Crest Nicholson v Secretary of State: Water neutrality upheld in planning decision

On 22 August 2025, the Planning Court delivered a significant judgement in Crest Nicholson Operations Limited v Secretary of State for Housing, Communities and Local Government & Anor, affirming the primacy of water neutrality requirements in housing developments adjacent to protected ecological sites.

The case concerned a statutory review of the Secretary of State's approval of reserved matters for 280 dwellings at Kilnwood Vale, Crawley Road, Faygate, Horsham. The development forms part of the West of Bewbush Joint Area Action Plan's strategic initiative to deliver approximately 2,500 homes with supporting infrastructure in the Horsham area.

Central to the dispute was Condition 6, imposed following a public inquiry, which required the developer to demonstrate water neutrality before occupation of the dwellings. This condition mandated that development could not proceed until water neutrality was achieved through Horsham District Council's adopted Offsetting Scheme or equivalent arrangement, reflecting heightened environmental considerations under the Conservation of Habitats and Species Regulations 2017.

The Inspector's decision acknowledged the implications of water abstraction for the adjacent Arun Valley designated sites, recognised for their ecological sensitivity. This recognition proved crucial to the subsequent legal challenge.

Challenge grounds

Crest Nicholson mounted a two-pronged challenge to Condition 6's legality. First, the company argued that the Inspector and Secretary of State had erred in presuming that reliable groundwater abstraction levels could potentially cause environmental harm. This contention questioned the application of "imperative reasons of overriding public interest" (IROPI) under the Habitats Regulations, with the claimant maintaining that sufficient alternatives to groundwater extraction existed to achieve water neutrality without significant ecological detriment.

The second ground challenged the decision-making process surrounding impact assessments, arguing it failed to adequately consider the rigorous criteria for protecting European sites. The claimant highlighted the lack of clarity regarding the Environment Agency and Southern Water's actions concerning groundwater extraction as a critical assessment shortcoming.

The court's analysis

Mrs Justice Lang upheld Condition 6, determining that the Inspector's conclusions regarding the condition's necessity were legally sound and proportionate to the environmental risks. The judgement emphasised that the precautionary principle inherent in the Habitats Regulations requires decision-makers to ensure no adverse effect on protected site integrity, including the Arun Valley.

The court found the existing evidence insufficient to determine that no significant adverse effects would arise from groundwater abstraction during the development process. The Inspector's acknowledgement of ongoing water supply investigations, combined with emerging understanding of groundwater extraction uncertainties, reinforced the need for concrete mitigation measures as outlined in Condition 6.

Implications

This judgement establishes important precedent regarding water neutrality as an essential planning consideration, particularly for developments potentially impacting sensitive ecological areas. The decision demonstrates the careful balance planning authorities must maintain between housing delivery and natural resource protection—an increasingly critical consideration amid ongoing environmental challenges.

The dismissal of Crest Nicholson's challenge solidifies the precedent that ecological integrity considerations can justify stringent mitigation conditions, even where they may impact development viability or timing. The judgement reinforces that uncertainty regarding environmental impact supports, rather than undermines, the application of precautionary measures in planning decisions affecting protected sites.