Over recent years, development viability and its role in the planning system has become increasingly important – paragraph 173 of the
National Planning Policy Framework (NPPF) states that ‘
pursuing sustainable development requires careful attention to viability and costs in plan-making and decision-taking’. The underlying concept is that planning policies and planning permissions which place burdensome obligations on development are reducing rates of delivery, in particular the delivery of new homes.
In this context, a recent DCLG letter re-emphasises an important principle when it comes to viability assessments and the (re)negotiation of s106 obligations. Despite dismissal of an appeal for 112 dwellings, Islington Council submitted a ‘letter before claim’ to the Secretary of State in anticipation of judicial review of the decision focussing on the Inspector’s application of affordable housing policies.
Whilst stating that judicial review was not necessary due to the appeal’s dismissal, DCLG’s response confirms that
it is the Secretary of State’s ‘unambiguous position’ that ‘land or site value … should reflect policy requirements and planning obligations” and advises that the Council should apply this position in respect of viability in future applications.
This DCLG letter sets out the principle that overpaying for land is not considered to be an acceptable position on which to (re)negotiate reduced planning obligations. It has implications for both developers and landowners and requires an appreciation from both that Section 106 obligations must form an intrinsic part of the land acquisition process – leaving issues relating planning policy to land value and development content to the application stage is likely to be too late. Alongside this, councils must be prepared to provide more detail and certainty at the pre-application stage with regard to likely s106 contributions, in order to inform land negotiations and minimise viability-based challenges further down the line.
Challenges based on viability are no doubt partially down to a more cautious approach to development funding in the recent past and the restricted availability of finance following the economic downturn, which has squeezed margins and necessitated developers maximising profitability on sites. In parallel the slow progress of some Local Plans across the country has led to a policy vacuum when it comes to planning obligations in many local planning authorities (LPAs), with 57% of local authorities currently making decisions without a post-NPPF adopted Local Plan
[1]. Such a vacuum helps create the opportunity to challenge out-of-date policy requirements, many of which were evidenced and adopted in a very different economic climate.
Both the Coalition and Conservative Governments have supported developers in challenging the content of s106 obligations on sites which they consider to be unviable - initially this was introduced as a means of renegotiating planning obligations which had been agreed pre-recession. However, the ability to appeal against unviable affordable housing obligations that was introduced in 2013 is to be extended to 2018, as set out in last year’s Spending Review and Autumn Statement. The NPPF requires that the cumulative burden of planning obligations should not ‘
threaten’ viability and this has been the subject of much debate at local plan examinations across the country.
Confirmation of the Secretary of State’s ‘
unambigious’ position establishes a clear need for a firm understanding of planning requirements and obligations to inform the purchase of both short-term and strategic land. NLP is well-placed to provide landowners, agents and developers with
insight and advice on the likely terms of planning obligations, so as to be able to assist fully in land negotiations from the outset.
