Government consults on temporary increase to affordable housing threshold

Policy Update
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On 6 August, the Government published a consultation document titled ‘Changes to the current planning system’ which sets out proposed measures to improve the effectiveness of the current planning system. The consultation runs until 1 October 2020 and invites responses to four main proposals; one of which comprises a potential time-limited increase to the small sites affordable housing threshold ‘to support SME builders as the economy recovers from the impact of Covid-19’.

What is the current threshold?
National planning policy sets out that affordable housing contributions should not be sought from developments on small sites; i.e. those delivering fewer than 10 residential units. It is also makes clear that affordable housing contributions should not be sought from developments that have a site area of less than 0.5 hectares. In designated rural areas, local planning authorities are entitled to set a lower threshold of 5 units or fewer.

An exception to national policy applies where Council’s with up-to-date local plans (less than five years old) are entitled to seek affordable housing contributions for small sites.

Why change the threshold?
The overarching aim of the proposed increase to the small sites threshold is to stimulate economic recovery in the wake of COVID-19. The intention is to specifically support small-to-medium sized developers (SMEs) by reducing the burden of developer contributions on sites more likely to be built out by SME developers.

The Government anticipates that, on balance, raising the threshold would make more sites viable for SME developers and therefore increase the pace of their delivery.  The consultation paper acknowledges that the trade-off for increasing the threshold would be a fairly significant reduction in affordable housing delivery.

What is being proposed?
The Government is proposing to temporarily raise the small sites affordable housing threshold to up to either 40 or 50 residential units. The existing site size threshold of 0.5 hectares will also be scaled up proportionately to the increase in unit numbers. The idea is that this new higher threshold will be implemented for an initial period of 18 months during which time the Government ‘will monitor its impact before reviewing the approach’ – thereby leaving the door open to extending the time limit.

The current threshold in designated rural areas is proposed to be retained.

The Government is keen to close down any loophole whereby developers could attempt to bring forward larger sites in phasings of up to 40 to 50 units as a means of avoiding contributions by ‘setting out in planning  guidance how local planning authorities can secure contributions for affordable housing where it is apparent that a larger site is being brought forward’.

Once the consultation has ended, the Government will decide whether to take forward this approach, which will likely be implemented via a Written Ministerial Statement forecast for issue ‘in the Autumn’.

What are the questions in the consultation?
Q17 Do you agree with the proposed approach to raise the small sites threshold for a time-limited period?
Q18 What is the appropriate level of small sites threshold?
i) Up to 40 homes
ii) Up to 50 homes
iii) Other (please specify)
Q19 Do you agree with the proposed approach to the site size threshold?
Q20 Do you agree with linking the time-limited period to economic recovery and raising the threshold for an initial period of 18 months?
Q21 Do you agree with the proposed approach to minimising threshold effects?
Q22 Do you agree with the Government’s proposed approach to setting thresholds in rural areas?
Q23 Are there any other ways in which the Government can support SME builders to deliver new homes during the economic recovery period?

What are the implications of the proposals?
The prospect of raising the affordable housing threshold to either 40 or 50 units will no doubt come as welcome news for many SME developers, particularly those who have been struggling to make their schemes viable in the face of an uncertain housing market.

It is, of course, the Government’s hope that such a significant jump in the affordable housing threshold will allow sites to be brought forward for housing which would not otherwise have been viable to deliver, and in doing so, help support SMEs.  Whether or not it is the Government’s intention, the proposals could have implications for developments at all stages of the application process.   As well as potentially enabling new sites to come forward, the higher threshold may also allow developers to revisit schemes which already benefit from extant planning permission with an affordable housing contribution. For example, a developer may be able to re-submit a fresh planning application for the same scheme to avoid the contribution or indeed, redesign a permitted scheme of more than 40 or 50 units (depending on the new threshold) so that it falls just under the threshold.  Equally, if the new temporary threshold is introduced, there may be scope for developers to re-evaluate schemes that are already in the application process or those nearing submission.  As well as viability, the inclusion of on-site affordable housing will often have implications in terms of a scheme’s design, unit mix etc. which may need to be reconsidered.

All of this will depend on the final wording of any WMS and/or planning guidance and its scope for interpretation.  However, if the proposals do come forward it is already clear that timing will be a key issue.  Whilst an initial 18 month period seems reasonable, in practice, it will give developers a very limited window of opportunity to take advantage of the higher threshold.  Developers may therefore need to be in a position to act quickly, especially where a local authority is likely to be slow to determine the application (perhaps through a lack of resources, or where a delay may be in their interest if it means that the applicant must then make an affordable housing contribution to that authority).

Perhaps the biggest question though, is the weight which any Written Ministerial Statement will be given in the decision-making process.  Will the WMS effectively trump all up-to-date Development Plan affordable housing policies for the specified period?  The Government’s last attempt back in 2014 to use a WMS to set a national affordable housing threshold of 10 or more units was met with resistance from many local authorities and was followed by a trail of appeals.

The current circumstances are very different to the 2014 scenario in that the proposed policy change is a direct response to the Covid-19 pandemic and will be on a temporary basis only. Nevertheless, the key to the success of the proposals will be ensuring that SME builders have the certainty that local authorities will take a consistent approach to implementing the higher threshold whilst it is in place.

We will be continuing to monitor the progress of these proposals. In the meantime, if you have any questions relating to the affordable housing threshold increase or indeed any other proposed changes to the planning system, please get in touch with one of the Firstplan team to discuss.

The Government’s consultation document can be found at the link below: