23 Jan 2020
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 Its introduction was challenged in the High Court and the VBC guidance was subsequently – but only temporarily -withdrawn.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.
So….to demolish or not to demolish?
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:
Existing gross floor area: 18,000 sq. m
Proposed gross floor area: 23,000 sq. m
Affordable Housing Requirement 30%
The formula to calculate site affordable housing requirement is as follows:
(Difference between proposed and existing floorspace / proposed floorspace) * policy requirement
Difference between proposed and existing: 23,000 – 18,000 = 5,000
Divided by proposed floorspace: 5,000 / 23,000 = 0.22
Multiplied by affordable housing requirement: 0.22 * 30% = 6.5%
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.
Community Infrastructure Levy
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.
Lichfields and VBC
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.
 West Berkshire District Council and Reading Borough Council v Secretary of State for Communities and Local Government  EWHC 2222 (Admin) Written Ministerial Statement (WMS) of 28 November 2014
20 Jul 2018
It is no secret that the redevelopment of brownfield sites is generally beset with more abnormal costs than a typical greenfield site. This is often a major hurdle that can delay or even stymie the redevelopment of brownfield sites. It is the viability issues that stalls or prevents development, or makes such sites less attractive to the market. This is where Vacant Building Credit [VBC] is relevant and why landowners and prospective developers should think twice before demolishing existing buildings.
The recent consultations on the revised National Planning Policy Framework [NPPF] and Planning Practice Guidance [PPG] both show a clear drive and emphasis on a ‘brownfield first’ approach to new development. They set out proposed changes to how viability is considered in planning therefore VBC is a particularly topical element of the current PPG.
VBC is a national Government, PPG-derived financial incentive for the development of brownfield sites with vacant buildings. VBC does not exist in Wales or Scotland. The credit is used to offset existing floorspace against proposed, so as to reduce/ remove locally-set contributions towards affordable housing that would arise via planning obligations. Of course, the PPG is only guidance and therefore can be applied to local circumstances as a material consideration - or not, by individual councils.
VBC has the potential to help prospective developers with issues of viability, depending on a council’s own plan policies and their stance on the guidance. This blog explains what VBC is, when it does and doesn’t apply, and how it may benefit project viability.
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’. So why are the details of VBC not widely known? It may be because 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. It is now proposed to be referenced in the new NPPF (currently at draft paragraph 64) which would add to its weight.
Policy and guidance on VBC is found in both the original written ministerial statement and the PPG paragraphs on planning obligations [21 to 23]. Paragraph 64 of the draft NPPF includes reference to vacant buildings offsetting affordable housing contributions, although it is not explicitly described as VBC. Local Plan policies relating to VBC are very thin on the ground; one of the few examples is in the Draft London Plan, which includes Policy H9 (Vacant Building Credit).
When VBC applies
According to the PPG, VBC is applicable in cases where either a vacant building is brought back into lawful use, or it is demolished and replaced by a new building. In either case, the gross floorspace of the relevant vacant building(s) can be used as a ‘credit’ when the LPA calculates any affordable housing contribution. Vacant floorspace can potentially offset the affordable housing requirements for any given site by a proportion relating to the quantum of existing floorspace compared to that proposed.
VBC will not normally apply if the building has been made vacant for the sole purpose of the re-development (and claiming VBC), nor if the building is covered by an extant or recently expired planning permission for the same, or substantially the same development.
Policy H9 of the draft London Plan holds the policy position that VBC is ‘in most circumstances’ not appropriate in London and unlikely to bring forward additional development. The draft policy includes criteria where exceptions might arise and VBC could be applied. For a building to be considered vacant, it has to have been vacant for a continuous period of at least five years before an application is submitted. The applicant is also required to provide evidence that the site has been actively marketed for at least two of those five years at realistic prices. In short, the draft London Plan is written to discourage the application of VBC; it is implicit in draft Policy H9 that viability is not seen as a constraint to housing delivery on brownfield sites. In the rest of England, there are - as yet - no other similarly drafted policies.
The maths: How VBC can boost viability of brownfield development
The basic calculation can be summarised with the following simple formula:
(Net change in Floorspace/Proposed Floorspace)*Policy Requirement=Site Affordable Housing Requirement
The PPG includes an example at Paragraph: 022 Reference ID: 23b-022-20160519. And here is a worked example here for clarity, based on the following assumptions:
Existing gross floorspace: 10,000 sq. m
Policy affordable housing requirement: 30%
Proposed development: 352 dwellings with a total floorspace of 30,000 sq. m (representing an average dwelling size of 85 sq. m)
The difference between the existing gross floorspace (vacant buildings on site) and the proposed new build floorspace is 20,000 sq. m i.e. the proposed development would result in 20,000 sq. m more of development in this example.
On this basis the Affordable Housing Contribution is (20,000/30,000)*30%=20%
Rather than a requirement of 106 (30%) affordable units the requirement is reduced to 70
From the above calculation it can be deduced that if the floorspace to be demolished is greater than the proposed floorspace, the affordable housing contribution would be zero.
There are many other ways in which vacant buildings can effect the planning strategy. Developers and land owners would need to consider the financial burden of rates that may persist by keeping a vacant building in situ. Benefits of keeping vacant buildings on site can relate to consideration of visual impact. The mass or scale of an existing building can be a helpful material consideration in comparing the same of the proposed development. For example where large industrial buildings are being replaced by residential development often the latter has a lesser visual impact . Existing buildings on site also provide a fall back position in terms of traffic generation. This can help with making the case for acceptable highways impact of new development.
VBC means there can be value in keeping vacant buildings standing, until a planning application for redevelopment has been determined; this element of a site’s wider planning strategy may improve scheme viability, by reducing or removing any requirement for affordable housing.
 Written Ministerial Statement (WMS) of 28 November 2014 West Berkshire District Council and Reading Borough Council v Secretary of State for Communities and Local Government  EWHC 2222 (Admin)