Growth and Infrastructure Act 2013 – Section 106, Affordable Housing and Viability

Our last blog post briefly outlined the Growth and Infrastructure Act 2013, which received Royal Assent on 25th April 2013.

One provision of the Act which has come into force immediately is section 7, which inserts new provisions 106BA, 106BB and 106BC into the Town and Country Planning Act 1990.  These provisions enable an application to be made to a local planning authority for the modification or discharge of a section 106 planning obligation relating to affordable housing on grounds of economic viability.  If an application is refused or not determined within the required period then there is a right of appeal to the Secretary of State.

The aim of the provisions is to encourage stalled sites to come forward where “unrealistic section 106 agreements negotiated in differing economic conditions” are proving to be an obstacle.  The new provisions will be repealed at the end of 30 April 2016 unless the Secretary of State amends the date by order.  There is therefore an initial three year ‘window’ for applications to be made under these provisions.

The Department for Communities and Local Government has published Guidance explaining the evidence which may be required to support applications and appeals under the new provisions.  The Guidance can be accessed here https://www.gov.uk/government/publications/section-106-affordable-housing-requirements-review-and-appeal .

Section 2 of the Guidance explains the ‘Viability Test’.  This is that “the evidence indicates that the current cost of building out the entire site (at today’s prices) is at a level that would enable the developer to sell all the market units on the site (in today’s market) at a rate of build out evidenced by the developer, and make a competitive return to a willing developer and a willing landowner”.  Section 2 also says that the developer should propose a viable level of affordable housing provision in the alternative and this may include adjustments to the mix and provision for phasing.  The developer will have to submit clear, up-to-date and appropriate evidence in support of their application and this will usually mean an open book review of the original viability appraisal (that (if any) which is the most recently agreed by the local planning authority and the developer).

Section 3 of the Guidance explains the form the viability evidence should take.  In most cases this will be a review of the original viability appraisal at the time planning permission was granted.  The revised appraisal should be based on current market conditions.  The local planning authority may undertake its own viability appraisal in response to an application and this can be used on appeal.

Section 4 of the Guidance deals with delivery.  This explains that revised affordable housing obligations should incentivise developers to start building.  On appeal this means that any modification allowed by an Inspector is valid for 3 years only.  If the development is not completed within 3 years, the original affordable housing requirement will apply to those parts of the scheme not commenced.  Paragraph 24 says that “Local Planning Authorities may wish to make similar time-limited modifications or conditions when considering an application….”

Annex A of the Guidance identifies key variables which may be relevant to a reassessment of viability.  Clear evidence will need to show that there have been changes in the original assumptions on matters such as land value, promotional costs, abnormal costs, building costs, gross development value etc.  The Guidance acknowledges that an acceptable developer’s return varies significantly between projects and any changed assumptions in this regard will need to be justified and evidenced from comparable schemes or data sources.

Annex B of the Guidance explains the procedures for applications and appeals in more detail.  There is no prescribed form for an application but it should include sufficient details to identify the land as well as a status report on the progress of development and a copy of the original Section 106 agreement.  In all cases evidence that the scheme is unviable with the existing affordable housing requirement must be submitted together with a proposal for a viable alternative.  The LPA has 28 days to determine the application unless a longer period is agreed in writing.

The Government expects to consult on a legislative procedure for appeals shortly but an interim procedure is set out in the meantime.  It is anticipated that most appeals will be determined using the written representations procedure.  Evidence will need to be submitted within two weeks of the appeal start date.  The Planning Inspectorate will have 28 days to issue a decision following receipt of all written representations.

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About waltonandco

Planning Law firm based in Leeds. Advising upon major infrastructure projects and more complicated negotiations is our forte but we are experienced in all aspects of planning law and policy. In the latest rankings within Chambers UK 2017, Walton & Co has been ranked as a leading firm. In addition, a significant part of our practice is advising upon highway and transportation matters, which may often form pre-conditions to the commencement of development. Compulsory purchase law and compensation form an increasing proportion of our work, where we often work with clients' retained property and agricultural lawyers and surveyors. We also advise local and public authorities including Parish Councils upon planning related administrative issues.
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