Wednesday, 11 May 2016

Reduced affordable housing contributions upheld

In November 2014 the government published a written ministerial statement on affordable housing. The government’s online Planning Practice Guidance was subsequently amended to reflect this revised policy.

The new policy proposed that:

(1) developments of no more than 10 homes (with a gross floorspace not exceeding 1,000 sq m) would be exempted from levies for affordable housing and tariff-based contributions,

(2) but in designated rural areas, National Parks and AONBs, the exemptions would apply only to developments not exceeding 5 new homes; developments of 6 to 10 homes could pay a commuted sum, either at or after completion of the development;

(3) redevelopment of a vacant building, or its demolition for redevelopment, would give rise to a credit (calculated in terms of floorspace) that could be off-set against any affordable housing contribution.

Ministers were hoping by this means to assist in preserving the commercial viability of small housing schemes.

Two LPAs, West Berks DC and Reading BC, were so concerned about the implications of this policy that they challenged it in the High Court. They feared that they (and other authorities) would have to find even more housing land to counteract the effect of this new ministerial policy in potentially depriving their areas of sites that could otherwise contribute to affordable housing.

The two councils won in the High Court in July 2015, and secured the quashing of the new policy. However, the Court of Appeal has today handed down its decision on the appeal by the Secretary of State against the quashing order ([2016] EWCA Civ 441). The Court of Appeal has allowed the Secretary of State’s appeal on all four of his grounds of appeal.

Ground 1 - Inconsistency with the statutory scheme

On the one hand, a decision-maker must not fetter their discretion, but on the other hand, a policy-maker (notably central government) is entitled to express their policy in unqualified terms. They are not required to spell out the legal fact that the application of the policy must allow for the possibility of exceptions. The question for the Court was whether the ‘offending’ ministerial statement on its face sought to countermand or frustrate the effective operation of sections 38(6) and 70(2) or whether it merely expressed the Secretary of State’s substantive planning policy in unqualified, though trenchant, terms.

The language of the ministerial statement is in mandatory terms: “… a threshold beneath which affordable housing contributions should not be sought”. However the Court of Appeal accepted that the articulation of planning policy in unqualified or absolute terms is not in principle repugnant to the proper operation of section 38(6), and so this use of language was unobjectionable.

In the Court’s judgment, the policy expressed in the ministerial statement was not to be faulted on the ground that it does not use language which indicates that it is not to be applied in a blanket fashion Its place in the statutory scheme of things is simply a material consideration for the purposes of section 38(6) of the 2004 Act and section 70(2) of the 1990 Act, and no more. It does not countermand or frustrate the effective operation of those provisions.

Ground 2 - Failure to take into account material considerations

In making planning policy, the Secretary of State is exercising power given to the Crown not by statute but by the common law. The Court accepted that the statutory planning context to some extent constrains the Secretary of State. It prohibits him from making policy which would countermand or frustrate the effective operation of section 38(6) or section 70(2). It would also prevent him from introducing into planning policy matters which were not proper planning considerations at all. Subject to that, his policy choices are for him. The planning legislation establishes a framework for the making of planning decisions; it does not lay down merits criteria for planning policy, or establish what the policy-maker should or should not regard as relevant to the exercise of policy-making.

In those circumstances the Secretary of State was not, in the Court’s judgment, obliged to go further than he did into the specifics, and in consequence was not to be faulted for a failure to have regard to relevant considerations in formulating the policy set out in the written ministerial statement.

Ground 3 - Inadequate consultation

It had been acknowledged by the Secretary of State that the real driver for the change in policy was the view that affordable housing requirements imposed a “disproportionate burden” on small sites, but the essential legal principles applying to this ground of challenge were not in dispute. The consultation document must contain sufficient information to enable an intelligent response. A consideration of whether a non-statutory consultation process such as this contravened the requirements of procedural fairness will always be fact and context sensitive. The test is whether the process has been so unfair as to be unlawful.

The Court found no unfairness in the procedure adopted by the Secretary of State. In their judgment, the present case was not one involving a failure to make plain, and to disclose, fundamental detail. On the contrary, the relevant paragraphs of the consultation document, together with its broadly based question, did not focus narrowly on strict viability issues. The question was posed in the context of broader-based impacts of the existing section 106 contribution regime upon small-scale building developments.

As to the question of whether appropriate consideration was given to the consultation responses, the Court did not accept that this obligation translates into an obligation on the Minister to adopt the submissions made to him by respondents. In their judgment, the Minister was entitled to consider the whole range of responses made to him, (together with all relevant information), and to form his own conclusion independently of the views of any particular section of consultees or indeed the views of his own advisers. The relevant paragraph in the minister’s response to the consultation represented the balance struck by the Minister after weighing up the various submissions made to him.

Ground 4 - Breach of the public sector equality duty

The written ministerial statement was not accompanied by any Equality Impact Assessment. However, when this omission was pointed out, a formal Equality Statement was produced, and the Secretary of State announced that, having considered the findings of the Equality Impact Assessment, he was satisfied that the policy changes announced in the ministerial statement were compatible with the requirements of section 149 of the Equality Act 2010 and, accordingly, after reconsideration he had decided to maintain the policy changes.

In light of this retrospective impact assessment, ministers concluded that the proposed policy would not have a negative impact on discrimination, fostering good relations or advancing equality of opportunity. They recognised that this policy may impact on the delivery of affordable homes, but drew attention to the expected delivery of 170,000 new affordable homes between 2011 and 2015, and to a further £38 billion of public and private investment that will help ensure another 270,000 new affordable homes are provided between 2015 and 2020.

The Court accepted that this Statement demonstrated a consideration of the potential for adverse impacts on protected groups. The requirement to pay due regard to equality impact under section 149 is just that. It does not require a precise mathematical exercise to be carried out in relation to particular affected groups or, for example, urban areas as opposed to rural areas. The Assessment undoubtedly acknowledged the effect of the proposals upon protected groups, but sought to place that in context by reference to other policies impacting on affordable housing. As such, it complied with section 149.

The judgment of the High Court was accordingly reversed.

UODATE (20.5.16) : As I predicted in a comment posted below, the government has now updated its online PPG to restore those passages relating to affordble housing thresholds which were excised from the PPG in response to the High Court judgment in the case reported above. The Court of Appeal's judgment has enabled the government to re-insert this material without further ado, as they have now done.

I would draw attention, however, to my remarks below as to the limitations on the practical application of this ministerial policy, which will not necessarily override up-to-date and recently adopted local plan policies, bearing in mind the effect of section 38(6).



  1. Andrew Preston MRICS11 May 2016 at 16:03

    Thank you Martin for this update, which has substantial implications for a number of planning applications that I am currently dealing with on behalf of clients. In your opinion, does this decision automatically reinstate the policy with immediate effect, or is there a need to wait for Government to update the Planning Practice Guidance? If the policy is reinstated, and a further legal challenge is made, what do you think the implications will be for planning decision making in the meantime?

  2. In answer to Andrew Preston, effect could (in principle) be given to the the Secretary of Stae's previously published policy immediately, but I imagine he will also wish to re-amend the online PPG.

    The Secretary of State is now free to re-instate the impugned policy in his on-line Planning Practice Guidance. This would not require any further formality. The Court of Appeal has found that the policy was lawful, and has rescinded the quashing order that had been made by the High Court. There would therefore appear to be no need for the Secretary of State to re-consult before re-instating the amendments made to the on-line PPG, so as to give effect to his previously published policy.

    A further appeal by the local authorities involved, this time to the Supreme Court, cannot be entirely ruled out, but until or unless such an appeal were to proceed (by permission of the court) and were then to result in the original order of the High Court being reinstated, the Secretary of State’s policy on affordable housing can in the meantime be implemented and applied, and the Department of Communities and Local Government (as well as the Planning Inspectorate) can be expected to give effect to this policy in determining appeals and called-in applications where the threshold level for affordable housing contributions is in issue between the parties.

  3. Martin, as always thanks for your prompt reporting on key cases.
    Taking your point from the comment above that CoA decision held the policy was lawful and affective, what would be the best course of action for applications submitted and approved in the intervening period between the High Court decision and this, where Contributions have been agreed to and required within a S.106 agreement but where the consent has yet to be implemented. We need to consider that the LPA in this instance had been extremely resistant to this policy from the start.

  4. It will be interesting to see if the NPPG does change in the next few days / weeks and if we are entering a world of what I would call 'hokey-cokey' policy making: "you put the policy in, the courts take it out, in, out, in, out, and shake it all about"; especially as the route to appeal up to the Supreme Court is still there.

  5. In answer to Nicholas Charalambous, it may depend on whether the section 106 agreement has been completed and, if so, whether it is immediately effective or comes into effect only upon the planning permission being implemented. Some care may be needed in this case in attempting to unpick what had previously been negotiated.

    It should also be borne in mind that this is only the Secretary of State’s own policy. As the Court of Appeal was careful to point out, it does not override formally adopted development plan policies. Planning applications must still be determined, as provided by section 38(6), “in accordance with the development plan unless material considerations indicate otherwise”. The Secretary of State’s policy is undoubtedly a material consideration, but it will not automatically override the Development Plan, and the weight to be given to it as against the development plan will depend on the circumstances in each case.

    Where LPAs are opposed to the relaxation of affordable housing thresholds that the Secretary of State has proposed, this issue may finally be determined only on appeal in disputed cases. I foresee lots more work for the planning lawyers. “Lovely-jubbly”, as Delboy would have said.

  6. I'm not quite sure why it would take so long to have reached this decision - given the potential ramifications we could all have done with a prompt resolution (notwithstanding the risk of the two LPA's dragging this out to the Supreme Court - irrespective of the arguments for and against this policy I hope they will see that any further expenditure will be waste as it is quite clear that the Government will seek to enable this policy one way or another).

    Perhaps the most important aspect of the Court's reasoning is the emphasis it gives to status of this policy as a material consideration that doesn't supersede an up to date development plan policy. Some LPA's seemed to throw in the towel when the policy was first announced, despite appearing to have up to date policies. I suspect that I will be having some different conversations to those I had with the same officers a year ago!

  7. I'm also surprised this has taken since last July given the implications for local planning authorities. In the context of CIL charging schedules, won't economic viability at some sites be affected by this? Any charging schedule in the course of preparation or examination and currently ignoring the policy may presumably be held not to have met the requirements (depending on whether permission is sought/ obtained for the SC and whether it follows the court of appeal's decision).

    I accept Martin's point that this is 'only' policy but it has materiality nonetheless.

  8. Will this new decision mean a section 106 agreement should no longer be applied to a change of use application?

  9. In answer to ‘Spongemum’ (16.5.16), as the comments above make clear, the answer will depend on the adopted planning policies that apply in the area in question (and how up-to-date they are). However, it is very unlikely that a section 106 agreement to secure a contribution to affordable housing could ever be justified on a single property.

    Howevr, if ‘Spongemum’ has in mind changes of use under Part 3 in the GPDO (e.g. under Class O) then there is simply no scope for the provision of, or contribution to, affordable housing in respect of such developments. This lies outside entirely the scope of Part 3. Section 106 obligations are only used in this context to deal with certain highway improvements or parking provision, where road conditions make this necessary or appropriate.

  10. Thank you for your response Martin.The latest information to the public is that Shropshire Council are set to lose millions. (not admitting to have financially supported Reading & Berkshire Councils to fight the government) Those who have already signed the 106 agreement would now still be expected to honour their contribution!!! Whether that will mean having to withdraw an application if merely a change of use to a single dwelling remains to be seen.

  11. If my local authority is insisting I still pay an affordable housing levy despite the appeal ruling and the fact that I am only creating 2 dwelling what can I do? Does it require a legal appeal on my part?

  12. Notwithstanding the court of appeal decision and the updated guidance now issued by DCLG my LPA is still intending to give full weight to their adopted local policy of affordable housing obligations for any scheme of one or more dwellings. Can they do this?

  13. Following on from "spongemum"'s comment...
    Martin, have you heard anything regarding people who have already signed the section 106 agreement, but have yet to actually commence work? I myself am in the Shropshire Council's catchment area and recently signed the section 106 on a single dwelling? Any information would be greatly appreciated.


    Paul. T

  14. Where a section 106 agreement is already in place, it will be binding on the parties, irrespective of any change in circumstances (including the Secretary of State’s recently re-instated policy change on affordable housing thresholds).

    On Wednesday, 2 March 2011, in an article entitled ”Unilateral undertakings – Developers beware!”, I reported on the case of R (Millgate Developments Ltd) v. Wokingham BC [2011] EWHC 6 (Admin), which graphically illustrates this point. There is only limited scope for seeking the relaxation of such an obligation.

  15. In answer to the anonymous queries of 29 May and 3 June, I have previously pointed out that the Secretary of State’s policy does not override an adopted Local Plan, provided it is up-to-date. Section 38(6) of the 2004 Act will apply in such a case, as the Court of Appeal pointed out.

    It is not surprising, therefore, that several LPAs have made it clear that they will be sticking to the lower threshold for affordable housing contributions laid down in their Local Plans.

    A disappointed applicant could try their luck with an appeal specifically addressed to this issue, but should not be surprised if they get the ‘wrong’ answer.

  16. Martin - what is considered an up-to-date plan in this instance ?

  17. In answer to ‘Unknown’ (29 June), it would take too long to explain the point here, and I would refer this enquirer to published ministerial statements on this issue.

  18. Martin,

    I am fairly new to the subject, however have found your blog which has helped me understand the subject a lot better. I would like to know your advice on my current position regarding a development site.

    It is a site for the demolition of an existing building and construction of 8 apartments. It was bought in January after the previous owner had taken it through planning to committee, where it had been recommended to "grant planning subject to a legal agreement". The previous owner didn't sign the S106 and sold the site without the S106 signed and with the "recommendation to grant" planning. My efforts to obtain formal planning were first delayed by the fact the site hadn't been previously registered with land registry (which took 3 months to resolve) and then subsequently by the government's appeal ruling regarding the affordable housing threshold.

    Whilst I was in a position to sign the S106 and hand over a sizeable sum of money, the high court case has now meant that the planning decision for this and similar schemes have been put on hold whilst LPAs decide their next move.

    The latest information from the LPA is that there is no further news as they continue to discuss matters with their legal department. They have, however offered me the opportunity to continue with the signing of the S106 and the £40k+ fee that comes with it.

    What are your thoughts?

  19. Does or will this apply to Wales?

  20. The answer to Jeremy Meea is “No.” It applies to England only.

    Planning is a wholly devolved function, and so the Secretary of State’s writ does not run beyond the Severn. It will be up to Welsh Ministers to decide for themselves how they handle this issue in Wales.

  21. Going back to Matt's query of 8 July, I can’t give legal advice without formal instructions, but this is a good example of the uncertainty that has resulted from the Court of Appeal’s decision in the West Berks / Reading case.

    It is understandable that the LPA may wish to consider their position. Equally, an applicant may prefer to wait and see, before entering into a planning obligation under section 106, and committing any money in fees or payments.

    One thing that did emerge from the Court of Appeal’s decision is that where there is an up-to-date Local Plan, a clearly formulated policy in that plan requiring the provision of, or financial contribution to, affordable housing, even if it sets a much lower threshold than the Secretary of States’ revised policy, may well carry more weight than the Secretary of State’s policy, so that in such cases a much lower threshold than that favoured by the Secretary of State may still apply.

  22. Martin, I note that your interpretation of the Appal Courts ruling has given comfort to some councils. However, my reading of the judgement is that the development plan is simply the starting point but that "it is not the law that greater weight be attached to it than other considerations". A technical point but Planning Inspectors will almost always apply government policy.

  23. In answer to my anonymous correspondent of 10 September, it is not my interpretation of the Court of Appeal’s decision that has given comfort to some councils, but the words of the Court of Appeal themselves. They were at pains to point out that their decision did not involve adopted local plans being overridden.

    The development plan is not simply the starting point. Section 38(6) of the 2004 Act requires that the planning application be determined in accordance with the development plan, unless material considerations indicate otherwise.

    Thus an up-to-date local plan will almost always trump “other material considerations” such as ministerial advice in the NPPF. The NPPF does not override an up-to-date development plan that has been formally adopted by the LPA. It is only where a development plan is arguably out-of-date or has not yet reached adoption, that the advice in the NPPF might then be given sufficient weight to indicate that the planning application can, or should, be determined otherwise than in accordance with the development plan.

    Thus lower affordable housing thresholds in local plans may well be upheld, notwithstanding the Secretary of State’s published policy in the NPPF.

  24. Thank you for posting such useful information.

    I'm very interested in the comments and any possible future developments because I am currently subject to a Section 106 Affordable Housing Contribution, dated 12 Dec 2013, as a result of a Change of Use planning application and am wondering if it should ever have been applied.

    Some derelict/redundant farm buildings were rebuilt to provide "Workshops and storage incidental to the domestic enjoyment of the property". Two years later a planning application for change of use of part of the barn complex (315 sq metres) to a single dwelling.

    Very little work on the conversion has been done; I believe glazing has been installed where previously there were large doors, sometime after June 2014, but probably very little else. I no longer live at the property although I still own a share of it but that is likely to change within the next 6 months. Do you think that I have any grounds for asking the local authority to review the Section 106? Will it depend entirely on the LPA's policy?

  25. In answer to the anonymous query of 19 October, relaxation of, or release from, a section 106 agreement that has been completed and is therefore binding on the parties (and on the land) is primarily a matter for negotiation with the LPA. An appeal procedure is available (subject to certain conditions) if agreement cannot be reached with the LPA.