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Developer contributions & viability – increased certainty and a nudge toward zoning? (3 of 3)
The courts, the sums & Parkhurst The two previous blogs covered changes to viability assessments proposed in the recent draft National Planning Policy Framework and accompanying guidance [i], and how these changes present a shift towards greater levels of prescription, in a bid to increase certainty over developer contributions. Whilst the second blog in this series highlighted that we are still some way away from a zonal-approach to planning, recent events show signs that the Government’s subtle zoning moves are being taken seriously, with many in the industry paying close attention to a recent case in the High Court, already known simply as ‘Parkhurst’. In April, a High Court judge ruled in favour of the London Borough of Islington over a long and drawn out dispute between the council and developer Parkhurst Road Ltd., over the levels of affordable housing which would be provided on a new-build development on the site of a former territorial army base [ii]. The appellant’s claim involved a challenge to an Inspector's refusal of an appeal against the decision the council took to refuse planning permission for a residential scheme, they claimed could only viably support 10% of affordable housing on-site. The appellant attempted to justify this based on the purchase price of the land and comparable transactions on other schemes in the area, claiming that delivering any more affordable housing would make the scheme unviable. However, using the EUV + method, the council argued that the benchmark land value was much lower than the figure reached by the developer. Whilst finding some fault with the council’s calculations, the Judge ruled the Inspector had validly rejected the evidence of the Claimant, as the appellant had failed to adjust the market evidence in order to ensure that it took account of local policy requirements. A simple change in guidance? In a post-script to the ruling, the judge advised that the guidance on viability assessments by the Royal Institution of Chartered Surveyors should be revised “in order to address any misunderstandings about market valuation concepts and techniques, the ‘circularity’ issue and any other problems encountered in practice over the last six years, so as to help avoid protracted disputes of the kind we have seen in the present case and achieve more efficient decision-making”. This has of course caused a stir in the development industry, especially from those with sites already in the pipeline. But the case is being viewed by many as a landmark decision, potentially becoming an important piece of case law on land valuation, viability and the funding of affordable housing. But there is a very clear down-side already in evidence. There is the risk that landowners will not bring forward sites, in the hope that policy will one day change in their favour. Of course, local authorities could use compulsory purchase orders, but interference in private property rights is politically unpopular and rare, especially when the money used could arguably better subsidise social and affordable housing. With cross-party consensus on the issue of land value, viability and developer contributions, and a suitable return for landowners factored into any new guidance on all three, the chance of this hiatus happening could be curbed – especially if there were to be clear transitional arrangements and no sudden change in approach. The government will still need to think hard about how to manage the transition period, as sites will not be built out if there is no feasible return for the developer and landowner. Whilst it seems likely (and necessary to some extent) that viability assessments will continue to be deployed at the application stage because almost no development project is fully policy-compliant, having a defined approach which is publicly accessible will hopefully reduce appeals, speed up the planning process and increase transparency. Increasing certainty has been a long-term aim for planning professionals, and repeatedly called for by developers and the public. Achieving this through prescriptive zoning-type measures seems like a dramatic step; however, when considering that development pressure and the scarcity of land are only likely to increase, it seems likely that the Government will continue to explore routes which have proven successful elsewhere. See our other blogs in this series: Rethinking developer contributions and the use of viability assessments increase Viability assessments at the plan-making stage, a step toward zoning? [i] HMCLG - Draft Revised National Planning Policy Framework    HMCLG - Draft Planning Practice Guidance [ii]High Court backs Islington in a landmark planning case on affordable homes  


Developer contributions & viability – increased certainty and a nudge toward zoning? (2 of 3)
Viability assessments at the plan-making stage, a step toward zoning? The first blog in this series of three discussed some of the Government’s proposed changes to policy and guidance on viability assessments and developer contributions[i]. In short, the proposals aim to introduce a standardised approach to appraising land values, whilst front-loading viability assessments to the plan-making stage - suggesting a subtle move toward a more prescriptive, zonal approach to planning.    In theory, such a move could potentially bring a number of benefits in light of the UK’s housing crisis.    For one, the changes could give planners and the public far greater control over what is built and the contributions expected from developers.   Funding for infrastructure could be better aligned to the uplift in local land values arising from granted permissions, whilst people living in the vicinity of new development may feel less likely to oppose it, due to there being greater certainty of the related benefits being delivered.   Taking matters one step further, a further shift toward a zonal approach could also offer the opportunity for more detailed, statutory guidance over design. Housing density, internal space standards and public realm requirements could be written into ordinances alongside or within plans, in theory at least helping ensure safe, vibrant and well-loved places are created, while speeding up the planning process for individual projects too. Design codes prescribe spatial standards for new development, helping individual schemes conform to a wider vision for an area Whilst a fully developed system of zoning is unlikely to be rolled out across England any time soon, for certain site allocations a more prescriptive approach could work well. Local authorities could take on the role of master planner, clearly indicating what kind of development is required and the associated contributions sought from specified site allocations. This could also help garner public support and provide reassurance over potentially sensitive projects, such as estate regeneration schemes or the development of Green Belt sites.   Used in conjunction with land-pooling and a plot-based approach to urban design, this zoning-type approach could also help to reduce some of the risk associated with development, levelling the playing field for smaller developers and simultaneously increasing the diversity of housing on offer, contributing to the genuinely mixed neighbourhoods the Government wants to deliver.   A culture shift in planning? Wider questions remain as to whether local authorities have the capacity or the will to take on the task, as this would require a wide range of professional expertise outside the normal remit of local planning departments.   Those drawing up plans would have to work closely with architects, urban designers, social scientists, economists and community groups, as well as those from the development industry delivering the changes. Whether some of these skills would be brought in-house or outsourced is another question, either way a major change in the culture of planning would be needed. There does appear to be a growing appetite in the development sector for change along these lines.   The recent interim report of the Raynsford Review has called for the profession to welcome a ‘new kind of creative and visionary planner into the system’, arguing that ‘planners and planning need to communicate their creative and visionary ambition’, as well as calls to reform the system of developer contributions [ii]. In the same week, the GLA-commissioned report ‘Capital Gains - A Better Land Assembly Model for London’ has called for powers to be granted to London boroughs that would allow them to designate ‘Land Assembly Zones’ [iii]. Although some London boroughs like Croydon and Hackney have taken a very pro-active approach to regeneration in their areas, this has tended to be on a site-by-site basis and is far from being comprehensive. By assembling smaller plots together, development and infrastructure could be better consolidated, whilst the cost and risk of development could -  in the right circumstances - be shared through land-pooling, in a similar fashion to that outlined above. Without a huge culture shift, further devolution and a relaxation of local authority spending restrictions, zoning in the English system is likely to be limited for now.  A long way to go At present, draft National Planning Policy Framework (NPPF) policies and Planning Practice Guidance on viability testing are not linked to any stricter controls over what can and cannot be built. Given the amount of flexibility this bestows, it makes it more difficult to set developer contributions at a level which is sensitive to market conditions, whilst delivering the community infrastructure needed and not deterring development.   With paragraph 34 of the draft NPPF stating that “plans should also set out any circumstances in which further viability assessment may be required in determining individual applications”, without any stricter controls over development in plans themselves, it seems likely that this will be an option which many applicants decide to pursue. See our other blogs in this series: Rethinking developer contributions and the use of viability assessments increase The courts, the sums & Parkhurst [i] HMCLG - Draft Revised National Planning Policy Framework HMCLG - Draft Planning Practice Guidance [ii] Interim Report of the Raynsford Review of Planning in England [iii] Capital Gains - A better land assembly model for London