Draft National Planning Practice Guidance (August 2013)

October 2013 Draft National Planning Practice Guidance (August 2013) Planning Representations Prepared by Savills UK on behalf of Thames Valley Housing Savills UK 33 Margaret Street London W1G 0JD

Introduction These planning representations have been prepared by Savills on behalf of Thames Valley Housing (TVH), in response to the draft National Planning Practice Guidance published in August 2013. TVH is an active housing provider providing over 14,000 homes, including shared ownership, social/affordable rent, private rent (PRS), student and key worker accommodation, across London and the South East. TVH was also one of the first housing associations to move into the market rent sector to supplement its activities in the social housing sector. They have a set a target of building a total of 1,000 new market rent units across London and the South East over the next five years through their market leading subsidiary, Fizzy Living, and have so far acquired three landmark PRS schemes across the Greater London area. Plans are to fund this 200+m investment programme with institutional equity, with TVH being a significant equity participant. TVH are therefore well placed and known in the PRS market. These representations therefore address issues around PRS but also wider issues in relation to affordable housing provision and its delivery and viability considerations in planning negotiations. Draft NPPG Representations 2 Savills UK on behalf of TVH

Assessment of Housing and Economic Development Needs: 1. What is the Purpose of the Assessment of Housing and Economic Development Needs Guidance?, 2. What Areas Should be Assessed?, 3. What Methodological Approach Should be Used?, 4. How Should the Current Situation be Assessed?, and 5. What are the Core Outputs? Can local planning authorities apply constraints to the assessment of development needs? General support is given for this section of the draft NPPG which states The assessment of development needs is an objective assessment of need based on facts and unbiased evidence. Plan makers should not apply constraints to the overall assessment of need, such as limitations imposed by the supply of land for new development, historic under performance infrastructure or environmental constraints. This objective-led assessment of housing first is directly connected to the National Planning Policy Framework (NPPF) guidelines (at paragraphs 14, 17 and 47) which requires Local Authorities to identify full, objectively assessed needs for market and affordable housing of a range of mix of tenures in order to significantly boost housing land supply across the UK. This approach also accords with the spirit of Eric Pickles Ministerial Statement (September 2012), which stated that local planning authorities should take a responsibility to meet their needs for development and growth, and to deal quickly and effectively with proposals that will deliver homes, jobs and facilities. Importantly, the acknowledgment that previous land supply issues cannot be used as a constraint to plan making ensures that previous shortfalls do not facilitate a cyclical argument to justify delivery targets that fall below full, and objectively assessed need. This requirement to identify objectively assessed need without constraint was highlighted in a recent High Court Judgement (Hunston Properties Ltd vs Secretary of State and St Albans City and District Council) (September 2013). The Judge continued to presses on the point of identifying objectively assessed need first and then identify constraints, as a correct NPPF interpretation. The Judge concluded that the housing target, being used by St Albans, was based on an RSS target which did not represent objectively assessed needs as it was constrained in favour of protection of the Green Belt. What is the definition of need? In this section, the draft NPPG states that any assessment of need should be realistic in taking account the particular nature of that area (for example geographic constraints and the nature of the market area). These representations consider that this point is in conflict with the above section, Can local planning authorities apply constraints to the assessment of development needs?, which states that plan makers should not apply constraints to the overall assessment of need. Given that the NPPF (paragraph 47) is clear that objectively assessed housing need should be met in full, irrespective of constraints (a point that has recently been reinforced through Local Plan Inspectors comments in relation to plans at Blaby, Denbighshire, Halton, Hertsmere, Rushcliffe, Waverley and Coventry), this contradiction should be removed from the draft NPPG in order to provide consistent and certain guidance for plan makers, and decision takers and importantly the development industry. Suggested Revision to Text Draft NPPG Representations 3 Savills UK on behalf of TVH

In accordance with the comments above, in order to make this section of the draft Guidance sound and consistent, the following amendment 1 should be made. What is the definition of need? Need for housing in the context of the guidance refers to the scale and mix of housing and the range of tenures that is likely to be needed in the housing market area over the plan period and should cater for the housing demand of the area and identify the scale of housing supply necessary to meet that demand. Need for all land uses should address both the total number of homes or quantity of economic development floorspace needed based on quantitative assessments, but also on an understanding of the qualitative requirements of each market segment. Any assessment of need should be realistic in taking account the particular nature of that area (for example geographic constraints and the nature of the market area). Assessing development needs should be proportionate and does not require local councils to consider purely hypothetical future scenarios, only future scenarios that could be reasonably expected to occur. Can local planning authorities use a different methodology? These representations are in support for providing guidelines within the draft guidance towards standard methodology for assessing housing need. This approach will help to introduce a much needed level of consistency and predictability across all local authorities, which will be particularly useful for the purposes of satisfying the duty to cooperate and producing Strategic Housing Market Assessments (SHMAs), as well as increasing the pace of plan preparation. What areas should be assessed?, Is there a single source that will identify the assessment areas?, What is a housing area? and How can housing market areas be defined? These representations agree with the draft Guidance that needs should be assessed in relation to the relevant functional area: either a housing market area, a functional economic area in relation to economic uses, or an area of trade draw in relation to main town centre uses. Furthermore, it is also agreed that such areas are very likely to be subdivided into smaller sub-markets for both market and affordable housing. It is agreed that the extent of housing market areas will vary, with many cutting across various local planning authority administrative boundaries. As stated above, this makes the use of a standard methodology and the importance of the duty to cooperate even more important (since the revocation of Regional Spatial Strategies and their housing targets). What methodological approach should be used? and What is the starting point to establish the need for housing? The starting point to establish housing need must be the CLG s household projections. This is well established through Inspectors recommendations in plan making and decision making and indeed recent court Judgments in relation to new housing developments in considering levels of housing need/ demand. 1 NB:- Bold text as additional text and strikethrough as deleted draft Guidance text. Draft NPPG Representations 4 Savills UK on behalf of TVH

Beyond, this, the draft guidance indicates that Authorities will need to look at local house prices and rents, employment growth, land prices and the appetite for self-build when they draw up their plans. Two key extracts from the guidance are provided below: Prices or rents rising faster than the national/local average may well indicate particular market undersupply relative to demand. In areas where an upward adjustment is required, plan makers should set this adjustment at a level that is reasonable. The more significant the affordability constraints (as reflected in rising prices and rents, and worsening affordability ratio) and the stronger other indicators of high demand (eg the differential between land prices), the larger the improvement in affordability needed and, therefore, the larger the additional supply response should be. This indicates that local authorities will need to have a clearer understanding of the housing and land markets in their area and plan for additional supply if the market is over-heating. It is acknowledged that the draft NPPG implies that where there is an affordability gap in a part of the borough or borough as a whole, there should be planned land release subject to the outcome of evidence, but it also needs to recognize that private sale drives forward the delivery of new affordable homes through cross-subsidisation (with limited grant availability) and therefore planned land release for mixed tenure schemes should be actively encouraged where there is a need/ demand. Assessments of housing need will have to be robust and will have to be based on a full understanding of the local housing market and follow the methodology set out in the guidance, which should assist Local Authorities and Inspectors in drawing to planning decisions on new housing developments at sustainable, market locations. Can adjustments be made to household projection-based estimates of housing need? It is acknowledged that draft guidance permits plan makers to test alternative housing need assumptions in relation to the underlying demographic projections and household formation rates; and that the starting point to assess housing needs and demands are the CLG latest population and household projections. It should also be noted that a local authority s testing of the scenarios could result in a higher housing target than indicated by the CLG s projections. How should employment trends be taken into account? and How should market signals be taken into account? These representations support the draft Guidance within this section which states that the housing need number suggested by household projections should be adjusted to reflect appropriate market signals as well as the likely growth in job numbers based on past trends and/or economic forecasts. This ensures that the growth of jobs in relation to housing is appropriate, and that neither constrains the others growth. It should be noted that neither employment trends nor market signals should be considered on their own, as effective plan making should consider a range of evidence, as discussed above. Support is given for the statement that prices or rents rising faster than the national/local average may well indicate particular market undersupply relative to demand. How should plan makers respond to market signals? Support is given for the draft Guidance which states that Market signals are affected by a number of economic factors, and plan makers should not attempt to estimate the precise impact of an increase in housing supply. Rather they should increase planned supply by an amount that, on reasonable assumptions and consistent with principles of sustainable development, could be expected to improve affordability, and monitor the response of the market over the plan period. Market drivers are key to delivering housing in strong market locations (for both market and affordable housing). Accordingly, these representations consider this approach to accord with the Government and NPPF growth agenda and boosting the supply of housing significantly. Draft NPPG Representations 5 Savills UK on behalf of TVH

What is the total need for affordable housing? Given that the delivery of affordable housing is often financially reliant (in terms of cross-subsidisation) on the delivery of market housing and other types of mixed tenure schemes, these representations are in support of the draft Guidance which states that an increase in the total housing figures included in the local plan should be considered where it could help deliver the required number of affordable homes. This accords with the NPPF (paragraph 47) which requires Local Plans to meet the full objectively assessed needs for market and affordable housing, and will help to ensure that new residential development of all tenures is directed towards the specific local areas where demand exists. How often should indicators be monitored? and What could be monitored? These representations acknowledge that the draft Guidance states that local planning authorities should not need to undertake comprehensive assessment exercises more frequently than every five years. However, it should be noted that, as per the requirement of the NPPF (paragraph 47) to identify and update annually a supply of specific deliverable sites sufficient to provide five years worth of housing against their housing requirements (including both market and affordable housing provision), local authorities should produce annually an Annual Monitoring Report including a housing trajectory. Draft NPPG Representations 6 Savills UK on behalf of TVH

Planning Obligations: 1. When Can Planning Obligations be Sought by the Local Planning Authority? When can planning obligations be sought by the local planning authority? It is acknowledged that the draft Guidance, reflecting the Community Infrastructure Levy Regulations 2010 and the NPPF (paragraph 204), in stating that planning obligations should meet the tests, ensuring that they are necessary to make the development acceptable in planning terms, directly related to the development, and fairly and reasonably related in scale and kind. This approach is in compliance with current government Guidance and should be fully considered during planning negotiations, with a particular focus towards scheme viability. Should policy on seeking obligations be set out in the development plan? It is also acknowledged that the draft Guidance requiring policies for seeking obligations should be set out in a development plan document. This is essential to ensure that the policies are fairly and transparently tested at examination and allow stakeholders to comment prior to adoption. Does the local planning authority have to justify its requirements for obligations? This section states that where affordable housing contributions are being sought, obligations should not prevent development from going forward. It is strongly supported that the draft NPPG should stipulate that planning obligations should not be a barrier to development. However, given the critical national housing shortage that the UK is currently experiencing for both market and affordable housing, it is important that affordable housing provision should not be the first item to be reduced in order to make non-viable schemes, viable. A careful consideration needs to be given towards the local area s affordable housing shortfalls and future needs and demands of the local area against the other 106 obligations in the planning negotiation and in the spirit of the NPPF in boosting housing and affordable housing supply where suitable and viable. What evidence is required to support negotiations on obligations? Support is given for negotiation on obligations being grounded in an understanding of development viability. This should be carried out via a viability toolkit submitted to the local authority in support of an application and properly assessed by a local authority. Draft NPPG Representations 7 Savills UK on behalf of TVH

Duty to Cooperate: 1. What is the Duty to Cooperate and What Does it Require? These representations are in general support of this section of the draft NPPG which deals with the duty to cooperate, along with small amendments to offer greater clarity and certainty. What is the duty to cooperate and what does it require? These representations welcome the clarification within the draft NPPG that the Localism Act 2011, and its amendment of the Planning and Compulsory Purchase Act 2004, place a legal duty on local planning authorities, county councils and other certain public bodies to actively and constructively engage in the duty to cooperate on strategic cross boundary matters. Support is also given for the clarification that if a local planning authority cannot demonstrate that it has complied with the duty, then the Local Plan will not be able to proceed further in examination. This is consistent with the approach of Local Plan Inspectors in Coventry and the North London Waste Plan Examinations in Public. In comment of the Coventry Core Strategy, the Inspector stated that if the duty to cooperate is not discharged the Plan would be found unlawful and there would be no remedy for this. How does the duty to cooperate relate to the Local Plan test of soundness? The duty to cooperate is a legal requirement as are the legal tests of soundness for a local plan (as per section 20 of the 2004 Act). This section of the draft Guidance goes on to state that, as required by NPPF (paragraph 182), Local Plans will be subject to the tests of soundness. These representations consider that an amendment should be made to note that the Plan must be capable of meeting the tests of soundness for the full lifetime of the plan, not simply a proportion thereof. Suggested Revision to Text In accordance with the comments above, in order to make this section of the draft Guidance sound and consistent, the following amendment 2 should be made. How does the duty to cooperate relate to the Local Plan test of soundness? The duty to cooperate is a legal test that requires cooperation between local planning authorities and other public bodies to maximise the effectiveness of policies for strategic matters in Local Plans. It is separate from but related to the Local Plan test of soundness. The Local Plan examination will test whether a local planning authority has complied with the duty to cooperate. The Inspector will recommend that the Local Plan is not adopted if the duty has not been complied with. The examination will also test whether the Local Plan is sound across the lifetime of the Plan. The legal test of soundness, set out in full in the National Planning Policy Framework (paragraph 182), assesses whether the Local Plan is: Positively prepared; Justified; Effective; and 2 NB:- Bold text as additional text and strikethrough as deleted draft Guidance text. Draft NPPG Representations 8 Savills UK on behalf of TVH

Consistent with national policy. In assessing whether the Local Plan is effective the Inspector will assess whether it is deliverable within the timescale set by the Local Plan and if it demonstrates effective joint working to meet cross boundary strategic priorities. If a Local Plan is found unsound at the examination the Inspector will recommend that it is not adopted (although an Inspector must recommend modifications that would make a Local Plan sound if asked to do so by the local planning authority). Draft NPPG Representations 9 Savills UK on behalf of TVH

Viability: 1. What does the National Planning Policy Framework Expect on Viability in Planning?, 2. How should Viability be Assessed in Plan-Making?, and 3. How should Viability be Assessed in Decision Taking? What does the National Planning Policy Framework expect on viability in planning? The draft NPPG correctly identifies that understanding Local Plan viability is critical to the overall assessment of deliverability, and goes on to state that The National Planning Policy Framework policy on viability applies also to decision-taking...viability can be important where planning obligations or other costs are being introduced. In these cases decisions must be underpinned by an understanding of viability. It concludes by stating that where the viability of a development is in question, local planning authorities should look to be flexible in applying policy requirements wherever possible. These representations wish to place a particular emphasis on the final point above; it is critical, particularly for projects that deliver affordable housing or development that cross subsidises the delivery of affordable housing (ie RPs delivering PRS to fund affordable housing stock), that viability is taken into account when policy is being applied during the decision making process. This approach accords with the NPPF (paragraphs 173 and 19, respectively) in seeking to ensure that viability does not affect the deliverability of development proposals, and that planning should proactively drive and support sustainable economic growth and take account of market signals such as land prices and housing affordability. If developers and landowners are not able to achieve competitive returns (NPPF paragraph 173), the Government will not be able to achieve its growth agenda. Further comment on what planning obligations should be altered to increase the viability of schemes is discussed below. What are the underlying principles for understanding viability in planning? Support is given for the principles of evidence base judgement, collaboration, and a consistent approach behind the assessment of viability in the planning process. However, as discussed below, the approach should be flexible enough to be applied between various development types to reflect the complexity and use class specific factors. General support is also given to the draft Guidance encouraging the alignment of preparing Community Infrastructure Levy (CIL) charging schedules alongside Local Plans, as far as practical. How should different development types be reflected in viability assessments for plan-making? These representations support this section of the draft NPPG which states that viability assessments should be proportionate, but reflect the range of different development, both residential and commercial...different types of residential development, such as self-building and private rented sector housing, are funded and delivered in different ways. This should be reflected in viability assessments. Different development types, even within one use class (ie C3 residential) can have very different revenue streams which can in turn impact on the viability and deliverability of developments. Support is given for the draft Guidance encouraging plan makers to take account of this and acknowledge the importance of bespoke viability assessments to appraise viability of schemes on a case-by-case basis. These representations discuss this issue in greater detail below with regards to decision taking. How should the viability of planning obligations be considered in plan-making? Draft NPPG Representations 10 Savills UK on behalf of TVH

Full support is given for this section of the draft NPPG guidance which, in line with the NPPG (paragraph 205) identifies that local authorities should be sufficiently flexible to prevent planned development being stalled. Planning obligations policies should reflect local viability. How should different development types be treated in decision-taking? The draft guidance notes that for residential schemes, viability will vary with housing type. For example, in respect of large scale private rented sector housing that is built for long-term institutional or registered providers ownership, viability considerations in decision-taking should take account of the economics of such schemes, which will differ from build for sale. This may require a different approach to planning obligations or an adjustment of policy requirements. In referring to the private rental sector (PRS), the comments are confined to the large scale provision of PRS homes. No comments are provided in the context of individual buy to let homes. It is important that any national, regional or local planning policy is clear about definitions of PRS - i.e. the difference between small (buy to let) and large (build to let) landlords. In London (for example), circa 25% of households are within PRS tenure and it is an important tenure in London, currently displaying growth. The large scale provision of PRS homes can play a significant role in helping to increase the overall level of housing supply and accelerate the delivery of new homes in London, the south east and UK as a whole. The rate of housing delivery for sale is limited by market absorption rates - this is much less of a concern for rental. PRS does offer the potential to attract new investment into London s housing supply which would otherwise not be realised. The prospect of this new, additional investment delivering new homes and the role that PRS can play accelerating the rate of housing delivery justifies the reason why public policy should seek to proportionally encourage the provision of large scale PRS homes. PRS delivers other benefits such as labour market mobility, flexibility and ease of access and the prospect of professionalising the sector and more generally delivering high quality homes that help to drive up standards in the PRS in general. The draft NPPG should ensure that there is support for the large scale provision of build to let homes. There are a number ways this could be achieved. One of them is understanding the PRS sector and viability constraints in the context of 106 liabilities. These representations are, therefore, in full support of the recognition that PRS schemes require a different approach to viability, than build for sale. PRS is a fundamentally different business model (being short to medium term revenue driven), but no less important than market housing. While PRS still experiences market competitiveness, in terms of overall scheme viability PRS cannot deliver the same levels of planning obligations and affordable housing levels at the outset of a scheme as build for sale market housing. Despite its important contribution, national, regional and local, policy remains slow to recognise PRS as a different development type in terms of viability. The GLA s planning guidance already recognises the distinct economics of the PRS relative to mainstream marketing housing when considering the issue of viability. The draft NPPG could indicate further a greater understanding of the PRS sector, in indicating that PRS developments remain as rented accommodation for a specified length of time and the impact that this has on land value is reflected in the level of planning obligations and community infrastructure levy (CIL), that is sought. Crucially, this is applied only where the viability of the development justifies such an approach. This does not mean that all PRS development should be exempt from affordable housing but rather that the affordable quota should be flexibly applied. Draft NPPG Representations 11 Savills UK on behalf of TVH

Consideration should be given to the scope of issues covered by the 106 agreement beyond the length of time it applies to development and the opportunity for a flexible approach to planning obligations and CIL. For example, it could include the use of a claw back mechanism for planning obligations and CIL to provide assurance that it is not misused. The draft NPPG might also want to recognise points about PRS design; a high quality of design is obviously desirable but policy should acknowledge that build to let developments might ideally require different specifications from market sale homes. For example, a different mix of flats and range of on-site services could be required. All of this may require some flexibility in regional and/ or local hosing design standards. The draft NPPG should identify the importance of delivering PRS at a local level more generally to meet a specific rental need; and as the draft NPPG does, recognise the distinct viability characteristics of the tenure in policies, plan-making and decision-taking but go perhaps further to indicate that Local Authorities could pro-actively look for build to let development opportunities/ allocations in their area. The draft NPPG might also want to provide an indication of tracking the number of PRS homes delivered across boroughs and suggest a requirement or otherwise of a delivery target to ensure delivery. How should the viability of planning obligations be considered in decision-taking? This section of the draft Guidance states that where an applicant is able to demonstrate to the satisfaction of the local planning authority that the planning obligation would cause the development to be unviable, the local planning authority should be flexible in seeking planning obligations. This is particularly relevant for affordable housing contributions which are often the largest single item sought on housing developments. These contributions should not be sought without regard to individual scheme viability. These representations support the guidance which encourages local planning authorities to be flexible in seeking planning obligations, however they object to affordable housing being inferred to as the first planning obligation to be revised in such cases. It is widely acknowledged that the UK is currently experiencing a critical housing shortage of both market and affordable. In a Ministerial Statement in September 2012, the Secretary of State noted that the need for new homes is acute and supply remains constrained and that the need for affordable housing remains high. Boosting significantly the supply of market and affordable housing is a key element of the NPPF. Accordingly, affordable housing, as a key element of overall housing delivery, should not be the first obligation to be reduced in order to make unviable schemes viable. Careful consideration needs to be given to the affordable housing needs and demands of the local area against other 106 obligations in their impact on scheme viability, as part of planning negotiations. In particular, where affordable rent products form part of an affordable housing contribution, decision makers (and policy drafters) should be aware that a variation in the level of affordable rent can have sharp sensitivity in relation to overall scheme viability. Draft NPPG Representations 12 Savills UK on behalf of TVH