Planning update on housing


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The UK housing shortage has continued to shape changes to planning law this year. Below is an update on two of those changes.

Permitted development to residential use

The Government has continued to use permitted development rights to try and encourage an increase in housing supply. A few points to note, as follows:

  • As most will be aware, the permitted development right (PDR) for office to residential change of use was made permanent from 6 April 2016. The main changes to the now permanent right are:
    (a) any permitted development scheme must now be completed within three years of the date of prior approval rather than the use having begun;
    (b) the noise generated by commercial premises and its impact on intended occupiers of the residential units may now be considered alongside flooding and contamination risks and transport and highway impacts;
    (c) the areas which are currently exempt from the PDR will continue to benefit from their exemption until 30 May 2019.
  • Planning statistics do show that applications made under the permitted development rights have fallen for the last three quarters in a row, however there has been an increase in applications for change of storage and distribution centres (B8) to residential use.
  • A new right to convert light industrial (class B1(c)) to residential has also been introduced starting from 1 October 2017 subject to prior approval. A local planning authority will be able to consider transport and highways impacts, contamination and flood risk, together with the sustainability of the provision of industrial services if the authority considers the building is in an area that is important for providing industrial services.
  • HMRC confirmed in May 2016 that the conversion of non-residential property without an express grant of planning permission will continue to be zero-rated for VAT but that they will require evidence to be produced to show that the work is lawful, such as written notification from the local planning authority advising of the grant of prior approval or advising that prior approval is not required.

Starter Homes

The Housing and Planning Act 2016 included the new concept of “Starter Homes”. Starter Homes are new homes that will be sold to first-time buyers aged under 40 at no more than 80% of their market value. It is expected that they will be capped at £250,000 outside London and £450,000 in London. In an unexpected change, the Housing Minister, Gavin Barwell, announced at the RESI conference this month that the Government was considering allowing other tenure types, in particular discounted rent in order to achieve 200,000 starter homes by 2020. He said that the private-rented sector in particular would prove important in solving the housing crisis.

The framework for the proposed Starter Homes regulations was consulted on earlier in the year and the results of that consultation are awaited. It is thought that the following will be included:

  • the Government intends to set a 20% Starter Homes quota for sites of ten or more units or that are larger than 0.5 hectares;
  • the consultation proposed that Starter Homes should not be sold at full market value for a restricted period.  Five years was the suggestion;
  • tapering would apply, whereby sales can take place during the restricted period, but only to other qualifying first time buyers;
  • all sales in the restricted period would be controlled, but once the period has come to an end the property would be capable of being freely sold;
  • the consultation considers exemptions to the 20% quota; and
  • the main exemption would be a general viability exemption, requiring developers to demonstrate that the Starter Homes requirement renders the scheme unviable. The assessment will need to be agreed with the local authority. This will be similar to the viability assessments which are already carried out for other affordable housing provision. If on-site provision is not viable, the Act does allow for off-site contributions in lieu.

The relationship between Starter Homes and other forms of affordable housing is not clear. It had been expected that regulations will stipulate that the Starter Homes requirement will take precedence over other forms of affordable housing such as social rented and shared ownership.  However, in light of the announcement from the housing minister, it appears this might be changing. The uncertainty about the relationship between Starter Homes and local plan affordable housing requirements is likely to lead to more disputes over viability. Developers and local authorities will need to agree the mix of affordable housing, which will inevitably lead to delay. On the positive side, it is thought that Starter Homes will be more profitable for developers and more straightforward to sell.

Even though the regulations have yet to be published, a number of local authorities are already allowing obligations for Starter Homes to be introduced. A development of 80 homes in Hampshire has been agreed, 40 of which will be affordable housing, and 20 will be Starter Homes.

For further information, please contact Mark Harnett, Partner, Fladgate LLP (mharnett@fladgate.com)

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