Can The Planning System Help Or Hinder The Creation Of A Large Scale Private Rented Sector?

Karen Cooksley, Partner - Head of Planning, Winckworth Sherwood

Karen Cooksley, Partner – Head of Planning, Winckworth Sherwood

Residential developers who build for sale have, for many years, voiced consistent concerns about the length of time it often takes to navigate the planning system and achieve the consent required to build much needed homes. Inefficiencies in the processing and determination of applications can result from a lack of resources or experience at officer level.

There is frequently a lack of political will or leadership to help communities understand the need for more homes to be built in their locality and the wider social and economic benefits which will result. Each local authority has different policies and there is a frequent tendency to apply planning law and national policy in a different way.

Successive governments have tinkered with primary and secondary legislation, and latterly made more radical changes to both law and national policy, in an effort to speed up both policy making and decision taking at a local level. In recent years the Coalition Government has given special emphasis to the need for the construction and provision of more homes of all tenures, not just to serve spiralling housing need, but also to kickstart the recovering economy.

With the resurgence of interest in Private Rented Sector (PRS) housing come concerns that this tenure may also experience problems with planning. This at a time when there is widespread recognition that the PRS has a significant part to play in providing homes of the right size, quality and in the right places to suit the needs of those who cannot afford, or choose not, to own their homes but do not qualify for subsidised affordable housing.

There is inconsistency between local planning authority views on the PRS, which does not fall neatly across traditional party lines. Some appear to believe that it is simply a new form of affordable housing tenure and have discussed how best to regulate it as such. Others have suggested that PRS units should be a different use class from the normal C3 dwelling – which is not favoured by developers, operators or funders who point out that non-special needs affordable housing is not classified differently from private residential use and who need the flexibility of being able to retain the ability to sell units on in the future.

There may need to be regulation to ensure that PRS units are used as such for a minimum period, for example where this tenure will meet a particular housing need or to ensure that there is a sufficient scale of private rented housing available, but this can readily be achieved by the usual mechanisms of s106 planning obligations or planning conditions. In both cases, care will need to be taken to ensure that any restrictions imposed are framed in the context of very different valuation requirements from those which local planning authorities have used in dealing with development for sale and the calculation of the affordable housing which should be provided as part of those schemes.

There will also need to be recognition by local planning authorities that, whilst there is not a ‘one size fits all’ PRS model, many of the schemes which are now coming forward are purpose built for rent and will often be laid out to a different specification than flats which are built for sale. There will need to be careful reasoned explanation provided by developers and operators of PRS schemes and their specialist architects, to enable authorities to be flexible in relation to their current adopted design standards and policies from a position of understanding.

A potentially exciting new proposal by which the planning system could assist the development of the PRS at scale was launched on 12 June 2014 when the Chancellor (in his Mansion House speech) announced that the Government would be “removing all obstacles that remain to development on brownfield sites” and that the Government would be “putting local development orders on over 90% of brownfield sites that are suitable for housing”.

As part of this initiative a prospectus has now been published by the Mayor of London (MoL) in relation to the establishment of 20 Housing Zones (HZs) across London. Central Government will also be creating ten HZs outside London. In the foreword to the Mayor’s prospectus, written jointly by Boris Johnson and the Chancellor of the Exchequer, it is expressly stated that “All this builds on the steps we’ve already taken like our reforms of the planning system… improving the private rented sector and building 100,000 affordable homes in London”.

HZs were first mooted in the draft Housing Strategy published by the MoL in November 2013. HZs will be areas where house building will be accelerated by a variety of funding and policy levers with the primary aim of the maximisation of new housing supply. Each HZ will be expected to deliver at least 1,000 new houses and will have a lifespan of up to ten years. Overall the MoL expects the 20 HZs to deliver more than 50,000 homes.

The MoL’s draft Housing Strategy originally indicated that the HZs would be located in the 38 Opportunity Areas. However, other locations will be considered if they meet the criteria set out in the Prospectus. The principle idea behind HZs is to stimulate construction activity in areas where the market is as yet unable to support large scale development. Only four London boroughs recorded more than 1,000 residential starts last year and the aim is for there to be a greater volume and spread of housing development across London.

The MoL is committing £200 million of capital funding from GLA housing funds to the HZs and a further £200 million will be made available by Central Government. The capital funding from the GLA will be recoverable funding and therefore will be available either by means of a loan with a commercially calculated interest rate or through an overage or profit share type arrangement. If this is not possible the MoL will consider making investment available through a grant, but such investment will have to be state aid compliant. The Central Government funding will also be made available as capital funding but will only be open to private sector organisations. Registered Providers will be entitled to apply for the Central Government funding.

The Prospectus states that the funding for HZs cannot be allocated to revenue expenditure. However, the funding can be made available for a wide variety of capital expenditure purposes including infrastructure/gap funding, land remediation and site preparation, affordable housing delivery or supporting home ownership. It is also suggested that pre-sale guarantees could form part of the package of financial measures made available within a HZ.

The Prospectus states that HZs are a new approach to housing delivery and that some legislative or policy changes may be required in order to maximise their potential and effectiveness. The Prospectus highlights the use of Local Development Orders (LDOs) by the boroughs. It concedes that LDOs have so far been little used in London and it is clear that the GLA will expect the boroughs to promote LDOs within the HZs. The Prospectus also suggests that the MoL could acquire land in HZs using compulsory purchase powers if necessary. The MoL would then work with the borough and other development partners to draw up a master plan for the zone and even issue outline planning permission for the construction of new homes. This could herald the granting of powers to the MoL to make Mayoral Development Orders which presumably would take the place of LDOs.

A borough with an area designated as an HZ would need to demonstrate how it is able to adequately resource and streamline its planning function. It would be supported by the GLA in both plan making and development management, in return for which it would need to meet agreed outputs. There will also need to be a clear demonstration that once permission has been issued it will be capable of speedy implementation, for example by ensuring that reserved matters and pre-commencement conditions –which often take months or even years to clear down – are agreed in advance. It is likely that some HZs will cross borough boundaries and the GLA’s support there might include bringing together the different authorities’ planning teams to ensure co-ordination of approach and decision making.

Statutory consultees can often delay or impede decision making – as a result of the time taken to respond to planning authorities’ queries or in surveying or implementing infrastructure works – it is proposed that the GLA would be willing to act as mediator or broker to improve performance in that regard.

A further suggestion in the Prospectus is that boroughs who want to encourage development and minimise planning risk and delay might consider an accelerated planning process. This would mean treating a site as though there was a planning application for the desired type of development, e.g. large scale PRS, and undertaking all the necessary preparatory work that such an application would involve. This would enable any subsequent application to be processed much more quickly. Plainly, there would be costs involved in that – which a developer would no doubt be asked to reimburse – and there would need to be attention paid to the ability of developers or operators to rely upon the work undertaken by the authority’s professional teams in the preparatory works.

There is specific support for PRS development to come forward in HZs, which are said to be areas where the planning system would encourage PRS “in order to increase the pace of development and add to the range of housing options available”. It is noted that there would normally need to be planning covenants – s106 obligations – to ensure that such homes are held as PRS over ‘a reasonable timescale’.

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