Planning for the future: the implications of the White Paper (& Class E) for town centres, retail and leisure
In the second of our series of deep dives into the Planning White Paper, we are going to take a look at the implications of the upcoming reforms for our high streets and town centres.
I think it is probably fair to say that 2020 is shaping up to be an annus horribilis for the British high street and bricks and mortar retail more generally. The question is whether the proposals in the White Paper will make things better, or worse, particularly when taken in combination with the reforms to the Use Classes Order which come into effect next week*
Once again,** getting to grips with what the White Paper might mean for our town centres involves a certain amount of reading between the lines. The overall objective of the proposals is to increase levels of housing supply. Whilst town centres do get the occasional mention,*! it is primarily in respect of their potential to incorporate housing, rather than because of their wider social or community functions.
Changes to Local Plans
It is likely that the vast majority of town centres will fall within renewal areas under the new system. By way of a reminder, renewal areas are those that the Government deems suitable for more modest amounts of development. The definition in the White Paper itself is as follows:
"Renewal areas “suitable for development” – this would cover existing built areas where smaller scale development is appropriate. It could include the gentle densification and infill of residential areas, development in town centres, and development in rural areas that is not annotated as Growth or Protected areas, such as small sites within or on the edge of villages."
It is envisaged that the 'renewal area' would then be subdivided into specific sub areas (or, dare I say it, allocations) with lists of acceptable uses, heights, densities and/ or design requirements for each.
Those developments which comply with the requirements of the plan would benefit from a stronger presumption in favour of grant. Those developments which do not meet the required standards, or which do not comply with the uses set out in the plan, could still be brought forward through a planning application, but would face a higher decision making hurdle than they do at present. The Government is proposing to 'beef up' the 'Plan First' nature of decision-making through statute - so it is likely to become harder for decision-makers to justify departures from the plan.
It is also possible that a town centre may find itself in a protect area, if, for example, it is also a conservation area. In which case, planning applications will be needed for all development that is not covered by permitted development rights.
You might think that these moves towards more prescriptive 'Plan Led' system would give councils greater levels of control over their town centres. In fact, the opposite is likely to be true. Once an area has been allocated, and the presumption in favour of grant comes into effect, it is likely to be very difficult for councils to resist a development that can bring itself within the rules set out in the allocation.
In addition, and potentially more disturbingly for councils, or those who live in a town centre, the White Paper and other recent reforms hint that there is likely to be further deregulation of the planning system in renewal areas - that will erode local control over development even further.
Impact of Class E and Permitted Development Rights
The White Paper proposes yet more extensions to permitted development rights in 'renewal' areas. Promising to:
"legislate to widen and change the nature of permitted development, so that it enables popular and replicable forms of development to be approved easily and quickly"
There are already wide-ranging PD rights available to switch from existing town centre uses to residential development; so, as a concept, this is nothing new. However, it looks as if the trend of viewing town centres as places where people live, rather than places where they work and shop, is set to continue.
That said, one of the biggest changes facing our town centres is not contained in the White Paper.
From 1 September 2020, Use Class E will come into effect. This will encompass shops, financial & professional services, restaurants & cafes, and business (which were previously four distinct use classes). It will also include indoor fitness, medical or health services, and day nurseries.
Moving from one use within Class E to another will no longer constitute development; although planning permission may still be required for changes to the outside of a building that are necessary to give effect to that change.
This is a massive and radical change. So radical, that I reached out to Planning Barrister (and fellow Planorak) Zack Simons to get his views on it's implications:
"Class E is one of the most significant deregulatory steps in the English planning system for decades. And unlike the reforms in the White Paper, Class E is already in law, and comes into effect as early as next week. The changes go to the heart of what town planning in England is about because Class E is not a permitted development right which local authorities have the power to restrict e.g. using Article 4 directions. There will be no need for a permitted development right to change from one Class E use to another because that change is not development.
Class E is a tool with enormous potential to help bring about the recovery of our high streets, which could not be more timely in a time when many parts of the High Street are struggling to survive. It gives businesses an incredible amount of flexibility, with fewer worries about the legal niceties of distinctions between outdated use classes. Overall, it brings the Use Classes Order into the 21st Century.
But those opportunities come with substantial risks. Local Planning Authorities and local communities will lose the ability to plan for and control these (sometimes very different) kinds of use, many of which give rise to different planning considerations. Which makes Class E a drastic deregulatory step which will remove at a stroke lots of important issues from the scope of the English planning system."
It is also not a change that is limited to town centres. The changes apply to uses, not locations, so changing from a clothes shop to a supermarket would not constitute development regardless of where the original store was located.
That said, it may not be as liberalising as intended. The ability to change uses under the Use Classes Order only applies to building that already have a use that falls within the class - so buildings that have yet to be occupied are unlikely to benefit. Then there is the question of planning conditions. Whilst planning conditions cannot be used to prevent the operation of the Use Classes Order, as they can PD rights, it is still possible for a change of use to constitute a breach of a planning condition - putting the developer at risk of enforcement.
This is a point that is certainly going to end up in the High Court. So, let's hear from Zack again:
“The most important – and sometimes the only – mechanism to control changes between Class E uses will be planning conditions. For existing consents, the battleground will be over whether the language of particular conditions has the effect of excluding the operation of the use classes order - the case law on that is wide-ranging and goes back several decades. More cases are now inevitable! For future permissions, a key issue will be how planning conditions restricting changes of use within Class E can be framed which meet the tests in national policy (e.g. which are necessary, enforceable and reasonable) when MHCLG has decided that changes between those uses are immaterial and fall outside the scope of development control.”
Centralisation of Planning Policy
The move to a centralised set of national planning policies could be an opportunity, or a threat, to the British high street. Much will depend on how much thought is given to retail and leisure uses when the policies are drawn up. It will also be a real litmus test of whether the Government recognises the full extent of the shake-up caused by the reform of the Use Classes Order.
The current iteration of the NPPF sets out a sequential test for 'town centre' uses*^ (which include retail, office and leisure developments).
At present such uses:
"should be located in town centres, then in edge of centre locations; and only if suitable sites are not available (or expected to become available within a reasonable period) should out of centre sites be considered"
The introduction of 'renewal areas' makes such a sequential approach to town centre uses extremely difficult to sustain; particularly when combined with the effect of Class E.
Under the new system, all of the uses specified in a 'renewal' area will be considered acceptable - regardless of whether they are:
- in centre
- edge of centre; or
- out of centre
Similarly, Class E allows offices to switch to retail stores, and vice versa, without any regard to their location. All without engaging the planning system at all.
This may be intentional. If not, then the death of the 'sequential approach' for town centre uses (and the protection it has historically provided) may be the first of many unintended consequences arising from the White Paper.
Changes to Infrastructure Funding
The proposed changes to Infrastructure Funding are also likely to come as an unwelcome surprise for retail and leisure developers.
The Government proposes to abolish both CIL and s.106 agreements and replace with a single development land tax. The details of this new Infrastructure Levy are not yet known, but the White Paper proposes that:
- The tax would be set centrally and operate across England
- It would be charged as a percentage of the overall value of the development
- payable prior to occupation and
- subject to a threshold under which the tax would not be payable
Unlike the current arrangements, the new Infrastructure Levy would apply to all types of development. This is a significant change to the present system where CIL is frequently charged on residential and large-scale retail developments only. There is a tendency (particularly outside of London) for most other types of scheme to be nil rated on viability grounds.
The intention is that there would be very minimal exemptions and reliefs from the new Infrastructure Levy and no scope to reduce the amount payable on the grounds of viability.
The funds raised from the tax are intended to cover all of the council's infrastructure needs, including affordable housing. It is envisaged that the provision of affordable housing by residential schemes would be treated as a form of 'payment in kind' and used to off-set the overall amount due. This will be of no benefit to retail or leisure developments, which typically do not include large amounts of housing.
A lot will depend on how the tax is formulated and where the lower 'viability' threshold is set; but this 'one size fits all' approach does pose real risks for town centre developments.
In particular:
- Will the tax be set at the same rate for all types of development, with housing schemes, gyms and retail parks all paying the same rate? or will differential rates come forward? If so, how would this be any simpler than the current system?
- Would it take into account the ability of a scheme to change uses within 'Class E' without the need for planning permission - and if so, how is this to be factored into the calculations? Would rebates be given if you switched to a less valuable use? Or would councils be able to claw back additional funds if the scheme moved to a more valuable one?
- Would other forms of payment in kind be allowed or is this a mechanism that will purely benefit residential schemes?
The proposed changes would also make developers entirely reliant on local authorities for the provision of infrastructure which may be required to enable their scheme to come forward.
This is problematic because the White Paper is entirely silent on how developers, and indeed local communities, can ensure that this infrastructure actually comes forward.
Whether the White Paper brings forward a renaissance of town centre developments, or simply hastens their decline, will largely depend on how the ideas contained within it are shaped moving forward.
The consultation on the White Paper runs to 29 October 2020. I would urge you to engage with it.
*1st September to be exact.
** in a phrase which is becoming depressingly repetitive
*! the phrase 'town centre' is used five times, however 'retail' and 'leisure' are not used at all. The word 'shop' appears twice, once in the Prime Minister's foreword, and then again in a question about infrastructure needed to support housing developments.
*^ it's in paras 85 to 87 if you are interested
Nick Taylor, head of planning at consultancy Carter Jonas, agrees. "We have been talking for a while about the health and the future of our town centres, and we are all seeing the same thing," he says. "Nobody is putting town centre redevelopment schemes forward which provide lots more retail because of the view that many town centres are contracting."
Practitioners agree that the retooling of town centres will be a predominant theme over the coming months and years, particularly in the context of the pandemic and the government's reforms to the use classes order. Roy Pinnock, partner at law firm Dentons, argues that the current economic problems may act as a spur to some redevelopment schemes, if the deflated value of stock in town centres spurs landlords to bring forward redevelopment.”
Key Contact
