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What the health? The planning system and healthcare service funding
As the ongoing COVID-19 pandemic continues to reshape our daily lives, one thing has also become clear: we need to think more seriously about the links between the built environment and our physical and mental health. To date, this discussion has generally been weighted more towards access to open space and suitably-sized homes with windows, but the issues are more broadly based. Even though the Government’s Planning for the Future White Paper has charted some radical reforms to planning obligations, the current planning obligation framework will continue to be in force for a few more years, and there are some critical issues which will continue to need to be addressed over this interim period. Planning for health Pre-pandemic, the revised National Planning Policy Framework (2019) [NPPF] sought to include a stronger emphasis on health and well-being; it states that the planning system should support “strong, vibrant and healthy communities” (Para 8b) and should take account of “local strategies to improve health… for all sections of the community” (Para 92b). But, it also introduced the notion of addressing inadequate ‘services’ (Para 81b). The development industry in large part accepts the need to contribute to providing capital funding for education and health infrastructure, but despite the NPPF’s subtle shift to include services, little consideration had been given to what role, if any, the development industry should play in helping to address healthcare services revenue funding challenges (beyond its contribution via general taxation). By contrast, the NHS has proverbially left the running blocks. Faced with budget cuts, resource constraints, and need to keep up with an ageing population, one NHS Trust has been seeking s106 funding for acute healthcare services from via planning obligations since 2014. These initial requests were successively rejected at planning appeals, as the Inspectors considered that such funding requests were not in accordance with Regulation 122 of the Community Infrastructure Levy (CIL) Regulations (2012) and did not relate to the development. However, two appeals, recovered by the Secretary of State [SoS] in 2016, concluded that such requests were material to the consideration of the applications, were acceptable in principle, and were necessary to make the development acceptable in planning terms.[1] The ‘Securing Section 106 and community infrastructure levy funds’ (September 2018) guidance followed this, in which NHS Improvement and Trusts highlighted the capital and revenue opportunities for NHS trusts impacted by local development.[2] An un-funded funding gap So how are Trusts impacted by development beyond infrastructure requirements? The key issue for Trusts is the Government’s current funding mechanism. Trusts are commissioned by Clinical Commissioning Groups [CCGs] to provide planned and emergency acute healthcare to the population of areas under the terms of the NHS Standard Contract. However, this contract is an outturn activity volume-based contract which is agreed annually with CCGs and is based on the previous year’s activity. The contract, therefore, does not account for in-year population increases until the next year, and any additional healthcare activities resultant from an increase in the population of an area – which Trusts are legally obliged to undertake – remain unfunded. Simply put, there’s a potential hole in Trust’s budgets arising from population growth in an area, and a greater number of NHS Trusts are now turning their attention to the development industry to plug these ‘funding gaps’ through S106 contributions. Having dealt with a number of these requests, we can see there are practical concerns about how some NHS Trust’s are seeking s106 contributions. The Regulation 122 Tests requires s106 requests to be “fairly and reasonably related in scale and kind to the development”. In this regard, it is important that Trusts only make requests for the un-costed ‘new persons’ that would likely and reasonably present themselves for treatment because of a proposed development. This is because some of the population of the development will have moved from within the area, and will have already been considered within the service provider’s funding model. At present, there are legitimate questions regarding whether the Trusts’ calculations address this. In addition, these requests are typically made well into the determination period of planning applications. Indeed, one Trust submitted four s106 requests to developments which had already been determined by a planning committee in Worcester – requests which were subsequently rejected.[3] Consequently, there is little room left for the negotiation of additional s106 monies beyond which has already been agreed or found viable. A return to marginal viability debates? Turning to the latter point, and setting aside broader concerns about the Trusts’ calculations, the manner in which Trusts are currently engaging in the planning system is somewhat at odds with the spirit of the NPPF, and more importantly, likely to hinder the Government’s ambition to ‘build, build, build’. The revised NPPF shifted the consideration of the ‘viability’ of sites from the decision-making stage to the forefront of the planning process – plan-making – and is clear that Local Plans “should set out the contributions expected from development… [and] such policies should not undermine the deliverability of the plan.” (Para 34).  In the context of education contributions, the Planning Practice Guidance [PPG] states that obligations should be set out in the local plan, so that they are subject to examination [4]. The aim of this is to ensure that these obligations are sufficiently certain and “can be accurately accounted for in the price paid for land”.4 This is particularly important, as paragraph 57 of the NPPF serves to limit the scope for re-testing the viability of developments post-Local Plan examination. As such, developers are likely to find it more difficult to justify diverging from planning obligations on viability grounds. However, currently, few authorities have grappled with the revised NPPF through local plan reviews, and few, if any, local plans contain an explicit reference to the need for developments to fund healthcare services, let alone including a standardised approach. It is therefore difficult for the development industry to factor these ‘unknown’ costs into the viability of the development. Whilst the economic implications of COVID-19 are still crystalising, the viability of sites will invariably be at the forefront of many plan-making and decision-making discussions. This is likely to limit Trusts further, as the viability assumptions of sites will have already been ‘baked-in’, and the economic uncertainty of COVID-19 will invariably impact the viability of some schemes. Moreover, LPAs may have to make tough decisions in the balancing exercise, to ensure that planning obligations align with their area’s particular priorities: fund the NHS? deliver affordable housing in an area where there is already an acute shortfall? Or ensure this brownfield site is brought back in to use? The Government has been clear that a critical part of our economic recovery plan is to ‘build, build, build’ the homes and infrastructure this country needs. But there is still uncertainty from Councils and the Government as to whether such requests are acceptable. Fareham Borough Council rejected a c.£6m S106 request for the Welborne Garden Village in October 2019[5], and the SoS recently rejected a £1m request in Teignbridge in June 2020. Coupled with eleventh-hour requests, discussions and negotiations between LPAs, applicants and Trusts, there is a risk that such requests will delay the decision-making process for applications which are proposing to deliver housing to meet needs, which also deliver wider economic benefits. What the above highlights is that, increasingly, LPA officers will have to weigh up the importantance of further S106 requests in the planning balance, and make difficult decisions as to which best align with the LPA’s priorities, and importantly, which can be viably be delivered. Despite opening up planning obligations to the provision of public ‘services’, the Government is seemingly silent on whether planning should cooperate and integrate with service providers. Historically, whilst both NHS Trusts and CCG’s have been consulted in the preparation of local plans, this has largely in respect of the infrastructure-related impacts of planned housing growth. If planning is to play a role in mitigating the impacts of development on service funding – and evidence from the West Midlands indicates that Trusts believe it should – there is a cogent need for them to engage more proactively in the planning system form an earlier stage, or more specifically, the plan-making process. In the interim, we would urge our developer and housebuilders clients to have a more keen regard to these potential planning obligations when acquiring land and considering site viability, and to discuss this with us. [1] Appeal References: APP/T3725/A/14/2221613 and APP/T3725/A/14/2229398[2] https://www.hsj.co.uk/south-warwickshire-nhs-foundation-trust/massive-pool-of-untapped-cash-for-nhs-from-property-developers/7020202.article[3] https://www.worcesternews.co.uk/news/17918031.city-council-agrees-reject-hospital-39-s-plea-millions-massive-housing-developments/[4] PPG ID: 23b-004-20190901[5] Application Reference: P/17/0266/OA

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Under pressure: What does the new Standard Method mean for the West Midlands?
As many of you will be aware, the introduction of the National Planning Policy Framework’s (2019) [NPPF] current standard method raised some practical issues for the delivery of housing across the West Midlands. Namely, in many local planning authorities [LPAs], the local housing need figure generated by the current method was lower than adopted Local Plan requirements, and in many instances suggested that these LPAs would be required to deliver fewer homes than had historically been built in those areas. Indeed, one of the main consequences of the current method was that – cumulatively – it would have only boosted the supply of housing by c.6% across the West Midlands region when compared to adopted plan requirements. The West Midland’s new standard method figures So, what are the implications of the Government’s proposed new method for the West Midlands? Lichfields has set out all the new LHN figures for all the West Midlands LPAs under the proposed new method, along with more detail in respect of the average delivery rates over the past three-years, as well as the current method’s figure for Birmingham & Coventry; and West Midlands (outside of Birmingham & Coventry). Importantly, nearly 90% of authorities across the West Midlands will see an increase in their LHN figure under the new proposed method. Conversely, four authorities would see a decrease in housing need, compared to the current method – those being Birmingham City, Sandwell, Walsall and Worcester. However, despite these decreases, cumulatively, the West Midlands region would be expected to deliver c.27,503 dpa, a significant 40% boost in the supply by compared to the current method, and a cumulative 25% boost on recent delivery levels across the region. Figure 1 shows how these needs are distributed spatially across the region when compared to the current method. In general, this shows that the new proposed method would particularly affect the more rural LPAs located around Birmingham, Coventry and Worcester. In particular, the impact is more acute along the southern edge of the region. Whilst, the level of increases varies across the region, a majority of authorities would see an increase between 0.1%-40% and 80.1%-120%. However, four authorities would see a dramatic increase in housing need, in excess of 120%. The significant rise in LHN figures across the region is largely a result of the proposed new methods increased emphasis on affordability. Indeed, the proposed new method removes the affordability ‘cap’ which and applies affordability uplifts based the change in the ratio over last 10 years, which has led to significantly higher levels of need across the West Midlands due to the worsening affordability. For a more detailed review of the proposed New Standard Method, click here. The sub-regional challenge Looking more specifically at the Birmingham and Black Country and Coventry-Warwickshire housing market areas [HMAs], the proposed new method will have some significant implications for plan-making over the next two to three years. 1. Greater Birmingham and Black Country The housing needs of the Greater Birmingham and Black Country HMA [GBBCHMA][1] has been the subject of considerable and complex debate, stretching back to the adoption of Birmingham’s Local Plan in 2017 and beyond. Indeed, the adoption of Birmingham’s Local Plan quantified Birmingham’s unmet need as c.37,900 dwellings up to 2031. In this context, Birmingham would see a 15% reduction in its housing needs when compared to the current method. Importantly, Birmingham’s new LHN figure would be higher than its adopted Local Plan requirement, and therefore, an element of unmet housing need will likely continue to persist. Similarly, the Black Country Authorities [BCAs] published the ‘Black Country Urban Capacity Review December 2019’, which identified an c.26,920 dwelling unmet need up to 2038. In this regard, the BCA’s annualised LHN would largely remain the same as under the current method – only -1.8% lower. This suggests that the BCAs emerging unmet housing need up to 2038 is likely to persist, and remain an issue for the GBBCHMA authorities to grapple with, alongside their own needs, through the current raft of Local Plan Reviews. More broadly, as with the regional trend, a majority of the GBBCHMA would see marked increases in the number of houses they should be planning for under the new proposed method. Whilst many of the GBBCHMA authorities have begun to progress Local Plan Reviews over the last two years, due to the current COVID-19 crisis delays to plan-making have been inevitable. The consequence of this being that many LPAs may now need to have regard to their new LHN figures as the reignite their plan-making activities, along with making further provisions for any unmet needs arising from the GBBCHMA. Either way the GBBCHMA authorities will collectively need to find land for c.4,186 more homes per year than are planned for in current Local Plans. 2. Coventry-Warwickshire Across the five authorities within Warwickshire which make up the Coventry-Warwickshire HMA,[2] LHN figures would significantly increase under the proposed new standard method. Indeed, in absolute terms, both Coventry and Stratford-on-Avon would see the most dramatic increases when compared to the current method. For Coventry, this would equate to a 118% increase when compared to the adopted Local Plan requirement, and would even exceed the c.2,120 dpa objectively assessed housing need [OAN] identified in its Strategic Housing Market Assessment[3] – which Coventry were unable to meet. Further still, it would dwarf the level of delivery in Coventry seen over the last three years, and will place further pressures on the surrounding Warwickshire LPAs to accommodate unmet housing needs from the City. Similarly, Stratford-on-Avon’s new LHN figure would be well over double its Local Plan requirement, which included an element of Coventry’s unmet housing needs. Whilst many LPA’s have recently adopted Plans, the practical implications of these new LHN figures may trigger a need for an early plan review. This is because the Planning Practice Guidance is clear that “there will be occasions where there are significant changes in circumstances which may mean it is necessary to review the relevant strategic policies earlier than the statutory minimum of 5 years.” It goes on to set out that housing need will be considered to have changed significantly where a plan has been adopted prior to the standard method being implemented on the basis of a number significantly below that generated using the standard method.[4] Consequently, some of the Coventry-Warwickshire LPAs may need to consider whether their Local Plan strategies will require a review, in advance of the statutory five year requirement[4], and wider White Paper reforms; with the exception of perhaps Nuneaton and Bedworth. The implications for plan-making The proposed new standard method will have some profound implications for plan making across the region, and will ultimately impact those LPAs who are currently in process of reviewing their Local Plans, which is largely the authorities within the GBBCHMA. However, even those LPAs that have recently adopted Local Plan may, as a result of the proposed new method, need to progress an early review of their Local Plans to ensure that their housing needs are met. That being said, it is the Government’s wider ‘Planning for the Future’ standard method reform, which clearly signals a shift to an approach which favours a ‘policy-on’ housing requirement, which is likely to be more profound for the region. Nevertheless, the significant increase in housing needs across the West Midlands will inevitably once again raise legitimate and cogent arguments about the availability of brownfield land and the need for Green Belt release, in order to ensure sufficient land is available to deliver the homes that are needed. Consequently, the debate around where such land is to be found, alongside how these needs can be distributed across the West Midlands HMAs, looks set to continue for at least a few more years.  For implications of what the New Standard Method means for other regions, see below perspectives: London   |   North West   |   Thames Valley   |   South West   |   Yorkshire and The Humber [1] Comprising Birmingham, Bromsgrove, Cannock Chase, Dudley, Lichfield, North Warwickshire, Redditch, Sandwell, Stratford-on-Avon, Tamworth, Walsall and Wolverhampton; albeit, North Warwickshire and Stratford-on-Avon fall within the Coventry-Warwickshire HMA. [2] Comprising Rugby, Coventry, Warwick, North Warwickshire, Nuneaton and Bedworth and Stratford-on-Avon [3] The ‘Updated Assessment of Housing Need: Coventry-Warwickshire HMA (September 2015)’ [4] PPG ID: 61-062-20190315  

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