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).

© MARTIN H GOODALL