It's the Summer of Para 64 - the Revised NPPF, Affordable Housing & CIL ... or... why shared ownership is your new best friend (at least for the moment)
Nothing is ever simple when it comes to the interplay between national planning policy, local planning policies and the actual law.
The cynical might even claim that bright ideas at central government level tend to lead to unintended consequences when it comes to their implementation.*
This has been brought home to me recently by the sheer number of entirely unrelated conversations that I have been having about the meaning of Paragraph 64 of the Revised NPPF and how this might impact schemes currently going through the planning process.
For those of you with better things to do than commit the Revised NPPF to memory**, the new Paragraph 64 reads as follows:
"Where major development involving the provision of housing is proposed, planning policies and decisions should expect at least 10% of the homes to be available for affordable home ownership 29, unless this would exceed the level of affordable housing required in the area, or significantly prejudice the ability to meet the identified affordable housing needs of specific groups. Exemptions to this 10% requirement should also be made where the site or proposed development:
a) provides solely for Build to Rent homes;
b) provides specialist accommodation for a group of people with specific needs (such as purpose-built accommodation for the elderly or students);
c) is proposed to be developed by people who wish to build or commission their own homes; or
d) is exclusively for affordable housing, an entry-level exception site or a rural exception site"
Footnote 29 - which is referred to in the paragraph states:
29: As part of the overall affordable housing contribution from the site.
The paragraph is intended to boost the provision of affordable housing products which are aimed at 'affordable home ownership'; which has been a hot button issue for politicians of late. As such it directs that at least 10% of the affordable housing provision on a major development should be aimed at this segment of the market.
Precisely what is meant by 'affordable home ownership' is not defined, which is unhelpful given that it is a new term for the Revised NPPF, but it seems clear from the context that it is intended to refer to non-rental models of affordable housing. This appears to be confirmed by the new definition of affordable housing in Appendix 2 to the Revised NPPF, which defines Affordable Housing as:
Affordable housing: housing for sale or rent, for those whose needs are not met by the market (including housing that provides a subsidised route to home ownership and/or is for essential local workers); and which complies with one or more of the following definitions:
a) Affordable housing for rent: meets all of the following conditions: (a) the rent is set in accordance with the Government’s rent policy for Social Rent or Affordable Rent, or is at least 20% below local market rents (including service charges where applicable); (b) the landlord is a registered provider, except where it is included as part of a Build to Rent scheme (in which case the landlord need not be a registered provider); and (c) it includes provisions to remain at an affordable price for future eligible households, or for the subsidy to be recycled for alternative affordable housing provision. For Build to Rent schemes affordable housing for rent is expected to be the normal form of affordable housing provision (and, in this context, is known as Affordable Private Rent).
b) Starter homes: is as specified in Sections 2 and 3 of the Housing and Planning Act 2016 and any secondary legislation made under these sections. The definition of a starter home should reflect the meaning set out in statute and any such secondary legislation at the time of plan-preparation or decision-making. Where secondary legislation has the effect of limiting a household’s eligibility to purchase a starter home to those with a particular maximum level of household income, those restrictions should be used.
c) Discounted market sales housing: is that sold at a discount of at least 20% below local market value. Eligibility is determined with regard to local incomes and local house prices. Provisions should be in place to ensure housing remains at a discount for future eligible households.
d) Other affordable routes to home ownership: is housing provided for sale that provides a route to ownership for those who could not achieve home ownership through the market. It includes shared ownership, relevant equity loans, other low cost homes for sale (at a price equivalent to at least 20% below local market value) and rent to buy (which includes a period of intermediate rent). Where public grant funding is provided, there should be provisions for the homes to remain at an affordable price for future eligible households, or for any receipts to be recycled for alternative affordable housing provision, or refunded to Government or the relevant authority specified in the funding agreement.
When reading Para 64 in the light of the both footnote 29 and the appendix, it is clear that the Government intends that at least 10% of the affordable housing offer on a major residential development site should be made up of starter homes, discounted market sales housing or other affordable routes to home ownership (such as shared ownership or shared equity units); unless one of the exemptions in the paragraph apply.
These exemptions largely relate to housing models or sectors of the market where allowing people to buy or acquire their homes at a discounted or reduced rate would make no sense - such as Build to Rent or Student Accommodation schemes, where the whole point is that the entire scheme is operated on a rental model. There is however a get out jail free card in the text of the paragraph itself - namely that local authorities do not have to apply the 10% threshold where:
- this would exceed the level of affordable housing required in the area; or
- it would 'significantly prejudice the ability to meet the identified affordable housing needs of specific groups' to do so.
We do not at present have any express guidance on what these carve outs mean or how they are to be applied in practice, and I would not be surprised if we saw a judicial review challenge on the correct interpretation of the second of these provisions in the not too distant future. On the face of it, however, it looks as if it could be used to argue that a Council would not have to apply the 10% threshold if the demand for affordable rented housing units in their area was so great that to do so would prejudice their ability to meet that need (particularly if the 'specific group' referred to was defined as the people on the council's waiting list for affordable rented housing).
Whilst this push towards a more diverse mix of affordable housing tenures on a site might, at first glance, appear helpful to the development industry, and those looking for a more affordable route to getting onto the housing ladder, it does come with a sting in the tail, and quite a painful one at that.
The Government has, at least for the time being, designed a CIL trap into this particular part of the NPPF, which is likely to catch a large number of people unawares.
The issue is this - whilst MHCLG has released the Revised NPPF on time, and used it to widen the definition of Affordable Housing in planning policy terms, they have not released the outcome of the CIL consultation that was carried out at the same time. Nor have they published their proposed revisions to the regulations themselves.
As such, the definitions of Affordable Housing in the CIL Regulations have not been updated to reflect the intentions of the Revised NPPF.
This is a real issue because there are two types of relief for Affordable Housing under the CIL Regulations:
- Social Housing Relief*** - which applies automatically under the regulations themselves; and
- Discretionary Social Housing Relief *& - which is only available if the relevant council has actively chosen to adopt a policy making the relief available in their area.
The two reliefs apply to different types of affordable housing tenure. As a general rule of thumb:
- the mandatory relief covers tenures of affordable housing for rent - such as social rent, affordable rent, some (but not all) discount market rent models; and shared ownership; and
- the discretionary relief covers tenures of affordable housing for sale - such as starter homes, most shared equity schemes and discount market sale
As the discretionary relief is ... well... discretionary... very few charging authorities to date have actually adopted it.
The result of this lack of co-ordination between the required amendments to the CIL Regime and the Revised NPPF: there is now a very strong chance that developers, in attempting to comply with the requirement for 10% provision of 'affordable home ownership' units contained in Para 64 may accidentally end up adopting a tenure of affordable housing on which they cannot claim CIL relief - which clearly cannot be what MHCLG intended.
The only way around it is to ensure that the whole of that 10% provision comprises shared ownership units, which have the major advantage of being the only tenure of affordable housing which both qualifies as 'affordable home ownership' and for mandatory social housing relief!
In short - until MHCLG get around to fixing the discrepancy between the CIL Regulations and the Affordable Housing definition in the Revised NPPF, shared ownership housing may well end up being your new best friend.
* I almost called this post" Bright Ideas and Unintended Consequences" - but opted for the Bryan Adams reference instead;
** i.e. all of you.
*** Reg 49 of the CIL Regs 2010 (as amended)
*& Reg 49A of the CIL Regs 2010 (as amended)
Where major development involving the provision of housing is proposed, planning policies and decisions should expect at least 10% of the homes to be available for affordable home ownership 29, unless this would exceed the level of affordable housing required in the area, or significantly prejudice the ability to meet the identified affordable housing needs of specific groups. Exemptions to this 10% requirement should also be made where the site or proposed development:
a) provides solely for Build to Rent homes;
b) provides specialist accommodation for a group of people with specific needs (such as purpose-built accommodation for the elderly or students);
c) is proposed to be developed by people who wish to build or commission their own homes; or
d) is exclusively for affordable housing, an entry-level exception site or a rural exception site"
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