Planning inspectors keep housebuilders guessing on small-site exemptions

In theory, housebuilders developing smaller sites don’t have to make affordable housing contributions. There is, after all, a written ministerial statement (WMS) saying as much, and local plans are supposed to fall in line with national policy.

However, in recent months there has been a series of contradictory decisions made by planning inspectors, with the result that developers are no longer confident that they will be exempt. At a time when the government is supposedly encouraging smaller housebuilders to contribute to solving the housing crisis, the situation is highly unsatisfactory, they claim. Why isn’t the WMS being followed?

A change to national housing policy was made in November 2014 via a WMS by the then coalition government. The statement instructed planning authorities not to impose affordable housing contributions - or any other form of infrastructure payments - on developers to build schemes comprising 10 units or fewer.

The WMS went down very badly indeed among some local authorities. Most prominently, West Berkshire District Council and Reading Borough Council challenged the WMS in the High Court, arguing that it would reduce the delivery of affordable housing nationally by more than 20%. The authorities were successful, but the Department for Communities and Local Government (DCLG) challenged the High Court’s decision. The Court of Appeal ultimately sided with national government and the WMS was reinstated as national policy in May last year.

So that settled it then. Except that it didn’t. In the months since the Court of Appeal handed down its decision, many councils, including West Berkshire and Reading, have been happily ignoring the WMS, countering that “they cannot fulfil the obligation to meet housing need set out in the National Planning Policy Framework without contributions to affordable housing from small sites”, according to a briefing note for clients prepared by consultancy DLP.

Policy objection

One developer that has run into difficulties is the north London-based Linea Homes. Most recently, the housebuilder applied to Oxford City Council for planning permission for a small development and was told that the affordable housing contribution would come in at £500,000. “They said they appreciated that the government had won the appeal, but said it wasn’t acknowledging the national policy and that it wanted social housing under 10 units,” says Linea Homes co-founder Gavin Sherman.

Of course, developers can appeal to the Planning Inspectorate (PINS), but a quick glance at the decisions that have been made since May 2016 demonstrates that the PINS has not always come down on the side of developers. In some instances, it has given greater weight to the WMS, while in others it has sided with local policies.

[The council] said it wanted social housing under 10 units - Gavin Sherman, Linea

For example, a nine-home development in Ovingdean, East Sussex, recently ended up at appeal, where the inspector ruled that the WMS wasn’t sufficient to trump the council’s local development plan. In a case involving an application to build nine flats in Hove, on the other hand, the inspector ruled it could “see no reason” why the WMS should not apply.

“We’re seeing a real mixed bag - no one really knows what’s going on,” says Kieron Hodgson, a director in the central London planning team at Iceni Projects.

“If you look at appeal decisions, there are many examples where they have gone with the WMS and said it overrides local policy. But there are as many examples where inspectors have acknowledged the WMS but said that it doesn’t override policy. And then there are other examples where the inspector hasn’t taken a view and just stayed silent.”

There is a possible logic to why inspectors are coming to contradictory decisions: if an inspector believes that a council has robust evidence that is more up to date than the WMS, it may decide to give it more weight.

So, in London, councils typically have up-to-date development plans and robust data on the need for more affordable housing. In such cases, an inspector might well side with a local authority.

“It puts councils in a stronger position to say: ‘In this instance, development plan policy must outweigh the WMS because our evidence is more up to date,’” says Hodgson. “That seems to be where the balance of power is falling in London.”

Historical plans

Conversely, in many more rural areas many authorities have more historical plans that aren’t based on up-to-date information. In addition, they may not be able to demonstrate a five-year housing land supply and the evidence they can produce on objectively assessed housing tends to be weaker.

Much of their evidence base may well pre-date the WMS. In such circumstances, inspectors are more likely to attach weight to the WMS.

That’s the theory, anyway. The trouble is that some decisions simply haven’t conformed to the logic, meaning that developers can think they understand the situation locally, but still face a great deal of uncertainty if they end up at appeal. “Inspectors are still sometimes vague on the situation,” says Hodgson. “It really is a bit of a mess.”

This is one of those situations where the DCLG needs to step in - Kieron Hodgson, Iceni Projects

The confusion has now reached the point where it isn’t just developers and their planning consultants that are tearing their hair out. At the end of January, it was revealed that the London Borough of Richmond had written to the PINS in December to highlight apparently contradictory decisions made by its inspectors. The council wasn’t impressed by the situation and had written to seek clarity - something the PINS has so far not provided.

So we have reached an impasse - and one that many believe can only be resolved by the strong arm of government.

“My personal view is that this is one of those situations where the DCLG needs to step in,” says Hodgson. “It’s gone beyond the PINS, or rather the PINS doesn’t seem to be interested in clarifying the position strategically. It just seems to be assessing each case on its merits and inspectors are coming to different views.”

For Sherman, the lack of clarity on small-site exemptions is just the latest example of how the planning system appears designed to frustrate small developers. “It’s incredible to us,” he says. “Unless you’re in the planning system you don’t know how bad it is. They say they want to make it easier for smaller developers, but our business is now totally impossible because we can’t get a permission for anything, no matter how big the planning application.”

Scarce resources

In particular, Sherman highlights the parlous state in which most planning authorities now find themselves. In many instances, it isn’t that they want to block development or even demand affordable housing contributions - it’s that they simply don’t have the resources to process applications. That means that a shockingly high proportion of Linea’s applications end up being decided on appeal at the PINS for non-determination.

“I’ve got local authorities telling me that there is nothing wrong with my application, but they haven’t got the resources to determine it,” says Sherman. “That means we have to go to appeal, which takes four to nine months. Probably 70% to 80% of the applications we make end up at appeal for non-determination because councils aren’t determining them and have no intention to do so.”

With funding cuts for local authorities still very much the order of the day, it seems unlikely that much will be done any time soon to address the funding shortfall in council planning departments - even if it wanted to, the DCLG simply doesn’t have the financial clout. What the department can and should do is provide clarity on small-site exceptions - especially if it is genuine in its desire to encourage smaller developers to build more.

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