Major affordable housing ruling leaves Islington development in limbo

The high court has backed the refusal of planning permission for residential redevelopment of a former Territorial Army Centre in Islington, in an important decision on viability and affordable housing in the capital. Parkhurst Road, which bought the site for £13.2m from the Ministry of Defence in 2013, had challenged the June 2017 decision in respect of the 0.58ha site at Parkhurst Road, Islington, London N7, in which an inspector rejected its appeal against the London Borough of Islington’s refusal of planning permission for 96 homes. However, high court judge Mr Justice Holgate dismissed the claim, and called for the RICS to consider updating a key guidance note on assessing financial viability in planning in order to avoid similar disputes in the future. This is the latest decision in a protracted wrangle over redevelopment of the site. An earlier proposal for 150 homes, later reduced to 116 homes, was rejected by Islington in October 2014, and then by an inspector on design grounds in September 2015. The key issue at the centre of the 2017 planning appeal was whether Parkhurst Road’s offer 10% of affordable housing constituted the “maximum reasonable amount of affordable housing” in the context of Islington’s overall affordable housing target of 50% of all new housing across the borough. Crucial to that question was the appropriate benchmark land value (BLV) for the site. The parties were divided on how to calculate BLV. Islington maintained that this was exactly the type of site that should be making a substantial contribution towards affordable housing, as the existing use value (EUV) was “negligible”, and there was no alternative form of development which could generate a higher alternative use value (AUV). The council claimed that the achievement of that affordable housing objective was being frustrated by Parkhurst Road’s use of a “greatly inflated” BLV for the site which failed to reflect those factors. However, Parkhurst Road argued that the correct approach to establish BLV was using market value or “market signals”. Circularity could be avoided by disregarding any transactions which “are significantly above the market norm”. While Parkhurst’s approach resulted in a BLV of £11.9m (resulting in only 10% affordable housing), Islington’s was as low as £6.7m (justifying 34% affordable housing). The inspector accepted the council’s figure, taking the view that Parkhurst Road had failed to give adequate effect to policy requirements for affordable housing. Parkhurst Road argued that this decision resulted from a legal error in the assessment of the evidence. Although he found that there had been flaws in the approach taken by the council’s valuer which were not addressed properly by the inspector, Mr Justice Holgate dismissed the challenge. He said that the effect of the policies in the London Plan and Islington Core Strategy (together with national planning policy guidance) is that where an applicant seeking planning permission for residential development in Islington proposes that the “maximum reasonable amount of affordable housing” is lower than the borough-wide 50% target on viability grounds, “it is his responsibility to demonstrate that that is so”. He added: “The proposed residential development would accord with a number of development plan policies and objectives, particularly those that promote the delivery of housing. “However, the appeal proposal would not provide the maximum reasonable level of affordable housing and the submitted planning obligation does not provide a suitable means for a viability review. Having had regard to the development plan as a whole, the appeal proposal is in clear conflict.” The judge took the unusual step of adding a postscript in which he addressed some of the difficulties raised by this case. He said: “One of the key objectives in our planning system is efficiency in decision-making, in order to avoid delay in bringing about necessary or beneficial development. In this context the present case strikingly illustrates the importance of seeking to overcome uncertainty on how viability assessment should properly be carried out. “Similar schemes on the same site have been approached by two different inspectors in very different ways. That is not in itself unlawful, but from a practical perspective it does make it more difficult for practitioners and participants in the planning process to predict the likely outcome and to plan accordingly. It also leads to a proliferation of litigation.” He said that this might be an “opportune” time for the RICS to consider revisiting the 2012 guidance note, Financial viability in planning, “in order to address any misunderstandings about market valuation concepts and techniques”. Welcoming the decision, Islington said: “We are delighted by the high court judgment. This decision reinforces Islington Council’s long standing position that developers should abide by the councils’ planning guidelines – rather than overpaying for land and then trying to bypass our affordable housing requirements. “There is a shortage of good quality, genuinely affordable housing in Islington and a significant unmet housing need. The council is doing everything it can to address this, because we believe that everyone should have somewhere to live that is affordable, decent and secure – and developers must respect these important priorities when they purchase sites in Islington.” A spokesman for Parkhurst Road said: “We are disappointed with the high court’s decision. We acquired the site from the Ministry of Defence through a competitive bidding process in 2013, and our approach to viability was previously approved by the planning inspectorate at appeal in 2015. “Our track record in Islington speaks for itself – all our schemes deliver significant amount of affordable homes and jobs that help build thriving mixed communities. It is therefore extremely disappointing that the site remains empty after five years and is not delivering much-needed homes for Londoners. We are currently reviewing our options for the site.” To send feedback, e-mail jess.harrold@egi.co.uk or tweet @jessharrold or @estatesgazette