Real Estate EP5: The future of planning – Matthew White and Ghislaine Halpenny in conversation

British Property Federation (BPF) director of strategy and external affairs, Ghislaine Halpenny, sits down with Matthew White, partner and head of UK planning, to discuss planning, its ever-changing nature and the direction it is taking.

 

Also published on the BPF soundcloud for the BPF Futures network, a networking and development group for junior professionals working in all areas of UK real estate.

For further information please contact:

Matthew White
Matthew White
Partner and Head of UK planning, London
+44 20 7466 2461

Affordability, viability and clarity – the impact of valuation on supply of affordable housing

Viability is at the heart of the extent to which private developers can be expected to bridge the gap between demand for and supply of affordable housing. In April this year, in a postscript to his judgment in the case of Parkhurst Road Ltd v Secretary of State for Communities and Local Government and another [2018] EWHC 991 (Admin), Mr Justice Holgate said that “uncertainty on how viability assessment should properly be carried out” is leading to “a proliferation of litigation” and called on the Royal Institution of Chartered Surveyors (RICS) to revisit its 2012 Financial Viability in Planning Guidance. Since then, the revised National Planning Policy Framework (NPPF) has been published together with revised Planning Practice Guidance (PPG) on viability, but a review of the RICS guidance is still ongoing. On 5 October, the Deputy Mayor of London and the Executive Member for Housing & Development at Islington Council wrote a joint open letter to the President of the RICS regarding affordable housing and the 2012 RICS Financial Viability in Planning Guidance. Their letter asks RICS to revisit its guidance, as called for by Holgate J. 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

Closing the “viability loophole”? A return for the developer must be taken into account when setting local plans

The Government is recommending that viability is assessed in detail by the local authority at the stage of setting its development plan and allocating land for certain uses, and that specific assumptions should be made at that stage regarding land value and what is a reasonable return for a developer – using the ‘existing use value plus’ (EUV+) land valuation method and assuming a return of 20% of gross development value (GDV) for the developer in appropriate circumstances.  It could then be more difficult for a developer to re-open negotiations on viability at a later stage.

The Government’s new Draft Planning Practice Guidance for Viability sets out more detail on the new proposals, as we explain in this post.  This draft guidance is one of a raft of new publications which the Government have released, including new draft National Planning Policy Framework (NPPF) and a consultation on developer contributions including Community Infrastructure Levy (CIL) which are all aiming to increase the supply of housing, provide certainty for developers, capture land value more effectively and improve and speed up the planning process.

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A five step guide to calculating the level of affordable housing the Mayor considers viable

In this blog post, we explain in simple terms how a developer is now expected to set the level of affordable housing which the Mayor of London deems viable for a particular site.  This is part of our ‘back to basics’ affordable housing series.

The Mayor is fed up with developers arguing that it’s not viable for them to deliver policy compliant levels of affordable housing due to the high prices they are paying for sites. In his Supplementary Planning Guidance (SPG) on Affordable Housing and Viability issued last August, Sadiq Khan refers to the ‘circularity’ this causes: land prices are higher than they should be because buyers and sellers are not factoring in delivering much affordable housing.

The Mayor wants to stop this by ’embedding’ delivery of policy compliant levels of affordable housing into land prices. To do this, he is going to have no regard to the price developers actually paid for a site. The maximum he will let developers factor in to viability calculations is the value a site has in its existing use plus a margin of 10-30% where appropriate (what he refers to as the “benchmark land value”).

Please read on for the five step guide to calculating the level of affordable housing the Mayor considers viable.

Herbert Smith Freehills is running workshops which talk through an example calculation to show how this approach to viability assessment works in practice. In the workshop we also run through calculations showing how early and late viability reviews work  (post-planning) under the Mayor’s SPG. This will be the subject of future blog entries.  Please contact us for more information.

Step 1: Gross Development Value

Step 2: Residual Land Value

Step 3: Benchmark Land Value

Step 4: Comparing Residual Land Value and Benchmark Land Value

Step 5: How much affordable housing can the developer afford to deliver on this site, factoring in the benchmark land value?

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Affordable housing viability calculations: Herbert Smith Freehills workshops on Mayor’s new guidance

Herbert Smith Freehills are running workshops for property developers on housing and viability, with a focus on London and interpreting the Mayor’s recently adopted guidance on viability and affordable housing.  In our workshops we run through a case study with actual calculations showing how viability reviews work under the Mayor’s new formulae. Please contact us for more information on the workshops.

Background: proposals on a national and London-wide scale to address the housing crisis

Following the Government’s Housing White Paper (in February 2017), several recent publications by the Government and the Mayor of London set out proposed changes to planning legislation and policy, designed to address the housing crisis:

– The Mayor of London adopted his Affordable Housing and Viability Supplementary Planning Guidance (SPG) in August 2017. This SPG aims to improve transparency and trust in the planning process, with a focus on viability information, and aims to increase the expectation of actual delivery of affordable housing to at least 35% (and 50% on public land) for each new development scheme which proposes 10 or more new homes, with an overall long-term strategic aim of at least half of all new homes in London being affordable.  The method and explanations in the Mayor’s SPG are more detailed and rigorous than those in the Government’s national consultation (see below), and there have been industry calls for the Mayor’s methodology to be used nation-wide. Continue reading

Review of unviable affordable housing obligations to cease on 30 April 2016

Author: Matthew White, Partner and Head of Planning, London

Developers with planning permission for residential development can currently apply to renegotiate affordable housing obligations which have become economically unviable.  However, this review mechanism will cease to be effective on 30 April 2016. Therefore applicants have until this date to apply to renegotiate, and later requests will not be considered. 

The review mechanism was introduced as a temporary measure in 2013 (under new sections 106 BA-BC of the Town and Country Planning Act 1990) to assist stalled schemes, and it was due to end on 30 April 2016.   According to the Government's Spending Review and Autumn Statement 2015, the mechanism was going to be extended to 2018.   However the Department for Communities and Local Government (DCLG) has confirmed to us that the provisions will in fact cease to be effective on 30 April 2016, as originally stated in the legislation.  DCLG accept that this is a change in direction from the autumn statements but state that they are not planning to make a formal announcement on the matter at this stage. 

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Planning Update: office to residential conversion rights made permanent, Mayor’s advice to local authorities on avoiding these rights, Mayor’s viability disclosure requirements, and CIL and mezzanine floors

Authors: Matthew White, Partner and Head of Planning, and Lucy Morton, Professional Support Lawyer, Planning, London

Today's post is a planning update, summarising some of the recent and forthcoming changes to planning law and policy.

Please contact us for more information on any of these topics.

1.    Office to residential conversion rights made permanent

2.    Mayor's advice to London authorities on avoiding the office to residential conversion rights (new SPG for the Central Activities Zone)

3.    Mayor calls for more transparent viability information (new Housing SPG)

4.    Community Infrastructure Levy (CIL), mezzanine floors and multiple planning applications

5.    Coming soon…

 

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How to solve a housing crisis: commercial viability, land value and affordable housing

Author: Martyn Jarvis, Associate, Planning, Real Estate, London

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The UK is facing a housing crisis, most pronounced in London, and this is set to be a key factor in the forthcoming Mayoral elections.  Meanwhile, commercial viability is the talk of the town.  How “viable” a scheme is will influence how much affordable housing can be provided.   Requiring disclosure of viability information across London, standardising land value calculations, standardising viability methodology and fixing affordable housing targets are amongst recent recommendations made to the Government and to the Mayor.

Transparent viability information is already required in Islington, and with Greenwich and Southwark following suit where schemes are not policy compliant, the London Assembly are now urging the Mayor to adopt this approach across London.  Over the past few weeks the London Assembly Planning Committee and London First have both presented papers aimed at steering a policy shift once the new Mayor takes office.

 

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