As part of
Lichfields analysis of the draft NPPF (published for consultation on 16 December 2025
) this blog focuses on the changes for development of small-to-medium (StoM) sized housing sites and considers the implications for housing delivery.
Plan-making and Development Management: a proportionate approach that reduces documentation requirements
The government highlights delivery of homes on StoM sized sites as one of its “twelve key policy changes”, intending to provide clearer support for the principle of development across a wider range of locations in plan-making.
L1: Planning for an effective use of land
This promotes the allocation of sites of different scales, including StoM-sized sites, and the use of design guides and design codes to establish common design principles and highlight development opportunities of sites of StoM-sized sites.
This would replace the paragraph 73 of the 2024 NPPF, which requires at least 10% of a housing requirement be met on sites no larger than one hectare.
DM1: Preparing development proposals and DM2: Information requirements.
The draft NPPF emphasises that planning requirements should be proportionate to site size, introducing a new “medium development” category in Annex C for schemes of 10–49 homes on sites of up to 2.5 hectares, supported by policy and regulatory easements intended to streamline development on sites of this scale.
The consultation states that the “medium development” category should not be subject to information requirements designed for larger developments (at pre-app or application stage), where these would be disproportionate to the scale of the proposal:
-
Pre-application engagement: Draft Policy DM1 states that pre-application engagement should be proportionate to the nature of the scheme and those likely to be affected.
-
Local validation lists: Draft Policy DM2 states local validation lists should only require additional information above what is required by the national decision-making policies when they are supported by local policies. Validation requirements should also distinguish between major, medium and other forms of development, to ensure they are proportionate to scale and potential impacts.
What do these changes mean? The shortage of suitable land for smaller sites and builders has contributed to the decline in SME-led housing delivery in recent years.
The Federation of Master Builders has estimated that, given the right conditions, the SME housing building sector could increase housing output by up to fivefold.
The changes in the new NPPF might go some way to help address this.
According to Lichfields’ research for the HBF’s Planning for Small Sites (2025), negotiating matters such as design and residential amenity is among the top three issues debated for urban small-site applications. The draft NPPF seeks to address this - at least in part - through the extended use of design guides and design codes on smaller sites. The aim is for greater clarity on local authority expectations, reducing the scope for negotiation.
Furthermore, a greater emphasis on allocation StoM-sized sites would reduce the need for applicants to establish the principle of development on a site-by-site basis. Our research for the LPDF -
Small builders, big burdens (2023) - indicates that SME developers are often required to go beyond proportionate validation and policy requirements, leading to increased financial risk and delays.
Reducing documentation requirements to proportionate levels would help lower upfront development costs, minimise delays, and accelerate housing delivery overall.
Our research (ibid) also concluded that a medium sized category could help “LPAs and National Development Management Policies to set more proportionate policies and evidence thresholds that are better suited to sites that are [medium sized]”. We also concluded requirement for some evidence should be a product of discussion, rather than be automatically demanded at the outset – “this should lead to case officers being more confident in deferring some of the evidence required to conditions and the reserved matters stage when funding is more readily available [for developers]”.
Affordable housing: Greater flexibility for Payment in Lieu and size standards
The draft NPPF places a strong emphasis on certainty and proportionality for StoM-sized housing sites, particularly for SME developers. Central to this are policies HO8, DM5 and PM12, which together seek to reduce risk, negotiation and delay.
HO8: Providing Affordable Housing
HO8 introduces flexibility whereby, if a proposal meets or exceeds up-to-date development plan requirements for the proportion and mix of affordable housing tenures (including the minimum proportion of Social Rent homes) a more flexible approach may be taken to the mix requirements for market homes. This flexibility could be particularly beneficial for StoM sized sites in urban London locations, allowing unit sizes to be adjusted to support development viability.
While HO8 retains the preference for on-site affordable housing, the government understands the difficulties experienced finding buyers for those properties, with uncertainty and negotiations disproportionately affecting SMEs. In the consultation document, the government is considering allowing developers of “medium development” sites to meet affordable housing requirements entirely through payments in lieu. This was a recommendation of our research for Pocket Living
back in 2020.
This could be significant, especially on urban sites, and in London where the Government/GLA emergency measures have already highlighted affordable housing as a viability issue holding back delivery.
The disposal of affordable housing to Registered Providers (RPs) has been a persistent and growing challenge on StoM-sized sites. RPs are often reluctant to acquire small numbers of homes within developments, as these can be inefficient to manage and require similar staffing and management inputs without the benefits of scale.
This can affect developer cashflow, creating market barriers to entry and delivery.
The HBF Bid Farewell (2024) notes many RPs require at least 20 affordable homes on their sites, with larger providers often rejecting schemes with under 100 homes. This may continue to present challenges for developments of approximately 50–300 homes, which exceed the 49 homes ceiling on the proposed definition of “medium development” but may still deliver fewer than 100 affordable units. This suggests the proposed definition may still not capture the current range of viability and delivery challenges.
Development Viability: A Standardised methodology and obligations
DM5: Development Viability and PM12: Developer Contributions
The policy introduces the presumption that developments complying with up-to-date plan policies should be considered viable. Where a viability assessment is required to demonstrate that a policy-compliant level of affordable housing is not achievable, this has to be specific circumstances, such as:
-
The development is significantly different from any typology assumed in the development plan viability assessment;
-
Site characteristics differ substantially from the assumptions used to assess viability when the relevant development plan policies were prepared;
-
The development is demonstrably burdened by costs which were unforeseeable when the development plan was prepared; and
-
Site or economic circumstances have changed significantly since the development plan was prepared.
The policy also sets out a more standardised method for assessment, namely to:
-
Refer back to the viability assessment(s) that informed the relevant development plan policies;
-
Fully evidence all inputs and assumptions used, explaining any departures from the viability assessment(s); and
-
Utilise standard inputs set out in the Annex (to be added subject to the result of this consultation).
PM12 adds to this by requiring local plans to set clear, fixed expectations for affordable housing and developer contributions. Collectively, through these two policies, the government aims to standardise the planning process by reduce the time spent negotiating viability and planning obligations at the decision-making stage.
This approach could in due course benefit SME developers delivering StoM-sized sites, particularly in London, where the research by Lichfields for Pocket Living identified affordable housing and viability as key causes of delay in London, with around a third of cases affected by protracted land value and viability debates, and Section 106 negotiations often doubling determination times.
Greater standardisation of viability assessments and Section 106 could reduce delays and mitigate financial risk.
However, it remains unclear to what extent the viability process can be standardised, particularly as the exceptional circumstances identified in Policy DM5 may not be uncommon. In the absence of a stepped approach to affordable housing requirements for StoM sized sites, the number of viability assessments is unlikely to decrease, at least in the short term. This approach may be more effective once new-style local plans implement Policy L1 with a greater supply of StoM sized site allocations through local plans.
Standardisation of Planning conditions and obligations
Policy DM6: Use of planning condition and obligations
DM6 states that national model conditions and obligations should be used, unless there are strong reasons not to. The consultation highlights the aim to encourage consistency and simply the planning process.
As with attempts to standardise viability, this proposal could also reduce delays and financial risks for StoM sites. This was similarly highlighted in our research for Pocket Living, with smaller developers often restricted from realising returns on capital due to onerous pre-commencement conditions.
Biodiversity Net Gain (BNG): Exemptions for StoM-sized sites and supporting off-site contributions
The Government’s consultation document has set out the intention for BNG exemptions for certain site categories. The Housing Secretary pledged to introduce an area-based exemption for smaller sites that are up to 0.2 hectares and residential brownfield developments of up to 2.5 hectares. This could reduce the cost of development and slim the evidential burden required to support applications. A full consultation on this is expected in the new year.
This move could help address issues we highlighted in the HBF’s Planning for Small Sites (2025) research, which found that 94% of SMEs had experienced delays with applications due to BNG.
For slightly larger sites, simpler and more accessible mechanisms for delivering BNG off-site could also support SME developers, subject to the details proposed in the forthcoming consultation.
Summary and Conclusions
Overall, the draft NPPF and accompanying consultation signal clear efforts towards a more proportionate, standardised and delivery-focused planning framework for StoM-sized housing sites.
Through clearer policy expectations, reduced documentation requirements and a set of more flexible approaches to affordable housing, viability, planning obligations and BNG, the proposed reforms have the potential to address many of the structural barriers that have constrained SME-led housing delivery in recent decades.
If implemented effectively and supported through local plan allocations under Policy L1, these changes could reduce uncertainty, negotiation and delay, lower risk and improving the viability of development on StoM sized sites, particularly in challenging markets such as London. However, the extent to which these benefits are realised will depend on how consistently the policies are applied in practice, the scope of any exemptions or flexibilities ultimately adopted, and whether exceptional circumstances continue to drive site-specific negotiations. This consultation and the forthcoming consultation on BNG early next year presents an important opportunity to ensure that the final framework fully supports the role of StoM-sized sites in accelerating housing delivery.
Footnotes
