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Housing under-supply and over-demand

Housing under-supply and over-demand


Julian Boswall and Alex Minhinick consider the potential impact of the Conservative manifesto pledges on housing and infrastructure, and other significant developments

In our last article (SJ 161/13), we led with the news that the Department for Communities and Local Government had recently published its housing white paper, ‘Fixing our broken housing market’. Housing was an important theme during the election campaign, and the Conservative manifesto promises to ‘fix the dysfunctional housing market’, and to ensure that:

  • The reforms contained in the housing white paper are implemented;

  • A million homes are delivered by the end of 2020 and half a million more by 2022;

  • 160,000 homes are built on government land and existing protections of designated land, such as the green belt and areas of outstanding natural beauty, are maintained; and

  • Modern construction methods are encouraged, private sector developers incentivised, and councils’ powers to prevent ‘landbanking’ are enhanced by making changes to the rules on the valuation of land for compulsory purchase orders (CPOs).

It is clear that a focused programme of home building is required in the UK over the coming decades, and there will be significant pressure on the government to deliver on its promise to increase the number of homes being consented and constructed. The Conservatives’ commitment to deliver a million homes by 2020 has already been criticised following the publication of research by Property Partner which indicates that this represents an increase of only 9,000 extra homes a year on top of the current rate of home building. It also asserts that house building at these rates will still result in a housing deficit by 2025.

Also of interest is the manifesto pledge regarding CPOs. The manifesto hints at what could be a dramatic reform of compulsory purchase powers to make CPOs ‘easier and less expensive for councils to use’. It appears that this reform will centre on changes to the assessment of compensation and simplifying the determination of the market value of CPO land. At present, it is not at all clear exactly how the government will approach CPO reform and, with the upcoming complexities of Brexit negotiations and the Great Repeal Bill, it may be some time before a more detailed plan is provided.

With cross-party support for expenditure on infrastructure, a £23bn national productivity fund has been pledged to target housing, economic and digital infrastructure, development, and skills to boost productivity. Substantial expenditure on projects of national strategic infrastructure has been promised, including High Speed 2, the expansion of Heathrow Airport, and Northern Powerhouse Rail.

However, as these projects are, at the very least, extremely complex in terms of their deliverability and, at worst, rather controversial, it will be interesting to see how the schemes progress under the auspices of a minority government.

Interpreting the NPPF

The judgment of the Supreme Court in Suffolk District Council v Hopkins Homes Ltd and another and Richborough Estates Partnership v Cheshire East Borough Council [2017] UKSC 37 considers the interpretation of what amounts to ‘relevant polices for the supply of housing’ in paragraph 49 of the National Planning Policy Framework (NPPF). The decision was eagerly awaited to address the significant uncertainty around the correct interpretation of the NPPF.

The Supreme Court disagreed with the Court of Appeal’s wider interpretation that ‘relevant policies’ should include policies which specifically relate to the provision of housing as well as policies which are, more broadly, relevant to a planning application for housing development, such as policies relating to the green belt.

The Supreme Court, led by Lord Carnwath, found that the policy should be interpreted using the ‘narrower’ meaning, distinguishing between ‘housing supply policies which positively provided for housing’, which fell within paragraph 49, and those included in the wider interpretation. Lord Carnwath stressed that he considered that the key issue is not how individual policies are defined, but whether the result would be a five-year supply.

If the result of the ‘relevant policies’ was to secure less than a five-year housing land supply this was sufficient to trigger paragraph 14 of the NPPF and, as a matter of planning judgement, ‘it is this paragraph… which provides the substantive advice by reference to which the development plan policies and other material considerations relevant to the application are expected to be assessed’. The court further confirmed that the weight to be given to policies and other material considerations remains a matter for the decision maker rather than the court.

Although the judgment has given clarity on what amounts to ‘relevant policies’ and has given guidance to decision makers on how paragraph 14 should be applied, it remains a concern that where a five-year housing land supply is not demonstrated, decision makers seeking to curtail housing development will look to other applicable policies to support a decision to reject a scheme. In those circumstances planning by appeal is the likely result.

The Court of Appeal has confirmed that an obligation requiring new residential developments to be parking ‘permit free’ cannot be enforceable in a section 106 agreement. The decision in R (Khodari) v Royal Borough of Kensington and Chelsea Council and another [2017] EWCA Civ 333 is significant in two respects.

First, it is an important reminder of the limitations of obligations entered into by way of section 106 of the Town and Country Planning Act 1990. It is easy for developers to assume that any constraint to a development can be overcome by entering into a planning agreement with the local authority. However, section 106(1) of the Act is explicit in limiting the effect of a planning obligation enforceable against a successor in title. Planning obligations must:

  • Restrict the development or use of the land in any specified way;

  • Require specified operations or activities to be carried out in, on, or over the land;

  • Require the land to be used in any specified way; orRequire a sum or sums to be paid to the authority… on a specified date or dates periodically.

A covenant not to apply for parking permits for residential units, nor knowingly to permit any owner or occupier of a permit-free unit to do so, was not a valid planning obligation. Its restrictions did not seek to bind the land that was the subject of the disputed section 106 obligation, but instead land on the adjoining highways.

Second, the court acknowledged that section 16 of the Greater London Council (General Powers) Act 1974, which allows an agreement to be made ‘in connection with the land’, could be used to require ‘permit-free’ development. Local authorities outside of Greater London will need to consider what other methods are available to achieve this.

Legislation update

The Neighbourhood Planning Act 2017 received royal assent on 27 April 2017. The main purpose of the Act is to assist with the efficiency of the housing market, and it brings into force a wide range of changes.

As well as changes to neighbourhood planning and local development documents, a key potential benefit of the Act to developers is the new requirement that the terms of any pre-commencement conditions attaching to planning permissions must be agreed in writing. This may be of benefit to developers by providing some certainty ahead of the grant of planning permission. However, we question the effect of the new provision where the alternative to agreeing a pre-commencement condition will presumably be the refusal of the planning permission.

The Act also amends the statutory framework for compensation of land subject to a CPO. In particular, the Act provides statutory clarification of the ‘no-scheme’ principle, which, as we discussed in our previous article, is necessary to ensure a consistent approach to the hypothetical market in which compensation is assessed. Section 32 seeks to codify the ‘Pointe Gourde principle’ that the increase in value caused by the underlying CPO scheme is disregarded. However, its drafting leaves room for debate.

Julian Boswall is a partner and Alex Minhinick is a senior associate with the planning unit at Burges Salmon