I am amazed at the number of major planning policies being proposed by the new government. I know they said they would want to make major changes to all aspects of life in Britain during their election campaign, but no one really believed them.
I am also delighted that they are putting planning towards the top of their non-Covid agenda. Above Brexit negotiations it would seem. Although I’m not sure that is a cause for delight. Especially for those that live in the soon to be created lorry park called “Kent”.
So, as well as the Planning Reform White Paper they now have an “emergency measure” to increase the national threshold for affordable housing.
The Affordable Threshold
For those not familiar with this, thanks for reading this far. If you want to carry on, currently any development of less than 10 units does not require developers to provide affordable housing as part of their proposed scheme.
Although this threshold was continually challenged, especially by the egalitarian burghers of Reading, it has generally held for the past couple of years. But now, subject to consultation which ended on October 1st, it is likely that the threshold will be increased to between 40 and 50 units.
The stated intention is to help SME developers compete with national housebuilders and to increase delivery on small sites. (It does amaze me when I come across a government policy that makes sense). It has been trailed as a temporary measure but, if it can allow SME’s to compete with the nationals, it will probably be extended. Which, in theory, is all good news for SME developers.
Sites for SME Developers
As a rule, national housebuilders dominate the land market. They have the resources to promote strategic sites and urban extensions through the tortuous planning process, to eventually deliver large numbers of new homes.
As a rule, national housebuilders do not look at sites of less than 50 units – it simply isn’t worth their time and money. In most cases, neither do the regional builders.
So any sites for under 50 units are available to the SME’s. Which is ideal, as SME’s are looking for opportunities to buy land, develop and sell as quickly as possible. Quick wins. The faster they can develop, the faster they can move on to the next development. And here at least, their objectives are directly aligned with the government to deliver more housing.
But where to find such sites? SME’s don’t generally promote land and so they focus on small infill sites around existing settlements or, more usually, brownfield sites.
The Brownfield Policy Conflict
The vast majority of our viability work over the past 10 years has been for SME developers on exactly these types of “small”, brownfield sites. And this is why:
- They have a far higher existing use value. An acre of industrial land in the Midlands will probably have a minimum value of £300,000/acre. A “green-field” site 2 miles away will have an existing (agricultural) use value of circa £10,000/acre. So the cost of the SME’s raw material (land) is 30 times higher than the national housebuilder in this case.
- Brownfield sites will inevitably incur abnormal costs. These could include any or all of demolition, asbestos or ground contamination. None of these are likely to apply to large greenfield sites.
Brownfield sites are, by their nature, complex, individual and absolutely not formulaic. National and local planning policies recognise the need to protect green belt land and encourage development on brownfield sites. It does this by allowing LPA’s to allow permission in principle on brownfield land. Big deal!
What really matters is deliverability. Making sure that previously developed land is brought forward before green sites.
But policy for planning contributions treats brownfield and greenfield sites as the same entity. They are expected to provide the same level of affordable housing, the same contributions to education and the rest of the local authority’s shopping list. Even though brownfield land is relatively far more expensive than greenfield, in terms of planning contributions, there are no concessions to reflect this additional cost.
It is now too late to change current policy on contributions to rectify this ridiculous situation. Planning Reform will eventually do away with affordable housing and other planning contributions and replace it with a single infrastructure charge. The success of the policy will depend on the level of the charge.
There will be no appealing this charge, no concession to brownfield sites and, because of this, if the government sets the charge too high, developers will have two choices – develop or don’t.
The Immediate Future for SME Developers
So, while increasing the affordable threshold on small schemes is welcome and will encourage SME’s, there are still significant viability issues to overcome in the development of brownfield land.
In the vast majority of our viability cases on small brownfield sites, we have successfully argued that, not only can such sites not support policy required affordable housing, they also are not sufficiently viable to make the planning contributions required by adopted policy. Based on the above (and as we only get involved where there is a genuine viability issue) this is perhaps not surprising. But the case still needs to be made cogently and to the satisfaction of the local authority.
While we wait with baited breath to see what level the infrastructure charge will be, we continue to make the case for viable development.