The government has recently announced its intention to introduce the grandly titled “Growth and Infrastructure Bill”.

November 1, 2012 11:48 am - Categorised in: Commercial Law, Commercial Property News

This is to be a collection of measures that one would ordinarily expect to find in legislation dealing with quite separate areas of law. This article concentrates only on the parts that will affect Town and Country Planning, but other parts of the Bill will provide investment to improve high speed broadband in rural areas, allow employees to give up certain employment rights in return for a shareholding in the company they work for and defer the next business rate revaluation until 2017.

Most governments come into office announcing an intention to sweep away unnecessary red tape, while somehow eventually managing to leave behind more than they inherited. The coalition has announced the same intentions. Whether they will succeed where previous governments have failed remains to be seen.

Their initial attack on the planning system was largely commendable. With no legislation needed to achieve it, Eric Pickles set about sweeping away swathes of government guidance on planning policy and replaced numerous individual policy guidance notes with a single National Planning Policy Framework. The National Trust led the charge to the barricades against the original draft of this document, fearful that the “presumption in favour of sustainable development”, which nevertheless survived into the final version of the NPPF, would signal the end of the greenbelt and urban sprawl spreading across the countryside.

Some people appear opposed to any development anywhere ever. Most agree in general terms that development is a good thing provided it is put on somebody else’s doorstep.

In his recently enacted Localism Act Mr Pickles has attempted what to many planners would appear to be irreconcilable objectives of giving greater democratic control of the planning process to local communities, but so that development is encouraged rather than prevented. To many local communities this no doubt has the appearance of asking turkeys to vote for Christmas!

It is too early yet to judge how these reforms will work out. Inevitably some planning inspectors will shortly find themselves having to decide whether a proposed development is or is not “sustainable” and equally inevitably either the developer or the opponents of the development will appeal against the inspector’s decision to the courts. Only then will we have some judicial guidance on what, if anything, this interesting phrase actually means.

Now in their new Bill, the government is aiming to remove what it sees as a variety of blockages preventing developments coming forward. Are these blockages real or imagined? Again, we shall have to wait and see. The fact that the banks have turned off the tap of virtually uncontrolled credit may also have something to do with it.

The government’s first target is an object lesson in the law of unintended consequences.

When Mrs Thatcher’s government needed a big idea to boost the economy (and its own poll ratings) it came up with the idea of selling off council houses to sitting tenants at a significant discount. Whilst one could certainly make a case in favour of that policy, one could equally make a case against it, not least that it would seriously deplete the stock of social housing, as indeed it did. As the local councils were no longer being given funds by central government to build new council houses to replace those sold off, and they certainly couldn’t afford to do so from their rates/council tax, an increasing number of households struggled to find adequate accommodation.

Unwilling to adopt “old” Labour solutions for this problem, New Labour encouraged the use of theoretically voluntary agreements pursuant to Section 106 Town and Country Planning Act 1992 whereby developers, in order to obtain consent to large scale housing projects, “offered” to supply a percentage of them as “affordable”. In practice this has quickly come to mean that all new housing developments have to hand over a percentage of the site to a housing association for rental or shared ownership schemes.

In reality this was a stealth tax on the entire housing market, being paid for by all home buyers and financed on the never never by the now much maligned banks – although at the time nobody seemed to notice or care that they were keeping the economy moving by lending developers money which they didn’t actually have.

The developers of course did not provide the affordable housing out of their own profit margins. They simply added the costs to the other houses they were selling. This in turn drove up the prevailing market price of existing houses in the same area, to the delight of those who already owned them, but to the dismay of those who were having to buy them, and thus borrow more money from the same banks who didn’t actually have it. Then, since these homebuyers had promised to repay the money which they had borrowed from banks that didn’t actually have it, the banks were able to package these debts into the so-called “derivatives” and sell them to other banks in exchange for money that those banks didn’t have either and thus create the illusion of more money to lend to more developers to build more houses etc. But as this is a legal blog rather than a financial one, we won’t attempt to go any further down that route.

Suffice it to say that there are apparently a lot of sites on which the developers have “agreed” to supply a large percentage of affordable housing which in today’s more realistic financial climate they can no longer afford to do. Under the law as it stands, Section 106 Agreements cannot be varied within five years of having been made unless the LPA consents. The government has for a couple of years been encouraging LPAs to revisit agreements which have become unviable because of the affordable housing requirements, but inevitably the LPA will not only be the planning authority but also the local housing authority with an acute shortage of available social housing on its patch, and thus reluctant to forego social housing it has been promised.

Although the details have yet to be published, it appears the government’s intention is to allow developers to appeal against the terms of agreements that they have theoretically themselves offered voluntarily in order to secure the planning consent.

We suspect that the greatest impact of this is likely to be in the south-east where affordable housing requirements of fifty percent of the total site and above have become commonplace. Here in the East Midlands the requirement is generally no more than twenty five percent in the main cities and less in other urban areas. Moreover the price differential between open market housing and affordable housing is not as great as in the south-east, so that the developments have to fund significantly less subsidy for the affordable housing than is the case in the more expensive parts of the country.

The starting point will inevitably be for the developer to demonstrate on the basis of a recognised economic model that the level of affordable housing required by an existing Section 106 Agreement makes the development of the site unviable. Where that can be shown to be the case, LPAs are already being “encouraged” by central government to agree the relaxation of the requirements. What the new Bill appears to be going to introduce is a mechanism whereby a planning inspector can revoke or modify the existing requirements if the LPA refuses to do so.

Regardless of the theory that Section 106 Agreements are “voluntary” planning obligations offered by the developer, most LPAs now have a policy setting out a requirement of the percentage of affordable houses expected on new developments. Particularly where these percentages were set at the peak of the housing market, LPAs are likely to have to revise their policy requirements downwards, and in any event on a new application, if a developer can show that the policy requirement makes the site unviable, the LPA is likely to have to accept a level of affordable housing below its policy level or face any refusal of planning consent being overturned on appeal. Sites will thus need to be assessed more carefully on a case by case basis rather than developers simply being told what the policy requirement is.

Section 106 Agreements are currently used to obtain other benefits from the developer, such as the provision of Public Open Space on the development or a payment in lieu, contributions to transport improvements or to fund additional school places anticipated to be generated by the development. At the moment the government’s press release ahead of the publication of the Bill itself does not appear to suggest that there will be an appeal mechanism if the LPA refused to vary these types of obligation. The proposed new regime appears to apply only to affordable housing.

We are also promised that the Bill will tackle the “volumes of paperwork” that have to be submitted with a planning application. Here again the devil will be in the detail. LPAs (most of which in our experience are understaffed and overworked) do not require excessive paperwork for the fun of it. Those of us old enough to remember some of the appalling planning decisions that were made twenty and thirty years ago because wholly inadequate information was required to reach a proper decision will understand why nowadays a great deal more information is required in order to reach (hopefully) the right decision.

“Nationally significant business and commercial projects” may in future opt for a decision via an “infrastructure fast track process”, which will presumably be administered by central government rather than the LPA. We are being promised decisions on such applications within twelve months. However we are also being promised that “existing requirements to consult local communities [will be] retained, as will democratic checks and balances”.  Heaven only knows how this will actually work in practice. Does the government think it can create a French style procedure to force through such projects as HS2 or a new London airport runway? We all know that in practice “democratic checks and balances” tends to mean well organised local opposition groups backed by other campaign organisations of every shade of green, using every means possible to prevent or delay large scale development. Does the government really want these groups camped outside Westminster rather than the local town hall?

Equally worrying for anyone who values the local democratic input to the planning process is the proposal that “where Councils have a very poor record in deciding applications” major applications can in future be submitted to the planning inspectorate. Who will decide what is “a very poor record in deciding applications”? Will this be entirely to do with the speed with which decisions are reached or the number of decisions that are overturned on appeal? The press release says that “planning is a quasi judicial process”, which is true to an extent, but it is not the whole story. Are we beginning to see the removal of the democratic component from the actual decision making process so that in future it will be confined only to the preparation and adoption of the Local Plans?

The final and potentially important proposal is to bring the award of costs in planning inquiries more into line with Courts and Tribunals. Currently costs can only be awarded (in favour of a party who actually applies for them) against a party who in the opinion of the inspector has behaved in a particularly unreasonable manner. The proposals indicate that in future Councils may be penalised in costs simply for delaying a decision, even if ultimately that decision is upheld.  Moreover inspectors will have power to award costs even if they are not applied for and also to award costs to the Secretary of State. The scope of this aspect of the proposal is unclear, since the Secretary of a State is very rarely a party to an appeal before an inspector, so presumably the intention is that the inspectorate’s own costs of holding the appeal and considering the recommendation of an inspector at Secretary of State level may in future be ordered to be paid by one of the parties to the appeal. The danger of an increased liability to costs in the event of an LPA’s planning decision being overturned on appeal is presumably intended as a further deterrent against planning committees who make bad planning decisions against officer advice because of pressure from organised local opposition.

Are these changes sensible and welcome or unnecessary and sinister? It remains to be seen, but the one thing that is certain is that as with every tinkering with planning legislation since the original Act in 1948, applicants and LPAs alike are going to need to take legal advice on an ever widening range of potential questions.