Planning change: is there an alternative?

Duncan Field and Victoria McKeegan review the planning measures announced in the recent Budget and ask whether another set of planning policy changes is really the answer. Philip Hammond’s Budget statement last month was accompanied by the now customary set of planning reforms to boost housing delivery and economic growth. Town centres and new homes The chancellor announced that the government would consult on a series of planning reforms to increase the number of new homes and revitalise town centres. The consultation paper – Planning reform: supporting the high street and increasing the delivery of new homes – includes the following proposals: new permitted development rights for upward extensions to provide dwellings above a range of commercial premises and residential properties, subject to prior approval and height limits; new permitted development rights allowing commercial buildings to be demolished and replaced with homes, subject to prior approval; more flexible changes of use in high streets through the introduction of new permitted development rights, including from A1, A2 or A5 retail uses to offices and from A5 (hot food takeaways) to residential, subject to prior approval; extending permitted development rights for temporary changes of use in high street premises to other community uses, including libraries, exhibition halls, museums, clinics and health centres; changes to retail use classes to accommodate new and future business models and more flexibility within the classes. Shops, financial and professional services, and restaurants and cafés would be merged into a single use class, for example; removing permitted development rights for telephone kiosks and deemed consent for adverts on the side of them; and making permanent the permitted development rights for changes from storage and distribution to residential and for larger extensions to dwellings. Overall, these reforms are to be welcomed, but the fear of “unplanned planning” through the further “creep” of permitted development rights will lead to calls for the new rights to be subject to restrictions and limitations. The proposed review of use classes is also long overdue but it should not be limited to retail; the outdated classifications in the Town and Country Planning (Use Classes) Order 1987 do not sit well with the new operating models that have emerged in recent years for various sectors, including housing, care and supported living, and the way we work and distribute goods. The government would do well to widen this initiative. Housing delivery The Budget was also the occasion for publication of the final report of the Independent Review of Build Out Rates. This review, led by Sir Oliver Letwin, was commissioned last year to examine the reasons for the significant gap between how much land is allocated for – or has planning permission for – housing in areas of high demand and actual completion of new homes.  Letwin’s draft analysis was published in June and focused on the delivery of large housing sites with planning permission in areas of high demand. It concluded that the fundamental drivers of slow build-out rates on large sites were the homogeneous housing products offered to the market and the limited rate at which the local market could absorb those products without materially affecting market price. Letwin considered that this could be addressed by increasing the variety of housing and tenures that are brought forward on each site.  The report contains recommendations for achieving a greater diversity of housing on large sites:  1. The government should adopt a new set of planning rules specifically for all future large sites (initially those of more than 1,500 units) in areas of high demand, requiring a range of housing products to be provided in line with diversification principles, in a new planning policy document; 2. A national expert committee should be established to advise local authorities on the interpretation of diversity requirements for large sites and arbitrate on disagreements between the local authority and the developer; 3. In the short term, the government should: provide incentives to diversify existing sites of more than 1,500 units in areas of high housing demand by making any future government funding for them conditional on delivering diversity requirements; and allocate a small amount of funding to support the viability of existing large sites where the new diversity principles are followed. 4. In the longer term, the government should legislate to provide: powers for local planning authorities to allocate sites in the local plan that can be developed as single large sites only and establish masterplans and design codes to secure a high degree of diversification; powers for local authorities to purchase large sites compulsorily at prices that reflect the value of those sites once they have planning permission. A masterplan would reflect the new diversity requirements to the point that they generate a maximum residual development value of up to 10 times existing use value; and give local authorities clear statutory powers to control the development of large sites: either by establishing a local development company to lead the masterplanning process and bring in private capital to pay for land and infrastructure before selling parcels of land for different housing types and tenures; or by limiting their role to masterplanning and bringing in a privately financed company to fulfil the remaining requirements. A full government response to the Letwin Review is expected in February. However, it would be a surprise if the government adopted wholesale the recommendations for a parallel set of planning rules for large sites. We are more likely to see stronger national policy and guidance on the issue of diversification of housing. In an entirely separate initiative, the government has invited proposals from investors to help deliver a new concept of private shared ownership homes and other privately funded routes to affordable home ownership such as rent-to-buy. This is a positive move and capitalises on the current attractiveness of housing – and rented and affordable housing in particular – as an investment asset class. Land value capture (LVC) Capturing more of the uplift in land value associated with the grant of planning permission, in order to fund infrastructure and affordable housing, has support from across the political spectrum. The government could have taken the opportunity to look at LVC as part of a wider review of property taxation, including stamp duty, rates and capital gains. Instead, it appears to be pinning its hopes for LVC on the community infrastructure levy (CIL).  The proposed changes to CIL include: guidance for local planning authorities on adopting and revising CIL charging schedules; a streamlined requirement to consult on proposed charging schedules and levy rates; removing (in all areas) the current restriction on pooling financial contributions from section 106 agreements to fund infrastructure; changes to penalties for late submission of commencement notices; extension of abatement provisions to phased planning permissions granted before the levy’s introduction; guidance for local authorities that wish to set differential levy rates based on existing use of land; changes to indexation of levy rates, including use of the house price index for rates that apply to residential development and the consumer price index for non-residential development; use of statutory infrastructure funding statements to report on the income received from developer contributions and CIL and how it is spent, and removing the restrictions that prevent use of section 106 contributions for infrastructure items identified on the CIL expenditure list; and enabling combined authorities with strategic planning powers to take forward a strategic infrastructure tariff and encouraging groups of charging authorities to use existing powers to co-ordinate delivery of strategic infrastructure by pooling CIL receipts. There are some helpful changes here but, equally, the CIL regulations do not function well, and many practitioners will be concerned that some of the changes will add more complexity and create more of the practical issues that have dogged CIL since it was introduced.    The CaMkOx arc The government also published its response to the National Infrastructure Commission’s (NIC) 2017 report on the Cambridge-Milton Keynes-Oxford (CaMkOx) arc. The government confirmed that it would explore options for a single spatial plan for the arc, with a joint vision statement to co-ordinate investment in housing, infrastructure and the environment. We can expect to see the results of this by spring 2019, as well as consultation on route options for east-west transport corridors. National infrastructure assessment An interim response to the NIC’s national infrastructure assessment (NIA) was also published. This contained a commitment to publish a “comprehensive national infrastructure strategy” in 2019, setting out the government’s priorities for economic infrastructure and responding in detail to the NIA. In addition, the government asked the NIC to look at the resilience of economic infrastructure systems and economic regulation. More change Another Budget, another set of changes to planning law and policy. There are some helpful changes here, but it is hard not to wonder whether there is a tendency to resort rather too quickly to planning reform to achieve the government’s policy objectives. Occasionally, it would be preferable to resist the temptation to burden the planning system with more change and instead provide adequate funding for the local authorities that run it. Duncan Field is a partner and head of planning and Victoria McKeegan is an associate at Norton Rose Fulbright LLP