The revised National Planning Policy Framework was finally published on 24 July 2018 just before the summer recess of the House of Commons. Howes Percival’s planning team review the implications of the largest overhaul of national planning policy since 2012.
We wrote about the consultation on the new NPPF back in March 2018 (read the article here). Following this consultation where almost 30,000 responses were submitted the new NPPF dated 24 July 2018 (“new NPPF”) has finally arrived.
The new NPPF marks a significant evolution from its 2012 predecessor and there are also some interesting changes which have been made from the version consulted on in Spring 2018. This article cannot attempt to summarise the whole of the new NPPF, but simply seeks to highlight and comment on those areas which we consider are going to be most important to those interested in the development of land.
One point to note at the outset is that it is clear that the Government intends to expand and clarify the new NPPF through the use of national planning guidance; most notably within the Planning Practice Guidance (“PPG”). The new NPPF specifically refers to the use of PPG in relation to viability; the method of assessing local housing need; a local authority’s actions in response to the Housing Delivery Test; and flooding. The Government can, and indeed has over recent years, changed parts of the PPG with speed and without consultation: we anticipate that this trend shall continue.
The “tilted balance”
One key part of the new NPPF which continues to be of utmost importance to the development industry is the presumption in favour of sustainable development in paragraph 11 and in particular the “tilted balance” in paragraph 11 (d) (previously paragraph 14). Whilst no longer a “golden thread” for plan-making and decision taking, this will remain the key battleground where planning permission is sought on unallocated sites or for which the development plan supports a refusal of planning permission.
Paragraph 11 (d) will operate where there are no relevant development plan policies, or the policies which “are most important for determining the application” are “out-of-date”.
One of the more striking changes in format from the consultation draft NPPF is the new footnote 7 which clarifies the meaning of “out-of-date” in this context as including, for applications involving the provision of housing:
1. situations where the local planning authority cannot demonstrate a five year supply of deliverable housing sites (with the appropriate buffer) (“5YHLS”). This is in line with last year’s Supreme Court decision in Richborough Estates Partnership LLP and another v Cheshire East Borough Council [2017] UKSC 37; or
2. where the Housing Delivery Test indicates that the delivery of housing was substantially below (75%, subject to transitional arrangements) the housing requirement over the previous three years.
This does not change the substance of what was consulted upon in the consultation draft and paragraph 3 of the new NPPF makes it clear that footnotes (and annexes) should be given equal weight to the actual paragraphs.
This clarification also does not rule out other arguments as to why the “most important” policies for a particular application/appeal are out-of-date. Such arguments could perhaps include inconsistency with the new NPPF following an analysis in accordance with paragraph 213 or for example if housing targets within development plan policies are out of date by failing to adhere to the requirements of paragraph 67 and 73 of the new NPPF; both scenarios may allow the titled balance in paragraph 11 (d) to be triggered, even if a local planning authority can evidence a 5YHLS. Needless to say, it is clear that there will be much debate about what policies are “most important” for determining planning applications in due course.
Neighbourhood Planning
The new NPPF appears to still attempt to strike a balance between the Government’s largely competing goals of giving local communities more influence in decision making and boosting the supply of housing.
Paragraph 14 of the new NPPF relating to how neighbourhood plans affect the operation of the tilted balance in paragraph 11 (d) has been redrafted which, in the Government’s words, is to “ensure that it is easier to understand and apply in practice”.
Paragraph 14 means that for applications that involve the provision of housing for which the “tilted balance” in paragraph 11 (d) is engaged the adverse impact of allowing development which conflicts with a neighbourhood plan is likely to significantly and demonstrably outweigh the benefits provided all of the following apply:
a) The neighbourhood plan became part of the development plan two years or less before the date on which the decision is made;
b) The neighbourhood plan contains policies and allocations to meet its identified housing requirement;
c) The local planning authority has at least a three year supply of deliverable housing sites (against its five-year housing land supply requirement, including appropriate buffer); and;
d) The local planning authority’s housing delivery was at least 45% of that required over the previous three years, assessed against the Housing Delivery Test from November 2018.
It may also be important to note the impact of transitional arrangements in paragraph 216 which make it clear that point a) above also includes neighbourhood plans which became part of the development plan more than two years before the date on which a decision is made up to and including 11 December 2018. This paragraph 216 also clarifies that from November 2018 to November 2019 housing delivery should be at least 25% of that required over the previous three years, as measured by the Housing Delivery Test.
The new NPPF also includes the ability for Green Belt boundaries to be changed in neighbourhood plans (paragraph 136).
Plan Making
The consultation and publication of the NPPF has not been carried out in a vacuum. Against this backdrop, local planning authorities have either chosen to progress with or halt preparation of new local plans, in many cases driven by the expected impact of a nationalised assessment of housing need which would need to be catered for in these documents.
With this in mind, the transitional provisions in paragraph 214 of the new NPPF make it clear that policies in the 2012 NPPF will continue to apply for the purpose of examining plans where those plans are submitted on or before 24 January 2019. Where such plans are withdrawn or otherwise do not proceed to become part of the development plan the policies contained in the new NPPF will apply to a subsequent plan produced. In light of this, we can foresee arguments around the appropriateness of amending/updating a proposed plan by way of main modifications as opposed to a withdrawal.
The recent High Court decision in R (CK Properties (Theydon Bois) Ltd v Epping Forest District Council [2018] EWHC 1649 (Admin) in which Howes Percival acted as lead solicitors have clarified that it is open to challenge the steps taken in the preparation of a development plan by way of judicial review. Indeed, the High Court made it clear that the statutory bar set out in section 113 of the Planning and Compulsory Purchase Act 2004 only relates to a challenge to an adopted local plan, and therefore a judicial review of the local plan process at any point up to adoption is available. It may be tempting for local planning authorities to attempt to expedite the preparation and submission of draft local plans for examination so as to avoid any potential increase in housing requirements under the standardised approach to calculating housing need in the new NPPF; at the sacrifice of compliance with the procedural requirements for plan preparation. In such circumstances, local authorities may leave themselves vulnerable to scrutiny from unhappy developers, landowners and local residents through judicial review proceedings prior to - or indeed following - submission of the plan for examination.
The test of soundness at paragraph 35 in the new NPPF has also been tweaked to make it clear that a plan must provide a strategy to seek to meet the area’s objectively assessed needs as a minimum, rather than “as much as possible” of the need which was the approach in the consultation draft NPPF. The new NPPF also retains the requirement included in the consultation draft NPPF that a plan must be “an appropriate” strategy, rather than the “most appropriate strategy” which was required in the 2012 NPPF. It is debatable about whether - in reality - this shall cause examining inspectors to more readily find plans sound during examination. In theory, at least it could, but this is something that the industry shall no doubt find out in due course.
Housing
As expected, paragraph 60 of the NPPF makes it clear that strategic policies in plans should be informed by a local housing needs assessment conducted using the standard method in the PPG, unless there are exceptional circumstances which justify an alternative approach which also reflects current and future demographic trends and market signals. This paragraph 60 also confirms that any needs that cannot be met in neighbouring areas should also be taken into account when establishing the amount of housing to be planned for, in addition to the local housing need figure.
The Government do note in their response to the NPPF consultation that lower than previously forecasted population projections do have an impact on the outputs associated with the method set out for assessing local housing need. Revised projections are, according to Government, likely to result in the minimum need numbers generated by the method being subject to a significant reduction, once the housing projection figures are released in September. The Government are clear that they will consider adjusting the method after the projections are released in September to ensure this is consistent with the goal of ensuring 300,000 homes are built per year by the mid-2020s. As indicated above, this is something that the Government could do relatively swiftly by revising the PPG.
The Government have indicated that the local housing need figure shall be based on new household projection figures to be released in September 2018. Without these figures to hand, it is difficult to make any robust comment on the effect that the nationalised approach to calculating housing need will have on any particular local planning authority, although the data released in September 2017 (which may be found here) may be indicative. In light of the above, those local authorities that are pressing on with their plans in a bid to make the 24 January 2019 “deadline” may now be minded to hold off until these figures are released in September so they can assess what effect these will have on the preparation of their new plans.
Many will welcome the clarification that has remained in paragraph 61 of the new NPPF in that the size, type and tenure of housing needed for different groups in the community should be assessed and reflected in planning policies. This includes (amongst others) those requiring affordable housing, older people, students, people who rent their homes and people wishing to commission or build their own homes. Those looking to promote such forms of development will welcome this paragraph which has been widened from the first bullet point of paragraph 50 in the 2012 NPPF.
The wording of paragraph 68 of the new NPPF shall be welcomed by those promoting small and medium-sized sites as it requires local planning authorities to identify land through their development plan and brownfield registers to accommodate at least 10% of their housing requirement on sites no larger than one hectare, unless it can be shown that there are strong reasons why this 10% target cannot be achieved. This is less than the 20% figure included in the consultation draft NPPF but increases the size of site subject to this requirement from half a hectare or less.
Paragraph 71 contains interesting new provisions for entry-level exception sites suitable for first-time buyers or those looking to rent their first home. This paragraph sets out that local planning authorities should support the development of such sites (unless the need for such homes is already being met in the local authority’s area) and that these should be:
a) on land which is not already allocated for housing;
b) comprise entry-level homes that offer one or more types of affordable housing as defined in (the now widened) Annex 2 of the new NPPF; and
c) be adjacent to existing settlements, proportionate in size to them, not compromise the protection given to areas or assets of particular importance in the NPPF and comply with any local design policies and standards.
Footnotes 33 and 34 of the new NPPF make it clear that entry-level exception sites should not be larger than one hectare or exceed 5% of the size of the existing settlement and that the areas referred to in paragraph 71(b) are those set out in footnote 6. This form of development should not be permitted within National Parks, AONBs or the Green Belt. It is wholly unclear at this stage what 5% of the size of the “existing settlement” relates to and whether this means the physical area, population or number of existing dwellings - or indeed another parameter. This is a point which the Government could look to clarify in PPG, failing which we can envisage significant debate with local planning authorities on the point, or at appeal.
Paragraph 73 of the new NPPF again requires (as per its predecessor at paragraph 47) local planning authorities to provide a minimum of five years’ worth of housing against their housing requirement and footnote 7 of the new NPPF also refers to a five year supply of deliverable sites. In this context, the new definition of “deliverable” in Annex 2 of the NPPF is significant. This sets out that sites with outline planning permission, permission in principle, allocated sites or sites identified on a brownfield register should only be considered deliverable where there is clear evidence that housing completions will begin on site within five years. This is a change from the approach that has been advocated by the Courts in relation to the 2012 NPPF (particularly by the Court of Appeal in St Modwen Developments Ltd v Secretary of State for Communities and Local Government & Ors [2017] EWCA Civ 1643) and provides a clear opportunity for those promoting development to once again consider challenging local planning authorities on their conclusions as to which sites should be considered deliverable.
Paragraph 74 of the new NPPF provides a new mechanism to allow a local planning authority to demonstrate a five year supply of housing sites in an annual position statement (or recently adopted plan) which:
a) has been produced through engagement with developers and others with an impact on delivery;
b) considered by the Secretary of State; and
c) and incorporates recommendations of the Secretary of State where the position on specific sites cannot be agreed.
In order to demonstrate a five year supply of housing sites, the local planning authority would also have to include a 10% buffer to take market fluctuations into account (paragraph 73(b)). In our view, this new mechanism should not apply to any current figures presented in annual monitoring reports which have not conformed to the requirements of paragraph 74.
The potential for new settlements or significant extensions to existing settlements has long been mooted as part of the solution to the national housing crisis. The wording of paragraph 72 of the new NPPF shall be important to those who are seeking to promote such forms of development. This paragraph gives clear support to new settlements or large urban extensions which comply with the various requirements set out in this paragraph. This paragraph could well help form a set of parameters for local planning authorities to consider entertaining this form of development in their strategic plan policies.
Affordable Housing
The new NPPF includes a number of changes to the way in which affordable housing shall be planned and delivered across the country.
The most conspicuous revision is to the definition of “affordable housing” in Annex 2 of the new NPPF. This widens the definition of affordable housing to include starter homes, discounted market sales housing (at 20% below the local market value) and “other affordable routes to home ownership”.
The new NPPF does reinsert reference to “Social Rent or Affordable Rent” in the definition of “affordable housing for rent” which was omitted from the consultation draft NPPF. Interestingly however, these are not defined in the new NPPF as they were in the 2012 NPPF and these terms are only linked to the “Government’s rent policy for Social Rent or Affordable Rent”. This could mean the these tenures are open to be amended subsequently at short notice and without consultation, although the remaining provisions in the definition of “affordable housing for rent” at Annex 2 will still apply.
Pursuant to paragraph 62 and footnote 27 of the new NPPF where a need for affordable housing is identified by local planning authorities they now should specify the type of affordable housing required by applying the definition of Annex 2 in the Framework.
Those looking to develop sites should now consider whether their existing section 106 agreements provide flexibility to agree an alternative form of affordable housing provision to take into account the new wider Annex 2 definition or whether they can otherwise form an argument that existing section 106 agreements should be revisited to alter type of affordable housing provision. This may help ensure viability of residential schemes, or indeed allow local planning authorities to provide a wider range of affordable housing options to meet local needs.
Paragraph 63 of the new NPPF interestingly places the current national approach of not seeking affordable housing on residential developments on small sites on a stronger footing. However, this is subtly different from the approach which has been taken in the Written Ministerial Statement of November 2014 and the PPG to date. The former approach set out that affordable housing should not be sought from developments of 10 units or less and which have a maximum combined floorspace of no more than 1,000 sqm of gross internal area. Paragraph 63 now sets out that provision of affordable housing should not be sought for residential developments which are not “major developments”, other than in designated rural areas. “Major development” in the context of housing is defined in Annex 2 of the new NPPF as development where 10 or more homes will be provided or the site has an area of 0.5 hectares or more. This appears to mean that the national approach to setting thresholds for affordable housing provision now applies to sites of 9 dwellings or less which are also less than 0.5 hectares in area.
Vacant building credit for brownfield sites also benefits from being expressly set out paragraph 63 of the new NPPF and should hopefully mean that those local planning authorities which have yet to embrace this now begin to take this into account.
Paragraph 64 of the new NPPF sets out an expectation that at least 10% of homes on major development (as defined in Annex 2 of the new NPPF) should be available for affordable homeownership as part of the overall housing contribution on the site. There are exceptions to this principle in the following circumstances:
a) this 10% percent would exceed the level of affordable housing required in the area or would significantly prejudice the ability to meet the identified affordable housing needs of specific groups;
b) the site or proposed development:
i. provides solely for “Build to Rent” homes (as defined in Annex 2 of the new NPPF);
ii. provides specialist accommodation for a group of people with specific needs (such as purpose-built accommodation for the elderly or students);
iii. is proposed to be developed by people who wish to build or commission their own homes; or
iv. is exclusively for affordable housing, an entry-level exception site or a rural exception site.
Viability
One of the more significant matters included in the consultation draft NPPF and the related consultation on new parts of the PPG was viability. Although there are slight changes from the consultation draft NPPF, the new NPPF and related PPG does represent a significant shift from the position taken by the 2012 NPPF.
A particular change from the consultation draft NPPF lies in paragraph 57 of the new NPPF. This confirms the Government’s approach that planning applications complying with up-to-date policies which set out the contributions expected from development should be assumed to be viable and that it is up to the applicant to justify a need for viability assessment at the application stage. This again opens a door which seemed to closing in the consultation draft NPPF to have viability arguments at planning application stage.
Paragraph 57 of the new NPPF does confirm, however, that all viability assessments (including those at the plan-making stage) should reflect the recommended approach in PPG, including standardised inputs, and should be made publically available. Related PPG was also published on 24 July 2018.
The PPG reiterates the Government’s wish for viability assessment to be made publically available other than in exceptional circumstances – and even in those circumstances for an executive summary to be made publically available. This is a major - and potentially concerning - step change for the development industry, where viability assessments are most often kept confidential.
The PPG does, however, include flexibility for an exemption to making viability assessments publically available but any bid for this must satisfy the local planning authority that the information sought is commercially sensitive. It will, therefore, be incumbent on applicants to formulate such arguments and reach an agreement with local planning authorities on the publication of viability evidence prior to submission to ensure there is no risk of sensitive material being leaked.
The revised PPG sections repeatedly make it clear that the price paid for land is not a relevant justification for failing to accord with relevant policies in development plans. It is therefore no surprise that the PPG supports the use of existing use value plus a landowner premium (or “EUV+”) to define the benchmark land value for viability assessments.
The PPG includes factors which should be considered when establishing benchmark land value. Whilst these factors include market evidence those familiar with the judgment in Parkhurst Road Ltd v Secretary of State for Communities And Local Government & Anor [2018] EWHC 991 (Admin) will recognise the caveats to this that such evidence should be based on developments which are compliant with development plan policies, including for affordable housing. The PPG is clear that the use of market evidence could lead to the use of historic benchmark land values of non-policy compliant developments which could be used to inflate benchmark land value over time.
The PPG does set out that alternative use value (or “AUV”) may be informative in setting the benchmark land value but that the application of such alternative uses must be limited to those which have an existing implementable permission for that use. Where there is no such implementable permission it will be open to plan makers to set out circumstances where alternative uses may be used but this must be supported by evidence of the costs and values of the alternative use to justify land value and that there should be no double counting of any landowner premium.
The PPG also looks to provide some clarity for how the “premium” or “plus” element in the EUV+ should be defined. It is said that this should reflect the minimum return at which it is considered a reasonable landowner would be willing to sell and must provide a reasonable incentive for a landowner to bring forward land for development while allowing a sufficient contribution to comply with policy requirements. There shall no doubt be many debates in due course as to what a “reasonable incentive” shall constitute, particularly given the wide-ranging circumstances of landowners and reasons for releasing their land for residential and other forms of development.
Interestingly, the PPG has diluted the 20% of gross development value return to developers which was included in the Spring consultation to a 15-20% figure which the Government now consider is a suitable return to developers in order to establish the viability of plan policies. It is anticipated that there shall be some debate in local plan preparation as to the precise figure that shall be used.
It is also accepted in the PPG that viability will need to be dealt with differently for the build to rent sector given that they depend on a long-term income stream but much of the detail is left to local planning authorities in this regard.
The approach of the PPG to viability review mechanisms in section 106 agreements is tighter than that suggested in the Spring consultation and now appears to be aimed at the potential of such provisions to secure further contributions from a developer rather than catering for a two-way review to provide flexibility for all parties through economic cycles.
Appropriate Assessment
Those involved in development proposed in the vicinity of “European sites” will be familiar with the sweeping effect of the recent case of People Over Wind and Sweetman v Coillte Teoranta (C-323/17) (“People Over Wind”).
This article does not seek to set out a full analysis of the effects of this case on the plan-making and decision-taking process but in a nutshell, this case fundamentally changed the long-accepted position mitigation measures could be taken into account at the “screening” stage of the appropriate assessment process. This position was supported by the English Courts, most notably the Supreme Court in Champion v North Norfolk District Council [2015] UKSC 52 (led by Howes Percival). Now mitigation measures (referred to in the judgment as “avoidance or reduction” measures) may not be taken into account when screening for whether a scheme would have a significant effect on a European site. Ultimately, this means that many more appropriate assessments are being carried out as fewer schemes are “screened out” of this requirement.
Paragraph 177 of the new NPPF largely mirrors paragraph 119 from the 2012 NPPF and sets out that the presumption in favour of sustainable development at paragraph 11 of the new NPPF does not apply where development requiring appropriate assessment because of its potential impact on a “habitats site” (as defined in Annex 2 of the NPPF) is being planned or determined.
This means that those schemes which require appropriate assessment following People Over Wind now cannot benefit from the “tilted balance” pursuant to paragraph 11 (d).
The Government’s rationale for not changing paragraph 177 in light of People Over Wind is not immediately clear. It is possible for a scheme to be subject to appropriate assessment, be found to have absolutely no impact on a “habitats site” but then not be capable of benefitting from the tilted balance in paragraph 11 (d). We question why such schemes should not benefit from the tilted balance, particularly given that it would be clear following appropriate assessment whether there would be any “adverse impact” on a “habitats site”. The key for applicants is to try - through robust technical evidence and submissions - to screen away the need for appropriate assessment in line with the People Over Wind ruling. Where this is not possible, it will be crucial to boost the planning benefits of a proposal to maximise prospects of negotiating a planning consent in the absence of 5YHLS arguments.
It is important to finally note that the implications of People Over Wind do not affect screening for the purposes of Environmental Impact Assessment. Champion remains the leading authority on the ability to take into account mitigation measures at the screening stage, as incorporated in the 2017 EIA Regulations.
Howes Percival’s planning team is already advising clients and contacts on the implications of the new NPPF on existing and future projects, whether in the context of planning applications or appeals. If you have any queries on the impact of the new NPPF please do not hesitate to contact us.
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