Planning matters

How is it 2020? My 2018 blog on Vacant Building Credit [VBC] seems so long ago. We have had two iterations of the National Planning Policy Framework [The Framework] since. The PPG has been updated. Many Local Planning Authorities have released their own guidance on VBC. As a result VBC is becoming more widely recognised as a useful mechanism for boosting the viability of brownfield sites.

 

To recap, VBC was introduced by a written ministerial statement of 28 November 2014 as an incentive ‘… to tackle the disproportionate burden of developer contributions on small-scale developers, custom and self-builders ’. Its introduction was challenged in the High Court and the VBC guidance was subsequently – but only temporarily -withdrawn. The Government appealed the decision and it was reinstated in the PPG in May 2016.

Since July 2018 VBC has been referenced at paragraph 63 of the Framework. It states:

Provision of affordable housing should not be sought for residential developments that are not major developments, other than in designated rural areas (where policies may set out a lower threshold of 5 units or fewer). To support the re-use of brownfield land, where vacant buildings are being reused or redeveloped, any affordable housing contribution due should be reduced by a proportionate amount²⁸.  [emphasis added]

The accompanying footnote states:

Equivalent to the existing gross floorspace of the existing buildings. This does not apply to vacant buildings which have been abandoned.

The inclusion of a reference to VBC in the Framework, in addition to the 2014 Ministerial Statement, shows that the Government continues to consider it an important policy for decision making.. It emphasises the importance in considering the planning and related viability implications of demolishing a building(s) prior to the grant of planning permission. Demolishing following the grant of planning permission can often greatly assist making brownfield sites viable options for development.

A number of local planning authorities have incorporated guidance on vacant building credit into supplementary planning documents or other guidance documents. Whilst the approach should broadly be in accordance with the Framework (or local plan) such guidance has been found to include detail on a Council’s interpretation of ‘vacant’ or ‘abandoned’ and in some cases Council’s set out that only net floorspace will be considered in the VBC calculation.

For example, Warrington Council provides guidance on vacant building credit within its Planning Obligations SPD. It requires applicants to demonstrate buildings have been vacant for 12 months and that the building(s) have been satisfactorily marketed. This is a relatively common approach, but applicants should have an awareness of the criteria the relevant local authority applies when considering VBC, to avoid delays at the stage of planning application submission.

You may be reading this and have a site with a vacant, unused building or number of buildings. You will likely be considering whether to demolish or not to demolish. What is the benefit of retaining a vacant building and what difference could VBC make? 

The following demonstrates how VBC is applied in practice. It gives an example of a site that has 18,000 sq. m (gross) of vacant floorspace. The example demonstrates the affordable housing requirement with the building retained on site. It is then explained what the impact of demolishing the building would be to the overall affordable housing requirement. The key inputs are:

The formula to calculate site affordable housing requirement is as follows:

The affordable housing requirement if the building is not demolished is therefore 6.5%. If the building was to be demolished the Council’s standard affordable housing requirement is 30%.

To demonstrate in terms of housing units; a development of 23,000 sq. m could be the equivalent of 271 homes at c.85 sq. m per unit. A 30% requirement would mean 81 affordable homes on site compared with 18 if the building is retained and VBC is applied.

In real terms if those houses were on the open market at £2,150 per sq. m. (circa £200 per sq. ft.) then revenue would increase by over £4.61m (assuming a value of 60% of OMV for the affordable homes). This represents a significant loss of income that arises simply because of the premature demolition of a building.

This is clearly a significant reduction in affordable housing requirements and a significant uplift in revenue. It should leave you to think twice before demolishing existing vacant buildings on development sites. In a world where viability assessments are becoming increasingly protracted and difficult, this represents an important policy tool to improve delivery of brownfield sites.

Furthermore, albeit that it is a separate calculation, in areas where a Community Infrastructure Levy (CIL) charging schedule is in effect, demolishing a building may reduce the amount of “in-use” floorspace that can be deducted from the area of a chargeable development to reduce CIL liability.

Vacant building credit can do one of two things; remove any affordable housing contribution or reduce it. Depending on the floorspace of the building or buildings on site, the cost implications and resulting viability for development can be substantial. The worked examples above demonstrate the significant impact VBC can have on affordable housing requirement and the financial viability of a development.

Since publishing the blog in 2018 at Lichfields I have been involved in a number of schemes where vacant building credit [VBC] has been applicable.

In considering eligibility for VBC the case and associated calculations can be included within a planning statement or we also prepare supplementary or standalone Vacant Building Credit Notes. These provide the policy context, demonstrate the eligibility of a scheme for VBC and undertake the calculation on VBC to illustrate the resulting implications for the affordable housing contribution. Work we have undertaken to date has ensured our clients have been able to secure or are currently working towards securing viable planning permissions that without VBC may not have been deliverable. Where a CIL charging schedule is in effect, we can also provide advice on CIL liability.