News & Insights

Councils lose on affordable housing

Anna Zatouroff from our Commercial Property Team considers the Government’s recent victory over two local councils in the battle over affordable housing levies.

A recent judgment handed down by the Court of Appeal may have significant effects on future residential development applications.

The case involved a challenge by West Berkshire and Reading councils to the Government’s planning policy on minimum thresholds for affordable housing and the vacant building credit as set out in a Written Ministerial Statement of 28 November 2014. The High Court initially allowed the councils’ claim on four grounds:

  • Inconsistency with the statutory scheme;
  • Failure to have regard to material considerations;
  • Unlawful consultation; and
  • Breach of the public sector equality duty.

On appeal the Court of Appeal reversed the decision of the High Court.  The planning policy under consideration consisted of the following components:

  • Developments of 10 units or 1,000 square metres or less (including annexes and extensions) would be excluded from affordable housing levies and tariff-based contributions;
  • A lower threshold would apply in designated rural areas, National Parks and Areas of Outstanding Natural Beauty (as defined in section 157 of the Housing Act 1985), with developments of 5 units or less to be excluded from affordable housing levies and tariff-based contributions. Developments of between 6 and 10 units would be subject to a commuted sum payable on or after completion;
  • Where a vacant building is brought back into use or demolished for redevelopment, local authorities will provide a ‘credit’, equivalent to the floorspace of the vacant building, to be set against affordable housing contributions.

Legal effect of the judgment

The Court of Appeal’s judgment has raised significant legal questions in its endorsement of the process undertaken by the Government in forcing through its policy intervention.  By quashing the High Court’s judgment, the Court of Appeal has effectively permitted the Government to alter statutory provisions by simply amending Practice Guidance. Previously the Practice Guidance was just that – guidance. Its role was to explain how statute should be applied, but following the Court of Appeal’s judgement it appears the Practice Guidance can be used to alter the statutory provisions themselves.

Practical effect of the judgment

The judgment will also have a direct effect on local authorities and developers across England. The policy was initially introduced to reduce the burden of developer contributions on small scale developers, help boost housing delivery and incentivise brownfield development. It will make small developments more attractive propositions as greater profit potential is now available now that they are not subject to the affordable housing levies contained in related Section 106 agreements. That being said, larger sites will continue to be subject to affordable housing requirements and larger scale developers may find that more stringent affordable housing levies are forced upon them to allow for the small scale exclusion.

Local Authorities who, since November 2015, have continued to insist on applying affordable housing levies to developments of less than 10 units, may face difficulties in enforcing the related Section 106 agreements. If you, or your company, has entered into a Section 106 agreement which you have yet to implement and you wish to obtain an opinion as to whether your Section 106 agreement is enforceable, or whether you would simply like advice in negotiating a fresh Section 106 agreement without the conditional affordable housing levies, please contact Anna Zatouroff or James Burgess in FSP’s Commercial Property team.