. No reasons were given by the local authority for this departure from the officer’s report.

2. Supreme Court

Continue reading