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England and Wales High Court (Administrative Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> Barratt Developments Plc v City of Wakefield Metropolitan District Council & Anor [2009] EWHC 3208 (Admin) (10 December 2009)
URL: http://www.bailii.org/ew/cases/EWHC/Admin/2009/3208.html
Cite as: [2009] EWHC 3208 (Admin), [2010] BLGR 430
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QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Strand, London, WC2A 2LL |
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B e f o r e :
____________________
| BARRATT DEVELOPMENTS PLC |
Claimant |
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| - and - |
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| (1) CITY OF WAKEFIELD METROPOLITAN DISTRICT COUNCIL |
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| -and- |
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| (2) SECRETARY OF STATE FOR COMMUNITIES AND LOCAL GOVERNMENT |
Defendants |
____________________
Vincent Fraser QC (instructed by Wakefield MDC) for the First Defendant
Hearing dates: 19 and 20 November 2009
____________________
Crown Copyright ©
- A Core Strategy is, by virtue of regulation 6 Town and Country Planning (Local Development) (England) Regulations 2004, a local development plan document for the purposes of section 17(3) Planning and Compulsory Purchase Act ('PCPA') 2004. Among other things, the document sets out the "affordable housing" policy of the local planning authority for development control purposes. On 15 April 2009 Wakefield MDC adopted a Core Strategy which set out the development strategy for Wakefield District until 2026. The consequences of a Core Strategy for developers of land are significant. Section 70(2) Town and Country Planning Act 1990 requires the local planning authority ('LPA') to have regard to the provisions of the development plan when considering local planning applications. By section 38(3) PCPA 2004 the development plan comprises the Regional Spatial Strategy and the development plan documents of which the Core Strategy forms part. By section 38(6) PCPA 2004:
- This is a claim brought by the claimant house builders and developers under section 113(3)-(7C) PCPA 2004 (as amended as from 6 April 2009 by the Planning Act 2008) the relevant parts of which provide as follows:
- It is the claimant's case that Wakefield's adoption of policy CS6 'Housing Mix, Affordability and Quality" at section 7 of its Core Strategy was outside the appropriate power, because it failed to conform with sections 19 and 24 of the PCPA 2004, and should be quashed. The First Defendant appears to defend the claim. The Second Defendant is not represented and has taken no part in the proceedings. The claim raises the practical question what are the legitimate approaches which Councils and Planning Inspectors formulating local development plans may adopt when national policy for the provision of affordable housing is temporarily undermined by current economic conditions. The claim arises as follows.
- Section 19(2) PCPA 2004 requires the LPA "in preparing a local planning document" to "have regard to", among other things: (a) national policies and advice contained in guidance issued by the Secretary of State and (b) the Regional Spatial Strategy for the region in which the authority is situated and, by subsection (5), the LPA must also carry out an appraisal of the sustainability of the proposals in each development plan document and prepare a report of the findings of the appraisal.
- Section 24 (1) PCPA 2004 requires the Core Strategy to be in "general conformity with" the Regional Spatial Strategy and, by regulation 13(1) of the 2004 Regulations, the development document must contain a reasoned justification of the policies within it.
- Before the development plan document can be adopted it must be submitted under section 20 for independent examination by a planning inspector on behalf of the Secretary of State. Section 20(5) provides:
- The LPA must, under section 34, in the exercise of any function under Part 2 of the PCPA 2004 conferring, among other things, a power of adoption, have regard to any guidance issued by the Secretary of State.
- By section 23(2)-(3) PCPA 2004, the LPA may only adopt a development plan document on the recommendation of the Inspector, either as originally prepared or with modifications.
- There are two relevant Planning Policy Statements ('PPS'), PPS 3 and PPS 12.
- Paragraph 29 of PPS 3 provides that:
- Relevant provisions of PPS 12 are as follows:
- founded on a robust and credible evidence base; and
- the most appropriate strategy when considered against the reasonable alternatives.
- deliverable;
- flexible; and
- able to be monitored.
- be based on sound infrastructure delivery planning (see para 4.8 above);
- include ensuring that there are not regulatory or national policy barriers to the delivery of the strategy, such as threats to protected wildlife sites and landscapes or sites of historic or cultural importance;
- include ensuring that partners who are essential to the delivery of the plan such as landowners and developers are signed up to it. LPAs should be able to state clearly who is intended to implement different elements of the strategy and when this will happen; (These issues are handled through early involvement of key stakeholders in the preparation of options for the plan.) and
- be coherent with the core strategies prepared by neighbouring authorities, where cross boundary issues are relevant.
- Policy H4 of the Yorkshire and Humberside Plan (Regional Spatial Strategy to 2026), May 2008, states:n of affordable housing
- Wakefield submitted its draft Core Strategy to the Planning Inspector, Mrs Shelagh Bussey, on 17 January 2008. Included was the following extract from policy CS6 for the provision of affordable housing:
- In November 2006, following the Barker "Review of Housing Supply", the Government issued its policy statement "Delivering Affordable Housing". Its purpose was to highlight the urgent need for social housing stock to replace that which had been lost under the 'right to buy' scheme. Local authorities would be required to work with regional assemblies, social housing landlords, developers and others to identify the need and to make efforts to repair the deficit by, among other things, setting targets to be met in part through the use of their planning powers.
- Of particular relevance to the claimants is the employment of agreements under section 106 Town and Country Planning Act 1990 by which the developer agrees that, as a condition of the grant of planning permission for a housing development, it will set aside a particular proportion or area of the permission site for the building of social housing at a reduced (if any) profit to the developer. Such housing falls into two categories, social rented housing and intermediate housing. Social rented housing is sold or let to registered social landlords for letting to tenants at less than the market rate. Intermediate housing is funded by part rental and part ownership. The return to the developer will typically be somewhere between the social rented purchase price and the open market price of the property. Historically, public funding has been available to assist some developments by grants to housing associations and local authorities.
- It follows that the application of section 38(6) PCPA 2004 (paragraph 1 above) is of considerable moment both to the developer and the LPA. If the target for affordable housing provided in the Core Strategy is set unrealistically high, developers will be discouraged from bringing forward proposals and social housing needs will not be adequately addressed. The strategy depends upon profitable development, and profitable development depends in large measure upon buoyant land values. If prospective development land is unprofitable because it is 'blighted' by a social housing burden it is less likely that the land will be sold for development and the strategy may, in consequence, fail to bear its intended fruit. If, on the other hand, the affordable housing target is set too low to address need, the Council will fail to deliver national policy. It was Wakefield's view that it had not been sufficiently aggressive in pursuit of affordable housing provision in its District during the previous five years under its existing UDP. At the time when its Core Strategy (requiring at least 30% affordable housing with an 80/20 split) was in preparation market conditions were favourable. By the time the policy was submitted to the Inspector the market had slumped and no new housing was being constructed.
- The "robust economic viability testing" required by the Inspector (report paragraph 1.9) to ensure compliance with PPS 3, paragraph 29, and PPS 12, paragraph 4.36, was needed to ascertain what policy could, realistically, be delivered (PPS 12, paragraph 4.44) in a time of unprecedented recession in the housing market. DTZ's report became an essential part of the SHMA documents made available to interested persons.
- DTZ set about creating models of hypothetical sites for new build development, of a sufficient size to sustain affordable homes, in five geographical areas of Wakefield District known to vary considerably in land value and profitability. Having selected the sites DTZ applied a variety of assumptions as to the size of the development, building and development costs, a variable percentage of affordable housing and a variable split between social and intermediate housing. The object was to test what revenues could be generated across the district when applying the common assumptions to each site. DTZ took as its starting point its experience that land was unlikely to be brought forward for development when the "internal rate of return" ('IRR') was lower than 20% for small sites (under 50 units) and 23% for larger sites (over 50 units). DTZ was therefore engaged in an exercise of discovering which categories of, and how many, sites in the District were capable of sustaining a percentage of affordable housing while at the same time providing the developer with an acceptable return on investment.
- DTZ reached the following conclusions, among others:
- Mr Village QC, on behalf of the claimants, invited my attention to the source material in DTZ's report for the conclusion expressed at paragraph 19(6) above. Only 67% of sites across the district were capable of sustaining a ration of 30% affordable housing even in the most favourable economic conditions, namely a buoyant and probably over-inflated lending market. If the split between social rented and intermediate housing was changed to 30/70, 78% of sites could produce 30% affordable housing. However, the model made two controversial assumptions, namely (1) that developers would in more stable market conditions be prepared to accept an IRR of 18%-20%, and (2) that construction costs would be £90 per square foot for apartments and £80 per square foot for houses.
- On 28 October 2008 Wakefield sent by email to the interested persons a "statement of common ground" designed to obtain responses to the DTZ report in preparation for the resumed public meeting. Turley Associates replied on behalf of Barratt on 7 November. They did not accept that there was an overall shortage of affordable housing in Wakefield. They did not agree with a 30% affordable housing requirement. It should be a target and 30% was not achievable in the "foreseeable future". It was not agreed that the policy should aspire to a split of affordable housing as to 80% for social housing and 20% for intermediate housing. They did not agree with the modelling assumptions because section 106 costs were set too low and apartments should not be included. On the other hand, Turley agreed with the general approach of DTZ's modelling exercise. They agreed that thresholds should be different for rural and urban development and that the policy should allow for peaks and troughs. It was agreed that the affordable housing policy should be set for the whole 17 year period. The results of the modelling exercise were agreed but Turley asserted that they were understated by which they meant that, as a result of the underestimate of costs and IRR, the results were optimistic. On 11 September 2008 the claimants wrote to DTZ setting out the variety of respects in which they challenged the assumptions made to produce DTZ's conclusions as being too optimistic.
- In preparation for the meeting the Inspector prepared and distributed a document called "Main Matter 11" in which a series of questions was asked of the recipients including:
- Wakefield replied, detailing its answers to the questions posed in "Main Matter 11". In particular, the answers to questions 11.5 and 11.6 included the following:
- The meeting of interested persons was held at County Hall on 9 December 2008. A note was made by Mr Eamonn Keogh of Turley Associates. Also present were Barratt, Harworth Estates Ltd, Taylor Wimpey and Miller Strategic Land. Other observers represented "various parties". Mr Keogh's note demonstrates that the Inspector took the lead role in seeking from Wakefield, DTZ and arc4 (consultants for Wakefield) answers posed in the questionnaire "Main Matter 11" while receiving contributions from others present. Wakefield explained why it proposed a target of 30% affordable housing. The current UDP target was 25%. The evidence established that the need was even greater. The Regional Spatial Strategy indicated a 30%-40% need. Consultation responses had been considered and Wakefield had concerns about going higher than 30%. Wakefield agreed that it had to take account of viability. They did not feel constrained by the RSS figures. The Inspector questioned why Wakefield was going from such a low delivery under existing policy to a step of 30%. Wakefield acknowledged that it had not done well in the past because it had not been aggressive enough in pursuit of the policy and had not lowered site thresholds as it should. Only 41 affordable units per annum had been provided during a five year period by means of section 106 agreements. Wakefield wished to give greater prominence to delivery of affordable housing.
- Mr Philip Roebuck explained the DTZ methodology. He drew attention to the assumptions made about construction costs and suggested that they could fall even further than they had already. In his view it was not unrealistic to say that revenues had fallen by 20% from the top of the market. He recommended reducing the IRR target to 20% on larger sites and 18% on smaller sites. Professional fees were likely to fall by 1%. In his view the EVA had established that significant affordable housing could be provided but the policy needed to have a degree of flexibility. Wakefield responded that they had set clear thresholds and expected viability on each site, but it was willing to be flexible. It did not wish to hinder delivery of housing generally. The Inspector expressed doubt about a 30% threshold. Mr Roebuck said that what drove output was sales rates. He thought 15%-20% affordable housing was achievable (across the district) at normal market levels. Wakefield accepted that they were in difficult (economic) circumstances. When the Strategy was being prepared the market was more favourable. The position in December 2008 was not and could not have been anticipated. On the other hand, Wakefield was dealing with a coalfield legacy and was seeing significant regeneration. Wakefield was likely to become very different with households moving into districts with higher incomes. Wakefield had the largest publicly funded affordable housing programme in Yorkshire. Costs were likely to come down and the council wished to work with developers. Wakefield acknowledged that they could not hold to an 80/20 split in social and intermediate provision if the Strategy was to be viable. According to Mr Keogh's note, he made one intervention drawing attention to the absence of raw data in the Housing Needs Survey, explained by arc4 as the consequence of a confidentiality agreement. In particular he records no protest or public disagreement with Mr Roebuck's explanation of DTZ's modelling exercise and his opinions as to its sufficiency.
- The policy adopted and published by the LPA was as follows:
- In summary the Inspector concluded that:
- The claimant first submits that the target fails, contrary to PPS 3, paragraph 29 to "reflect an assessment of the likely economic viability of land for housing within the area..." It requires that all proposals for additional housing on qualifying sites must make provision for suitable sufficient affordable housing to meet identified needs. A requirement is not the same thing as a target. A requirement that every proposal must make provision for affordable housing to meet identifiable needs does not reflect and effectively ignores the conclusions of the EVA that in current market conditions 0% affordable housing was viable and that even in the most favourable market conditions only two thirds of all sites in the District could produce affordable housing.
- The closing words requiring that, "All but the smallest sites should contribute to the provision of affordable housing", ignored the evidence that market conditions were likely to exclude the possibility of affordable housing on these sites at any time during the duration of the Strategy.
- A target of 30% affordable housing throughout the 17 year duration of the Strategy was not just justified within the meaning of PPS 12, paragraph 4.36, since it was not based upon the EVA. The EVA established that the provision of any affordable housing under the Strategy was currently unviable, would be unviable in the short to medium term and, in any event, would remain unviable unless there was a return to the unhealthy and inflated conditions of late 2006/early 2007. Even this gloomy prognosis is founded upon an optimistic appraisal of building costs and the developers' willingness to accept a reduced return on their investment (see paragraph 20 above).
- Mr Village argued that there was no evidence before the Inspector one way or the other during what period of time the market would recover, if ever, nor whether it would recover to previous levels of activity. It was therefore not open to the Inspector to rely on the absence of evidence to form a conclusion that the market would recover (see paragraph 27(7) above).
- The evidence before the Inspector was that Wakefield's affordable housing policy should be both flexible and have built in trigger points. No such trigger points were considered or recommended by the Inspector, so the policy is burdened with a requirement for 30% affordable housing across the board. The effect of unviability on the smaller and less valuable sites would be to create a pressure upon the LPA to impose on the larger and more valuable sites a percentage of affordable housing higher than 30% in order to make up the shortfall. However, the evidence of the EVA was that 30% was the viable maximum percentage obtainable on the better sites in favourable market conditions.
- It follows, in the submission of the claimant, that:
- Mr Village drew my attention to the decision of Collins J at first instance in Persimmon Homes (North East) Ltd and others v. Blyth Valley Borough Council [2008] EWHC 1258 (Admin). The Council had adopted a target of 30% affordable housing in its Core Strategy, policy H4, under section 23 of the 2004 Act without, the judge found, giving requisite consideration to the issue of economic viability. It was thus a flawed policy which must be quashed. Collins J posed obiter at paragraph 71 of his judgment the question what the inspector could have recommended in the absence of an evidence base supporting a policy of 30%. He said:
- On appeal to the Court of Appeal (in Blyth Valley Borough Council v. Persimmon Homes (North East) Ltd and others [2008] EWCA Civ 861) the Court did not further examine the meaning of the word "target" in PPS 3 paragraph 29 and, therefore, whether a "target" set to comply with paragraph 29 could be represented by something other than a numerical value. Keene LJ expressed the main issue in the appeal as follows:
- The claimant argues that the Inspector was wrong to read the Regional Spatial Strategy ('RSS') as supporting in the Core Strategy a percentage for affordable housing in the range 30%-40% (Inspector's report paragraph 3.3.13/15, paragraph 27(3) above). Policy H4 in The Yorkshire and Humber Plan dated May 2008 stated that Local Development Frameworks should set targets for affordable housing. Provisional, indicative estimates for the proportion of new affordable housing which may be needed in the Wakefield district were 30%-40%. However, the figures would need to be reviewed in the light of findings from emerging strategic housing assessments (Policy H4, B and 12.32). Mr Village argued that the RSS was merely a preliminary estimate of need and did not purport to state what was deliverable. It did not require Wakefield to specify a percentage within the range 30%-40%. The Inspector failed to carry out a review of affordable housing needs against current economic conditions.
- The RSS recognised that there would be differences in requirement within districts. The Inspector made no attempt to analyse and reflect those differences in the target set but recommended a policy that all but the smallest sites should contribute to the provision of affordable housing.
- The Inspector failed, it is asserted, to deal adequately in her reasons with the objections taken by the claimant to the assumptions made in DTZ's report and she failed to explain why she had rejected the advice to include triggers within policy CS6.
- Policy CS6's justification text at paragraph 7.25 states that, "Exceptionally it will be possible that the affordable housing element of a development proposal cannot be met on site. In such circumstances the council will follow advice set out [in] national policy and commuted sum payments will be assessed against the criteria set out in the Developer Contributions Supplementary Planning Document or the prevailing guidance at the time of the determination of the planning application". The evidence base established, on the contrary, that during current market conditions this would be the rule rather than the exception. This is a matter which should appear in the policy itself and be properly justified. It amounts to a levy on planning permission. The text fails to explain in what circumstances commuted sums will be required, nor whether it would apply to a proposal which failed to deliver any affordable housing, or to a proposal which failed to deliver 30%.
- The Inspector's reasoning was inconsistent. If it was appropriate to abandon a target for the split between social and intermediate housing on the ground that flexibility was required, then it was contradictory to impose a policy which required that all sites should provide affordable housing and that across the district 30% affordable housing should be provided. Further, if it was right, as the Inspector judged at paragraph 3.3.10 of her report, to provide a flexible approach for the required housing mix "based on the latest information in the most recent SHMA" then it was also right to adopt the same approach to the viability of proposals in current market conditions. The Inspector's recommendation imposed a target achievable only in the most advantageous economic conditions upon a market which was suffering the worst economic conditions in living memory.
- By section 23(2)-(4) PCPA 2004, if Wakefield was to adopt the Core Strategy it had to do so as the Inspector recommended. It was not, however, bound to adopt the Strategy if it failed to have regard to the requirements of national policy. It was open to Wakefield to submit the Strategy for examination by another Inspector. In adopting a flawed Strategy Wakefield acted outside its powers under Part II of the Act.
- The imposition of an affordable housing target which is impossible to achieve renders development by Barratt economically unviable. It cannot bring forward proposals for development which will be blighted by an uneconomic affordable housing burden. It is unable to make commercial decisions about its own strategy for land holdings in the Wakefield area while the affordable housing policy imposes an unrealistic target.
- Mr Fraser QC, on behalf of Wakefield, submitted that PPS 3, paragraph 29, plainly had in mind a numerical target. If there was no target to be aimed at there would be no need for an economic viability assessment to support it. As a matter of practicality developers and others need to know what is the benchmark for affordable housing. If they do not they will be unable to plan effectively the prices they need to pay for land acquisition. It is recognised that land values will be "burdened" by the policy to provide affordable housing because that is the whole point of the strategy - that private developers should contribute towards both a mix of community development and housing which is affordable.
- The underlying purpose of the target is to deliver national policy. It cannot be assumed that the authors of PPS 3 were unaware of the obvious fact that the ability to deliver will vary between districts and between sites within districts, and will depend upon variable economic conditions. Mr Fraser submitted that it was not Wakefield's task to settle for the lowest common denominator. What he meant, as I understood him, was that a target was a figure to be aimed at and not necessarily a figure which would always be achieved. Setting the target too low would not deliver the policy.
- DTZ's report made clear the view of the authors that current market conditions were truly exceptional and advised that in time the market would recover. It identified the need to set a target which reflected a return within the life of the Strategy to more normal market conditions. It was not being suggested by Turley Associates on behalf of Barratt that the methodology employed by DTZ was not robust and reliable. What was at issue between DTZ and Barratt were the assumptions applied to the model. DTZ stated in their report that developers were not all of the same profile. The strength of the evidence base was to be judged for its assessment of the market as a whole and not just according the views of one developer. The thrust of DTZ's report was that the policy required flexibility. Although it mentioned trigger points on one occasion in the report it did not explain what it meant by that term and suggested none to be considered. It was not raised at the stakeholders' meeting held on 9 December 2008.
- DTZ recognised that the target figure could be set anywhere between 0% and 30%. Although DTZ had identified 67% of sites which could deliver 30% affordable housing in favourable economic conditions, those figures took no account of the availability of subsidy and grant. Furthermore, the modelling exercise conducted by DTZ demonstrated that in the most profitable of sites the IRR was considerably above the 23% threshold. On those sites a percentage greater than 30% might have been achievable.
- DTZ made an assessment that it was right to assume that when stable economic conditions return the threshold IRR would not be as high as 20%-23% but would lie in the range 18%-20%. That is a matter for opinion based on experience. Nobody challenged DTZ's qualification to express such views.
- The Inspector's acceptance of Wakefield's submission in response to the Main Matters 11 questionnaire that it would be inappropriate to fix a split between social and intermediate housing was not inconsistent with a target of 30% affordable housing. It was one of the means by which flexibility was delivered to the policy.
- The conclusion (see paragraph 23 above) that "As these [market] conditions are continually changing the Council does not consider that it is possible or appropriate to have varying thresholds and affordable housing proportions" was a legitimate one. It is therefore not surprising that the Inspector accepted it in almost identical terms in paragraph 3.3.28. Although "trigger points" were recommended by DTZ the underlying requirement was one of flexibility. It was open to the Inspector to accept Wakefield's submission that it was, by reason of the unpredictability of changing economic conditions, impracticable to set varying thresholds.
- Each of the Inspector's conclusions was supported by the evidence provided by DTZ's economic viability assessment.
- The Inspector clearly understood that the Regional Spatial Strategy contained a provisional assessment of affordable housing need. The RSS was, as its contents demonstrate, a statement of need rather than viability. The Inspector did not make the error of reasoning that the Core Strategy had to follow the RSS. On the contrary it was necessary to take it into account which the Inspector did at paragraphs 3.3.13-3.3.14.
- Policy statement PPS 3 provides that an affordable housing target should be set but does not explain how that target should be designed to reflect viability during the plan period or the differences in viability across areas of the district. An affordable housing target cannot be expected to provide for all eventualities. This is a matter for judgement based on the evidence and, as Keene LJ said in Blyth Valley Borough Council (paragraph 35 above), it is primarily a planning judgement whether the policy is compliant with national policy guidance.
- On the one hand, the Inspector was faced with evidence which established a significantly increased need for affordable housing and, on the other hand, she had cogent evidence that in current market conditions the provision of any affordable housing was unviable. She was entitled to accept the evidence of DTZ that conditions in the housing market were cyclical. She had to make a judgement on the evidence. It would have been contrary to national policy to set a target lower than that which could reasonably be achieved over the life of the plan.
- Mr Fraser submitted that the policy should be read as a whole and no one sentence should be taken out of the context of the whole. Read purposively, the policy did not require delivery of 30% affordable housing during the lifetime of the Strategy and did not require any site below the trigger threshold size to deliver affordable housing. The relevant part of policy CS6 read as a whole provides as follows:
- It is Wakefield's case that the policy, properly understood, provides the flexibility for which DTZ made a strong evidence-based recommendation. It therefore paid due regard to PPS 12.
- PPS 3, paragraph 27, states that the affordable housing policy statement should be read together with the Government's Affordable Housing Policy Statement, "Delivering Affordable Housing", November 2006. The aims of that policy are stated at paragraph 3:
- It is clear from the terms of the statement that the policy was intended to provide relief to those who had been excluded from the housing market by the escalation in house prices nationwide. The object was to ensure that cheaper housing was made available both through the increased provision of public funding and by the imposition of obligations upon private developers through section 106 agreements. While land prices remained high and revenue buoyant developers were able to accommodate the requirement for a significant proportion of affordable housing. Since the policy had been formulated, however, there had been a very significant change in economic circumstances together with a drop in house prices widely reported to be about 20%. The economic conditions which made the policy workable ceased to exist while at the same time the evidence before the Inspector was that affordable housing was in increasingly short supply in the Wakefield district. I agree with Mr Fraser that PPS 3 provided no guidance how these changed conditions should educate a long term strategy such as policy CS6 except that it required any target to "reflect an assessment of the likely economic viability of land for housing within the area, taking account of risks to delivery and drawing on informed assessments of the likely levels of finance available for affordable housing, including public subsidy and the level of developer contribution that can reasonably be secured". There are, it seems to me, two balancing considerations which these words reveal. The first is that social housing should have a fair stake in the private and profitable development of land. The second is that social housing should not be such a burden on development that housing development in general will be discouraged.
- I accept Mr Village's submission that if policy CS6 imposed a target of 30% across Wakefield District for the life of the plan:
- While neither PPS 3 nor PPS 12 gives specific assistance on changing economic and market conditions the fact that the strategy requires a robust evidence base to support it acknowledges that deliverability will depend upon those conditions. This is particularly evident in paragraph 4.46, PPS 12, which states that "A strategy is unlikely to be effective if it cannot deal with changing circumstances. Core strategies should look over a long time frame – 15 years usually but more if necessary. In the arena of the built and natural environment many issues may change over this time. Plans should be able to show how they will handle contingencies: it may not always be possible to have maximum certainty about the deliverability of the strategy. In these cases the core strategy should show what alternative strategies have been prepared to handle this uncertainty and what would trigger their use. Authorities should not necessarily rely on a review of the plan as a means of handling uncertainty." I agree with Mr Fraser that national policy anticipates that the "target" will be expressed numerically where possible. I also agree with Mr Village that if in particular circumstances it is not possible viably to express the target in numbers, a different approach may be required. The question for me is whether the Inspector's approach was, on the evidence, a rational one.
- The recommendation made by DTZ was to set a target with built-in flexibility, including triggers. The only triggers considered in the report concerned, firstly, the features of, and developments on, the hypothetical sites modelled which affected IRR, such as size, location, density of housing and land values; secondly, economic conditions as at December 2006 and August 2008 respectively. Given the state of economic uncertainty when the EVA was under preparation it is no surprise that DTZ did not attempt a forward analysis of economic conditions for the next 17 years. It would have been, in my view, an almost impossible task in the state of uncertainty then prevailing. DTZ did advise that it could be assumed the market would recover during the lifetime of the plan. That assumption seems to me to be based reasonably on experience. Everyone knows that the housing market is cyclical. The uncertainty lay in the period of time it would take for the market to recover and the degree to which it would recover. DTZ's advice was that any target set by Wakefield in the range 0%-30% should, by reason of exceptional uncertainties, be flexible. This is what PPS 12, paragraph 4.46, required. I shall have to consider in a moment how the Inspector applied that advice to the policy under consideration.
- While it was acknowledged at the meeting held on 9 December 2008 that there must be some doubts about the precision of the estimate of need in the SHMA of 971 dwellings per annum, the evidence that there had been a failure in past to meet need and that there was an increasing need for affordable housing was not the subject of serious challenge. It was supported by the provisional assessment made in the RSS.
- The assessment on which DTZ embarked in August 2008 was a large undertaking. In making their assessment they relied in part on their own experience as developers and in part upon their knowledge of the market generally. At paragraph 3.12, for example, they said:
- While Barratt did not accept some of DTZ's assumptions relating to the cost of development those disagreements were communicated to DTZ in writing before the meeting of 9 December 2008. At the meeting Mr Roebuck of DTZ gave an oral presentation of DTZ's methodology and explained the cost and IRR assumptions applied to the modelling exercise. Mr Keogh's note does not indicate any challenge to Mr Roebuck's expressions of opinion supporting the report.
- Barratt's response to the Wakefield's SHMA search for common ground was, as Mr Fraser submitted, largely favourable to DTZ's work. Turley Associates disagreed with the stated shortfall in affordable housing because it was not satisfied that the evidence base was sufficiently robust; it did not agree that a 30% affordable housing requirement was established; it did not agree with an 80/20 split of affordable housing; and it did not agree that the cost of section 106 developments had been set sufficiently high. All these matters were confronted by Wakefield, arc4 and DTZ during the meeting. However, Turley Associates did agree that DTZ's approach to the assessment was in general appropriate, as was their advice that any policy for the life of the plan should allow for the peaks and troughs of the housing market. As Mr Village acknowledged, I am not being asked to make a judgement whether DTZ's assumptions were justified. The question for me is whether the Inspector, for sustainable reasons, accepted that the evidence provided by DTZ was robust and credible.
- The thrust of the claimant's case was that the EVA could not rationally justify the policy recommended by the Inspector. Since the EVA demonstrated that a 30% affordable housing requirement could not, on the most optimistic view, be achieved across the district during the lifetime of the plan, the setting of such a target was irrational and, therefore, unlawful. I have already accepted that if this is the effect of the policy, his argument is right.
- The Inspector accepted that "the composite SHMA documents represent robust and credible evidence on the nature of the strategic housing markets affecting Wakefield District, the level of need for affordable housing, the economic viability of the submitted thresholds and percentages for affordable housing delivery, and information on housing mix. I consider it meets the requirements of PPS 12 and PPS 3" (paragraph 3.3.7 report). In my view the Inspector was entitled to accept that she now had robust and credible evidence to consider. As I have observed in paragraph 65 above Mr Village does not seriously challenge this finding. His case is that the EVA as produced did not support the policy recommended by the Inspector. However, he submitted that to the extent the Inspector was prepared to dismiss the concerns expressed by Barratt she should have given reasons and she gave none.
- Mr Village relies on the speech of Lord Brown, with which the House agreed, in South Bucks District Council and another v. Porter (No 2) [2004] UKHL 33. The appeal concerned the quality of reasons given by an inspector in a planning appeal. At paragraph 36 he said:
- There is, it seems to me, a difference between the planning process, to which Lord Brown's guidance was specifically directed, and the formulation of policy which was taking place here. In accordance with the Government's affordable housing policy, interested persons ("stakeholders", see PPS 12, paragraph 4.45) were engaged in the process of policy making with the Council and the Inspector. The purpose of the mutual exchange of responses to the EVA was to enable DTZ and others to consider them before the public meeting which took place on 9 December 2008, and to enable interested persons to make their submissions, cards on the table, at that meeting. This is what occurred. The Inspector tested Wakefield's response to the Main Matter 11 document and arc4 was asked to justify the SHMA. Mr Roebuck of DTZ expressed his views as to the assumptions which informed the modelling exercise and how his conclusions were reached. That the Inspector asked searching questions is revealed by Mr Keogh's note of the meeting. There is no evidence before me that there was at the meeting any significant challenge to Mr Roebuck's assessment. I accept that Mr Keogh's note cannot be regarded as a transcript of that meeting but, given Turley Associates' interest in Mr Roebuck's presentation on behalf of Barratt, I would have expected him to record at least the fact of such a challenge had it taken place.
- It does not seem to me that the Inspector was required, in the process which took place, to make her own judgement what should have been the assumptions which educated the EVA modelling exercise. It was not her task to adjudicate upon differences of view between developers. DTZ had recorded at paragraph 3.39 of its report that build costs at the base line in August 2008 were a calculated average taken from a national database, BCIS5, after applying a local index for the Wakefield area. Prospective reduction in build costs was a matter of opinion based on experience. The Inspector was required to make a decision whether DTZ, in performing its modelling exercise, (1) had taken proper account of available evidence and the views of stakeholders generally, and (2) if so, whether the report provided her with a robust and credible evidence base. Having led the meeting on 9 December 2008 and listened to Mr Roebuck's presentation, the Inspector was, in my judgement, entitled to conclude that DTZ had, in formulating its advice, properly considered the available evidence and, accordingly, that the EVA constituted robust and credible evidence.
- I accept that while the process of policy making was not the same as that which attended a planning appeal, the Inspector was required to give in her report intelligible and adequate reasons for her conclusions on the "principal important controversial issues". The detail of contributions by developers to the modelling process would not, in my opinion, constitute principal and important controversial issues unless the Inspector had reason to think that those details were at risk of undermining the whole exercise. Since the meeting of 9 December 2008 had not revealed any such reason the Inspector was not required to deal with it. It was not, in my judgement, necessary for the Inspector to descend to the detail of recording Barratt's written comments on the DTZ's methodology and DTZ's response to those comments; nor was it necessary for her to explain why she accepted DTZ's opinion that the assumptions on which the modelling exercise was based were reasonable. Apart from acknowledging the report, a substantial and impressive piece of work which spoke for itself, it was enough for her to record the process by which the evidence had been gathered and considered in meetings and led her to conclude that the evidence base was sound.
- The inspector identified the several documents which constituted the evidence base for policy CS6 at paragraph 3.3.4 of her report. They included DTZ's report described as the "Strategic Housing Market Assessment Economic Viability Appraisal (2008)". The Inspector noted that her examination had been suspended between August and December 2008 "partly to allow for the completion of the SHMA, including the production of the economic viability studies and to enable public engagement of interested parties". The Inspector wrote at paragraph 3.3.5 of her report:
- The Inspector then examined the "trigger thresholds" which would attract the 30% target under the policy. At paragraphs 3.3.16 to 3.3.21 she applied the 30% target to planning permissions granted in the preceding five years in order to test what increase could have been achieved if the approach to affordable housing had been more vigorous. By that means she would discover what percentage might be delivered assuming that similar market conditions returned. She concluded that in the past several opportunities for affordable housing had been missed because thresholds had been set too low. The EVA demonstrated that lowering the thresholds would make little or no difference to delivery. She concluded that thresholds set at 15 (urban-the national indicative minimum, PPS 3, paragraph 29) and 6 (rural) dwellings respectively were justified by both need and viability during favourable economic conditions. In my view that conclusion is supported by the evidence.
- The Inspector turned to the issue of effectiveness. At paragraphs 3.3.22 to 3.3.30 she recognised the conclusion of the EVA that nothing could be delivered in current market conditions. However, in the conditions prevailing when the Core Strategy was originally submitted, she concluded that schemes developed on the majority of sites above the "trigger thresholds" would have produced 30% affordable housing. A higher target could not, however, be justified. The imposition of an 80/20 split in favour of social housing was likely to be unachievable on past performance and it would hinder housing delivery especially in weak market conditions. Housing need suggested that the target should be higher than 30% but it was likely that the recession would "last some time". Nevertheless, there was no evidence that former strong market conditions would not return at some time during the life of the plan. She concluded that flexibility was required "to accommodate different market conditions". But economic conditions were constantly changing and it was "not possible or appropriate to have varying thresholds and/or lower affordable housing targets within the Policy". The necessary flexibility should be provided by the addition of text which "permits negotiation on a site by site basis, to take account of abnormal costs, economic viability and other requirements associated with the development". To provide a measure of certainty the prefix "at least" should be removed from the existing proposed policy leaving a target of 30%. The 30% target would apply to sites over the qualifying thresholds. In addition, the text should allow for the exceptional possibility that the affordable housing element of a proposal might be met by a commuted sum payment. The Inspector concluded that the policy as amended by her recommendations represented "the most appropriate and flexible policy options taking into account the evidence".
- As I have already suggested there were limited alternative strategies available to the Inspector which introduce the flexibility the policy required. First, by setting trigger thresholds for sites which would attract the 30% target, the Inspector was paying heed to the viability of the target in any market conditions. Second, she had to make a decision whether it was practicable to impose further trigger thresholds and/or percentages which would come into effect during different economic conditions during unknown periods of the economic cycle. The question only has to be stated to reveal the complexity of such an exercise. It does not seem to me that it is possible to bring such mathematical precision to a policy statement of this kind save perhaps in the most stable of conditions. It would require foresight of all relevant economic factors, including the disposition of a variety of developers to bring forward proposals in different market conditions. Even if the policy was to attempt to define the economic environments in which differential percentages would be applied the effect might well be to bring rigidity rather than flexibility to the policy, particularly if it turned out that the economic predictions were wrong. Triggers were discussed in argument with Mr Village. Although he had suggestions to make, such as differential IRR or land values and percentages, he offered no explanation how they would be defined and how they would work in practice. What is critical to the present decision is whether there was evidence before the inspector which demonstrated the possible existence of alternatives which might realistically be preferred to the solution adopted. As PPS 12, paragraph 4.38, observes, "The ability to demonstrate that the plan is the most appropriate when considered against reasonable alternatives delivers confidence in the strategy. It requires the local planning authority to seek out and evaluate reasonable alternatives promoted by themselves and others.... There is no point in inventing alternatives if they are not realistic." [original emphasis]
- In my judgment, discussion of the possibilities simply serves to demonstrate the correctness of Wakefield's submission that it was not appropriate to apply further thresholds or triggers to the policy. None had been proposed either by the EVA or the stakeholders and none would be sufficiently robust in constantly changing conditions to warrant inclusion. As DTZ observed, different developers had different approaches to development planning. It would, in my view, have been a hazardous process to attempt to predict land values which to an extent depend upon developers' willingness to enter the market, or to set a percentage threshold based upon them. In the conditions faced by developers, their willingness to bring forward proposals in different economic conditions was likely to depend on factors personal to their own businesses. Their intentions were likely to change from month to month depending upon a number of economic factors (such as the current value of their own land holdings, the price of land, the availability of money in the market, building costs, mortgage rates, employment rates, the availability of grant), and the particular features of the site under consideration. The Inspector's acceptance of Wakefield's view was, in my judgement, entirely rational. While the Inspector did not descend to the detail of her reasons for accepting Wakefield's submission, there was, in my view, no necessity to do so unless there was some feasible alternative available for consideration.
- Barratt objects to paragraph 7.25 of the supporting text to policy CS6 because it leaves open the possibility that while Wakefield might be driven to conclude during a future application for planning permission that the provision of affordable housing was not viable on a development site of whatever size, they would nevertheless be entitled to seek value equivalent to 30%, or some other proportion, through a commuted sum payment. I do not agree. Paragraph 7.25 is plainly subject to the policy itself. If the effect of the policy is as Mr Village submits it is then paragraph 7.25 must fall with it. If, on the other hand, 30% is a ceiling which applies only to those sites which qualify, and if the percentage figure is negotiable in any event, there would be no question of a commuted sum unless it was agreed that the development site should, under the policy, but for exceptional reasons could not, bear a proportion of affordable housing.
- I accept that policy CS6 is not happily drawn and that it does have the capacity to confuse. It is capable of giving the impression, as Mr Village has submitted, that:
- However, it is my view that the policy does not have the effect claimed. There are two features of its wording which create the uncertainty. The first is the first sentence at paragraph b, "all proposals for additional housing, including those for a mix of uses, above identified size thresholds must make provision for sufficient affordable housing to meet identified needs" [emphasis added]. The second is the final sentence of the policy, "All but the smallest sites should contribute to the provision of affordable housing" [emphasis added].
- As to the first sentence of paragraph b, it is my view that the only sensible reading requires the second sentence to provide its meaning. The reasons I have formed this view are (1) that both the first and second sentences are dealing with sites which are above the trigger thresholds; they are both expressing the Council's policy in respect of those sites and not sites in general; and (2) the second sentence is plainly explaining how the policy expressed in the first is to be delivered. Since the percentage only applies to a limited number of sites in the District the words "to meet" cannot bear their literal interpretation. Read in that way it is clear that the words "to meet identified needs" in fact mean "to contribute towards meeting identified needs". The alternative, as read by Mr Village, makes no sense. They would be, as Mr Village submitted, contradictory, and, in my view, they should be read purposively. As a matter of fact, if the first sentence was literally interpreted it would require a delivery of affordable housing which the Inspector had never approved. Recognising that a figure higher than 30% would be required to fulfil need, the Inspector had rejected it as unviable and recommended a target of 30% only for those sites which were above the trigger thresholds and, even then, subject to site by site negotiation.
- As to the final sentence of the policy, I reach the same view. The governing sentence is that which sets both the 30% target and the trigger thresholds to which it will apply. The whole of the final paragraph beginning "The actual amount of affordable housing...." is subject to the thresholds specified in paragraph b. It is the final paragraph which is intended to bring to the policy the flexibility which the Inspector required. In other words, the 30% target on sites over the trigger thresholds is itself negotiable; the result of negotiation will depend upon "abnormal costs, economic viability and other requirements associated with the development" but "All but the smallest [qualifying] sites should contribute to the provision of affordable housing". The result is that depending upon prevailing conditions the percentage may, as the EVA recommended, lie anywhere between 0% and 30%.
- I agree with Mr Fraser's submission that the policy must be read as a whole in order to understand its meaning and purpose. Read in that way I accept the interpretation he advanced.
- It follows that in my opinion the policy adopted by Wakefield did pay due regard to national policy and the relevant Regional Spatial Strategy. The policy as adopted set a justifiable target for sites above a workable threshold limit. It recognised, however, that the target was achievable only in certain economic conditions. Application of the policy that affordable housing should be provided where possible meant that provision must depend upon the exigencies both of the site and of market conditions at the time the application for permission was made. The policy provided the flexibility required by making the target subject to negotiation. The alternative, namely to provide stepped percentages based upon variable economic conditions, was unworkable and, in my view doomed to failure because of the difficulties of accurate prediction and definition. Having regard to the need for affordable housing this was the best the Inspector could do in unusual and unstable economic times. It is an undeniable consequence that, while national policy wished to provide both improved targets to deliver affordable housing and developers with the requisite degree of certainty for the purposes of planning development, current economic conditions have, at least for the time being, undermined policy. However, I cannot conclude that the solution adopted was irrational.
- Accordingly, the claim is dismissed.
PITCHFORD J:
"If regard is to be had to the development plan for the purpose of any determination to be made under the planning Acts the determination must be made in accordance with the plan unless material considerations indicate otherwise..."
"(3) A person aggrieved by a relevant document may make an application to the High Court on the ground that—
(a) the document is not within the appropriate power;(b) a procedural requirement has not been complied with.(4) But the application must be made not later than the end of the period of six weeks starting with the relevant date.
(5).....
(6) Subsection (7) applies if the High Court is satisfied—
(a) that a relevant document is to any extent outside the appropriate power;(b) that the interests of the applicant have been substantially prejudiced by a failure to comply with a procedural requirement.(7) The High Court may—
(a) quash the relevant document;(b) remit the relevant document to a person or body with a function relating to its preparation, publication, adoption or approval.(7A) If the High Court remits the relevant document under subsection (7)(b) it may give directions as to the action to be taken in relation to the document.
(7B) Directions under subsection (7A) may in particular—
(a) require the relevant document to be treated (generally or for specified purposes)as not having been approved or adopted;(b) require specified steps in the process that has resulted in the approval or adoption of the relevant document to be treated (generally or for specified purposes) as having been taken or as not having been taken;(c) require action to be taken by a person or body with a function relating to the preparation, publication, adoption or approval of the document (whether or not the person or body to which the document is remitted);(d) require action to be taken by one person or body to depend on what action has been taken by another person or body.(7C) The High Court's powers under subsections (7) and (7A) are exercisable in relation to the relevant document—
(a) wholly or in part;(b) generally or as it affects the property of the applicant."
Requirements of Preparation of the Core Strategy
"The purpose of an independent examination is to determine in respect of the development plan document-
(a) whether it satisfies the requirements of sections 19 [national policies and advice, and Regional Spatial Strategy] and 24(1) [Regional Spatial Strategy], regulations under section 17(7) and any regulations under section 36 relating to the preparation of development plan documents;(b) whether it is sound."
The Inspector is required by section 20(7) to make recommendations and to give reasons for those recommendations.
National Policy and Guidance
"In Local Development Documents, Local Planning Authorities should:
– Set an overall (ie plan-wide) target for the amount of affordable housing to be provided. The target should reflect the new definition of affordable housing in this PPS. It should also reflect an assessment of the likely economic viability of land for housing within the area, taking account of risks to delivery and drawing on informed assessments of the likely levels of finance available for affordable housing, including public subsidy and the level of developer contribution that can reasonably be secured. Local Planning Authorities should aim to ensure that provision of affordable housing meets the needs of both current and future occupiers, taking into account information from the Strategic Housing Market Assessment.
– Set separate targets for social-rented and intermediate affordable housing where appropriate. A sufficient supply of intermediate affordable housing can help address the needs of key workers and those seeking to gain a first step on the housing ladder, reduce the call on social-rented housing, free up existing social-rented homes, provide wider choice for households and ensure that sites have a mix of tenures.
– Specify the size and type of affordable housing that, in their judgement, is likely to be needed in particular locations and, where appropriate, on specific sites. This will include considering the findings of the Strategic Housing Market Assessment and any specific requirements, such as the provision of amenity and play space for family housing, and, where relevant, the need to integrate the affordable housing into the existing immediate neighbourhood and wider surrounding area.
– Set out the range of circumstances in which affordable housing will be required. The national indicative minimum site size threshold is 15 dwellings. However, Local Planning Authorities can set lower minimum thresholds where viable and practicable, including in rural areas. This could include setting different proportions of affordable housing to be sought for a series of site-size thresholds over the plan area. Local Planning Authorities will need to undertake an informed assessment of the economic viability of any thresholds and proportions of affordable housing proposed, including their likely impact upon overall levels of housing delivery and creating mixed communities. In particular, as the new definition of affordable housing excludes low cost market housing, in deciding proportions of affordable housing to be sought in
different circumstances, Local Planning Authorities should take account of the need to deliver low cost market housing as part of the overall housing mix.
– Set out the approach to seeking developer contributions to facilitate the provision of affordable housing. In seeking developer contributions, the presumption is that affordable housing will be provided on the application site so that it contributes towards creating a mix of housing. However, where it can be robustly justified, off-site provision or a financial contribution in lieu of on-site provision (of broadly equivalent value) may be accepted as long as the agreed approach contributes to the creation of mixed communities in the local authority area."
"Justification of Core Strategies
4.36 Core strategies must be justifiable: they must be:
Evidence base
4.37 Core strategies have major effects. Social and economic impacts may include altering property values by a considerable amount; or helping access to housing, jobs, accessible local services and open space for many people, especially people with limited resources. There may be impacts on environmental or cultural assets: the core strategy may affect how much the area contributes to mitigating and reducing climate change. It is therefore essential that core strategies are based on thorough evidence. The evidence base should contain two elements:
Participation: evidence of the views of the local community and others who have a stake in the future of the area.
Research/ fact finding: evidence that the choices made by the plan are backed up by the background facts.
Evidence gathered should be proportionate to the job being undertaken by the plan, relevant to the place in question and as up-to-date as practical having regard to what may have changed since the evidence was collected.
Alternatives
4.38 The ability to demonstrate that the plan is the most appropriate when considered against reasonable alternatives delivers confidence in the strategy. It requires the local planning authority to seek out and evaluate reasonable alternatives promoted by themselves and others to ensure that they bring forward those alternatives which they consider the LPA should evaluate as part of the plan-making process. There is no point in inventing alternatives if they are not realistic. Being able to demonstrate that the plan is the most appropriate having gone through an objective process of assessing alternatives will pay dividends in terms of an easier passage for the plan through the examination process. It will assist in the process of evaluating the claims of those who wish to oppose the strategy.....
Effectiveness
4.44 Core strategies must be effective: this means they must be:
Deliverability
4.45 Core Strategies should show how the vision, objectives and strategy for the area will be delivered and by whom, and when. This includes making it clear how infrastructure which is needed to support the strategy will be provided and ensuring that what is in the plan is consistent with other relevant plans and strategies relating to adjoining areas. This evidence must be strong enough to stand up to independent scrutiny. Therefore it should:
Flexibility
4.46 A strategy is unlikely to be effective if it cannot deal with changing circumstances. Core strategies should look over a long time frame – 15 years usually but more if necessary. In the arena of the built and natural environment many issues may change over this time. Plans should be able to show how they will handle contingencies:
it may not always be possible to have maximum certainty about the deliverability of the strategy. In these cases the core strategy should show what alternative strategies have been prepared to handle this uncertainty and what would trigger their use. Authorities should not necessarily rely on a review of the plan as a means of handling uncertainty."
Regional Spatial Strategy
"A The Region needs to increase its provision of affordable housing. Plans, strategies, programmes and investment decisions should ensure the provision of affordable housing to address the needs of local communities.
B LDFs should set targets for the amount of affordable housing to be provided. Provisional estimates of the proportion of new housing that may need to be affordable are as follows:
• Over 40% in North Yorkshire districts and the East Riding of Yorkshire
• 30-40% in Kirklees, Leeds, Wakefield and Sheffield
• Up to 30% in other parts of South and West Yorkshire, Hull, North Lincolnshire and North East Lincolnshire
12.32 Housing has become less affordable in the region in recent years. The delivery of more new homes in line with policy H1 will help to tackle this, but there will also be a need to increase the supply of affordable homes for those that cannot afford to buy or rent on the open market. PPS3 requires LDFs to set targets for the amount of affordable homes needed. As is recognised in the Regional Housing Strategy, there are differences across the region in terms of affordability.... Part B of policy H4 reflects these differences and sets out interim, indicative estimates of the proportion of new housing that may need to be affordable. The figures are set out for districts, but it is likely that there will be considerable variety in what is required within districts. The figures will need to be reviewed in the light of findings from emerging
strategic housing market assessments.
12.33 The planning system has a key role in delivering affordable housing through the allocation of sites for development and the use of planning obligations or planning conditions to ensure appropriate proportions of affordable housing where there is a demonstrable need. In view of the worsening affordability in the region, local authorities should give early priority to providing more affordable housing through the planning system drawing their evidence from Strategic Housing Market Assessments and other more detailed local assessments. Affordable housing provision through the planning system will be augmented by the provision made through schemes that are supported by funding from the Regional Housing
Strategy funding regime. Activities to support the delivery of more affordable homes will be required in the region including training, capacity building and implementation guides. It is important that the delivery of more affordable housing is done in ways that will ensure high quality design, resource efficiency, the right mix of homes and contribute to sustainable, mixed communities."OUTCOMES INDICATORS
Preparation of Wakefield's Core Strategy
"All proposals for additional housing, including those for a mix of uses, above identified size thresholds must make provision for sufficient affordable housing to meet identified needs. At least 30% of new dwellings on developments across the district which meet the thresholds should be dwellings which can be defined as affordable, with a split of approximately 80% social rented and 20% intermediate tenure..."
The Inspector called an exploratory meeting with the interested persons on 20 February 2008. A pre-hearing meeting was held on 2 June 2008. The Inspector was not satisfied that the Core Strategy was sound. Of principal relevance to the current dispute is her conclusion that the Strategy for affordable housing was unsound because there was (1) no completed Strategic Housing Land Availability Assessment (SHLAA), (2) no completed Strategic Housing Market Assessment (SHMA), and (3) no robust economic viability testing to justify Wakefield's affordable housing policy. Meetings were adjourned in August 2008 to enable Wakefield to bring its evidence base up to date (Inspector's report paragraph 3.1.8). The SHLAA and SHMA were completed. DTZ were instructed as experts to carry out an evaluation of economic viability of the Core Strategy for affordable housing. Their work was completed in October 2008.
Affordable Housing
DTZ Report
(1) Sites in high value areas tended to have the capacity to deliver highest levels of affordable housing while remaining profitable. Sites in low value areas experienced the greatest impact on profitability as quotas of affordable housing increased (Executive Summary, report page 1).
(2) Profitability increased as the tenure split was adjusted to include a greater proportion of intermediate tenures but, in general, it did not increase significantly the overall total of affordable housing provided (Executive summary, report page 2).
(3) As at August 2008, the baseline date, it was demonstrated that across the District there was little scope to deliver any development, let alone affordable housing: "The delivery of any housing development is potentially unviable and unlikely due to extended build periods, uncertainty in the financial market and a fall in property values. The impact of the unprecedented market conditions at the baseline date of valuation mean that if the affordable housing policy were formulated based solely on this analysis, an affordable housing requirement of 0% would be deliverable. However, over the course of the Core Strategy and the life of any affordable housing policy it is recommended to expect, having regard to the cyclical nature of the housing market, that the market conditions will vary significantly. WMDC need to ensure that any policy they put in place is flexible enough to deal with these changes in market conditions." (Executive summary, report page 2)
(4) Scenarios created to reflect conditions at the height of the market in early 2007 show that 30% affordable housing could viably be delivered at a 50/50 split between social rented and intermediate tenures. This is the highest level of affordable housing which has been deemed viable in all the modelling work which has been undertaken (Executive summary, report page 2).
(5) Wakefield's original target of 30% affordable housing is ambitious in the current market, and in the short to medium term, until the market recovers. Without social housing grant, schemes will be unviable for standard section 106 sites. The percentage of affordable housing requested by Wakefield over the coming years will have to be flexible (Executive summary, report page 2).
(6) The economic viability assessment ('EVA') demonstrated that a range of between 0% and 30% affordable housing can be delivered across the district depending upon market cycles/variables and affordable housing tenure splits. Using a baseline date of late 2006 when the market was buoyant, assuming construction costs of £90 per square foot for apartments and £80 per square foot for houses, and assuming an IRR of 18%-20% during more stable conditions, an affordable housing rate of 30% was viable. Determining the appropriate affordable housing percentage is difficult in current market conditions. Results showed that any policy put in place by WMDC needs to be flexible and have built in trigger points which enable more affordable housing to be delivered as the market improves. In order to ensure that any future developments are viable and not stifled by an onerous affordable housing requirement, the policy should be flexible and allow sites to be considered on an individual site specific basis having regard to prevailing market conditions. This method will allow both for the maximisation of affordable housing on site and the viability of schemes aiding delivery in the long term. The local authority's statutory requirement is to maximise the number of affordable homes delivered across the district regardless of market conditions. Having a policy which builds in flexibility and allows for the establishment of viability on a scheme by scheme basis is the best way of meeting this requirement. (Report paragraph 7.7, 7.8, 7.9, pages 71, 72).
Preparation for Meeting December 2008
"11.2 Is the recently produced SHMA robust and credible and does it have the support of stakeholders?...
11.4 What evidence is there to support the 30% affordable housing provision threshold and the tenure split thresholds contained in the Policy CS6? Are these RSS and PPS 3 compliant? If not what is the local justification for deviation?...
11.5 What is the evidence to support and justify those thresholds of the Policy? How were they derived and have they been tested for viability?
11.6 Should the policy also contain a trigger site size threshold to enable implementation? If so, what should this be? How would it be justified?
11.7 Is there a need for different thresholds across the district rather than the application of a blanket requirement?
11.8 Should the Policy state the overall/annual requirement/ target for affordable homes?
11.9 To what extent will the thresholds of the Policy address the housing need? What is the evidence to indicate that it will be successful and achievable?
11.10 Should the policy be more flexible to take into account site by site viability considerations?..."
"The results of the economic viability appraisal at the baseline date indicates that in the current market, delivery of housing schemes generally are [sic] unviable and until such time that the property market returns to more typical levels of transactional activity, the delivery of any housing scheme with or without affordable housing is very unlikely...The documents set out various other scenarios by varying factors, including construction costs, revenues, developmental timescales, levels of section 106 payments and it incorporated proposed values paid for affordable housing. The results are presented using a traffic light system and show that that in strong market conditions the Council's proposed 15 dwelling threshold/30 affordable housing and 6 dwelling threshold/30% affordable housing targets could be achieved...
"The council considers that in strong market conditions the affordable housing policy is achievable. It is clear from the economic viability evidence, however, that a degree of flexibility is required within the policy to accommodate different market conditions. As these conditions are continually changing the Council does not consider that it is possible or appropriate to have varying thresholds and affordable housing proportions. Other parts of the evidence base, such as affordable housing need, indicate that the proportions should be higher than 30%, for example. However, given the need to reflect historic rates of affordable housing provision and the results of the economic viability appraisal, Policy CS6 criterion (b) should be amended such that "at least" is deleted from the start of the second sentence....Trigger site thresholds are set out in Policy D7 of the submitted Development Policies document. The Council has put a suggested change to bring those thresholds into Policy CS6."
Meeting 9 December 2008
The Policy Recommended and Adopted
"Policy CS 6
Housing Mix, Affordability & Quality
All proposals for housing, including those affecting the existing housing stock, will be of a high quality and design and contribute to creating mixed and balanced communities. This will be achieved by providing dwellings of the right size, type, affordability and tenure to meet local needs evidenced in relevant studies such as housing needs surveys and strategic housing market assessments.
a. All proposals for housing must provide a broad mix of housing suitable for different household types and will show how they reflect the district's changing household composition in the types of dwelling they provide, taking into account the evidence base from housing needs surveys and strategic housing market assessments. On large strategic sites (60 dwellings or 2 hectares or more) the housing mix should reflect the proportions of households that require market or affordable housing and achieve a mix of house size, tenure and price. For smaller sites, the mix of housing should contribute to the creation of mixed communities having regard to the proportions of households that require market or affordable housing and the existing mix of housing in the locality.
b. All proposals for additional housing, including those for a mix of uses, above identified size thresholds must make provision for sufficient affordable housing to meet identified needs. Unless otherwise agreed with the Council, affordable dwellings should be provided on the application site and 30% of new dwellings on developments across the district which meet the following thresholds should be dwellings which can be defined as affordable:
i. where the proposal is for 15 or more dwellings, or is on a site of 0.5 hectares or more in area, and is within an urban area or local service centre as defined in the settlement hierarchy;
ii. where the proposal is for 6 or more dwellings, or is on a site of 0.2 hectares or more, and is within a village as defined in the settlement hierarchy.
The tenure split will be based on the Council's latest evidence. Secure arrangements will be required to retain the benefits of affordability for initial and subsequent occupiers. Different parts of the district have different affordable housing needs which will be assessed against the latest evidence. The Council will particularly seek to ensure the following needs are met as far as possible:
iii. affordable housing is required across the whole district, particularly in settlements in the Five Towns and settlements to the north and west of Wakefield
iv. there is a particular need for smaller, affordable one and two bedroom dwellings within the Wakefield urban area and in settlements in the South East of the district.
v. there is a particular need for larger 3 bedroom affordable dwellings in settlements in the Five Towns.
vi. there is a particular need to provide a broad range of affordable housing accommodation in settlements to the North and West of Wakefield
c. Actions proposed to improve the quality or make efficient use of the district's housing stock must contribute to sustainable development. Proposals which involve the redevelopment of existing housing must comply with the LDF spatial development strategy, policies and proposals.
The actual amount of affordable housing to be provided is a matter for negotiation at the time of a planning application, having regard to any abnormal costs, economic viability and other requirements associated with the development. All but the smallest sites should contribute to the provision of affordable housing." [controversial provisions italicised]
The Inspector's Reasoning
(1) the composite SHMA documents including the Economic Viability Appraisal prepared by DTZ ('EVA') represented robust and credible evidence of the nature of the strategic housing markets affecting Wakefield, the level of need for affordable housing, the economic viability of the submitted thresholds, and percentages for affordable housing delivery that met the requirements of PPS 3 and PPS 12 (paragraph 3.3.7 Inspector's Report).
(2) The SHMA confirmed a need for affordable housing across the district of about 971 dwellings per annum (paragraph 3.3.12-3.3.13).
(3) The Regional Spatial Strategy provisional target for affordable housing was 30%-40%. Given concerns as to economic viability in the current market a target of 30% was justified (paragraph 3.3.15).
(4) The EVA indicated that the delivery of housing schemes was generally unviable in current market conditions (paragraph 3.3.24).
(5) 30% affordable housing was the most which could reasonably be sustained in times of normal economic conditions, as when the Core Strategy was originally submitted (paragraph 3.3.25).
(6) Tenure split had an impact on viability. In current market conditions it was inappropriate to define a tenure split in the Core Strategy (paragraph 3.3.26, 3.3.27).
(7) There was no evidence which indicated that housing markets would not recover in time (paragraph 3.3.28).
(8) Market conditions are continually changing. It was thus not possible or appropriate to set varying thresholds of affordable housing or lower affordable housing targets (paragraph 3.3.28)
(9) The evidence demonstrated that to meet affordable housing needs of 971 units per year the target set would need to be greater than 30% (paragraph 3.3.28).
(10) To provide the flexibility advised by the EVA the text of the policy should be amended to provide that negotiation should take place with developers on a site by site basis (paragraph 3.3.28).
(11) The affordable housing policies were generally sound, informed by robust and credible evidence and based on a methodology which accorded with national guidance. Key stakeholders had been included in the preparation of policy. The Core Strategy was consistent with national and regional planning policy. Thresholds, targets and general approach represented the most appropriate and flexible policy on the evidence available. If amended as advised they would be recommended by the Inspector. The amendments set the target at 30% for qualifying sites but provided flexibility by making the provision of affordable housing negotiable on each qualifying site depending upon current economic conditions (paragraph 3.3.30).
In reaching these conclusions it is apparent that the Inspector accepted Wakefield's response to the questions posed in the main Matter 11 document, both in writing and at the meeting of stakeholders held on 9 December 2008 (paragraphs 23-25 above).
The Claimant's Case
Mandatory requirement
30% Affordable Housing Target
(i) The policy was not "justified" in that it was not founded on the EVA contrary to PPS 12, paragraph 4.36;
(ii) The EVA was not itself "robust and credible evidence" since it made unwarranted assumptions with which the Inspector failed to deal in her reasons (see paragraph 38 below), contrary to PPS 12, paragraph 4.36;
(iii) The policy was not formulated upon a judgement which of the available alternatives was the most appropriate. The policy was inflexible in that a proposal for affordable housing for all sites was mandatory. No attempt was made to test DTZ's advice that triggers should be included to aid flexibility and none was included in the policy, contrary to PPS 12, paragraphs 4.38 and 4.46;
(iv) The policy was demonstrably ineffective because it could not be delivered, contrary to PPS 12, paragraph 4.44 and 4.45.
"He could perhaps have substituted a provision which made it clear that the appropriate percentage should be considered on each application, and that it should be as high as reasonably possible, or he could have decided to adjourn the examination to receive evidence relating to that issue and to obtain a reliable figure."
Mr Village observed that his clients would much prefer a sustainable percentage target as envisaged by PPS 3, paragraph 29, than an open ended commitment to the best affordable housing provision which could be obtained on a site by site basis, since a percentage target provided a measure of certainty against which the developer could forward plan. On the other hand, an economically unviable percentage target was the worst of all alternatives for the developer. Site by site negotiation was preferable to that.
"...whether it was open to the inspector, on the evidence before him, to find that policy H4 complied with PPS 3 and was consequently "sound" within the meaning of section 20(5)(b) and the Secretary of State's guidance."
It was argued on behalf of the Borough Council that it was for the planning inspector to judge whether a development plan document complied with national planning policy, it being largely a matter of planning judgement. Keene LJ said:
"34....Certainly it is first and foremost a matter for the planning inspector to reach a judgement on whether a particular policy complies with a piece of national policy guidance. But it was expressly conceded before us by [counsel for the Borough Council] that policy H4 did not satisfy the requirements of PPS 3 in respect of an economic viability assessment of the 30 per cent proportion of affordable housing. One only has to read para 29 of PPS 3....to see that such an informed assessment of the viability of any such percentage figure is a central feature of the PPS3 policy on affordable housing. It is not peripheral, optional or cosmetic. It is patently a crucial requirement of the policy. The Appellant's policy H4 did not comply with that and it follows that the inspector erred in finding that H4 complied with PPS 3."
The Inspector's Reasons
Adoption of Policy CS 6
Substantial Prejudice
The First Defendant's Case
Target
The Evidence Base
The Inspector's Report
PPS 3
The Meaning of Policy CS6
(1) When the proposal is for a development of (i) 15 or more dwellings, or is on a site of 0.5 hectares or more in area and is within an urban area or local service centre, or of (ii) 6 or more dwellings, or is on a site of 0.2 hectares or more, and is within a village, all proposals must make provision for sufficient affordable housing towards meeting identified needs;
(2) Unless otherwise agreed with the Council, dwellings should be provided on any qualifying application site of which 30% can be defined as "affordable";
(3) The actual amount of affordable housing to be provided is a matter for negotiation at the time of a planning application, having regard to any abnormal costs, economic viability and other requirements associated with the development;
(4) All but the smallest qualifying sites should contribute towards the provision of suitable housing.
Thus, the 30% target applies only to the minimum qualifying thresholds defined and, even in the case of those sites which qualify, whether any affordable housing is provided, and if so how much affordable housing, will depend upon negotiation between the council and the developer in the market conditions which are current at the time of the application.
Analysis and Conclusion
National Policy and Affordable Housing Targets
"3. The Government believes everyone should have the opportunity of a decent home, which they can afford, within a sustainable mixed community. This means providing a wide choice of housing to meet the needs of the whole community in terms of tenures and price ranges. This should include affordable housing, both social rented and intermediate.
Affordable housing policy is based around three themes:
– providing high quality homes in mixed sustainable communities for those in need;
– widening the opportunities for home ownership;
– offering greater quality, flexibility and choice to those who rent."
The rationale for the policy is expressed as follows:
"6. The increase in house prices relative to incomes in recent years has been marked. At the start of this decade there were areas where house prices were very high, but this was largely confined to London, the South East and a few regional hot spots. By 2005, the position had changed significantly: there are now many areas in all regions where house prices are very high and where as a consequence first time buyers are finding it very difficult to buy a home in the market. This position is particularly marked in rural districts and smaller settlements.
7. This has several consequences:
– There are now far more areas where local authorities need, through the planning system, to be thinking about provision of intermediate market housing;
– High house prices mean that there will be need for more social rented housing, particularly family sized housing; but
– This also brings opportunities. Where housing commands much higher prices there is greater scope for securing affordable housing through developer contributions or "planning obligations". In traditional high value areas, local planning authorities already have strong experience of negotiating planning obligations to deliver both social rented and intermediate market housing. But there is now a need for local authorities in other areas to raise their game and to recognise that such obligations will increasingly be viable on new housing developments.
– More widely, there is increasing acceptance of the need for more housing of all tenures to be provided in many areas."
There were two primary methods of delivery. The first was government funding:
"8. The Government has backed this up with increases in financial provision and has developed a number of grant funded products (including HomeBuy – see Annex D) that aim to meet need in the intermediate market alongside traditional social rented housing, but it cannot subsidise every household currently priced out of the market."
Second was the contribution of the private sector:
"9. Increasingly the market will be able to deliver housing aimed at first time buyers: the Shared Equity Task Force will report shortly on the scope for this, now and in the medium term future. There has been much innovation from both the financial community and developers. But there is also scope for achieving development without grant, by effective use of developer contributions through planning obligations (sometimes known as section 106 agreements). Many local authorities are meeting this challenge well. But research suggests that performance is very varied. Others may be missing opportunities to deliver more by not exploring the options available to them. The Government strongly encourages the best possible use of planning obligations and other tools to improve delivery, and would like to see all local authorities meet the standards of the best performers.
10. Effective use of planning obligations to deliver affordable housing requires good negotiation skills, ambitious but realistic affordable housing targets and thresholds given site viability, funding 'cascade' agreements in case grant is not provided, and use of an agreement that secures standards."
(i) it would fail to reflect the DTZ assessment of economic viability (PPS 3, paragraph 29);
(ii) it would not be justifiable as founded on a robust and credible evidence base; nor would it be the most appropriate strategy when considered against the flexibility required by the evidence base (PPS 12, paragraphs 4.36 and 4.38);
(iii) it would not be effective because it would be neither flexible nor deliverable (PPS 12, paragraphs 4.44, 4.44 and 4.46).
For reasons which I shall explain below I do not consider that policy CS6 does impose the straitjacket contended by the claimant.
The Evidence Base
"It is important to acknowledge, however, that the returns sought by different developers and how they secure this through the whole development process will vary. Developers will take into account a range of factors relating to the risk profile of the scheme, such as scheme size, time of delivery, location and other market factors, in determining what is an acceptable rate of return. As noted, developers may secure their return through a composite process of land assembly, securing permission for development, and the actual development process; and the target rates of return may differ as market conditions change. Such complexities cannot be modelled in a strategic study such as this; this is something which WMDC need to be aware of when analysing the longevity of the proposed strategy."
The Inspector's Conclusions and Reasons
"The reasons for a decision must be intelligible and they must be adequate. They must enable the reader to understand why the matter was decided as it was and what conclusions were reached on the "principal important controversial issues", disclosing how any issue of law or fact were resolved. Reasons can be briefly stated, the degree of particularity required depending entirely on the nature of the issues falling for decision. The reasons must not give rise to a substantial doubt as to whether the decision-maker erred in law, for example by misunderstanding some relevant policy or some other important matter or by failing to reach a rational decision on relevant grounds. But such adverse inferences will not readily be drawn. The reasons need refer only to the main issues in the dispute, not every material consideration. They should enable disappointed developers to assess their prospects of obtaining some alternative development permission, or, as the case may be, their unsuccessful opponents to understand how the policy or approach underlying the grant of permission may impact upon future such applications. Decision letters must be read in a straightforward manner, recognising that are addressed to parties well aware of the issues involved and the arguments advanced. A reasons challenge will only succeed if the party aggrieved can satisfy the court that he has genuinely been substantially prejudiced by the failure to provide an adequately reasoned decision."
"A number of consultees were invited by the Council to comment on the SHMA in June/July 2007. In response changes were made to the draft report. In addition a workshop was held in September 2008 and 70 invitations were sent out to key stakeholders. The session included a presentation on the SHMA methodology and key findings. This was followed by a workshop session to discuss the approach set out and whether participants agreed with the key findings. In addition, consultees were asked to provide comments on the thresholds for delivering affordable housing; with the majority of respondents agreeing that a differential approach to sites in urban and rural areas is appropriate." [emphasis added]
At paragraph 3.3.6:
"I am aware that at the time of drafting the submission Policies and justification texts only raw data on household aspirations was available rather than the full published Housing Market Demand Study 2008. In my opinion, the lack of transparency of some of the original data upon which the assumptions are based is unfortunate and in breach of the justification test requirements. But I am satisfied that this has been rectified and that, albeit retrospectively, gaps in the evidence base and the weakness of public engagement in the early stages of the SHMA production have been properly addressed and rectified." [emphasis added]
In the absence of serious challenge to the "approach" during the workshop session to which the Inspector referred, it is my judgment that she was not required to descend to the detail of stakeholder responses and that her conclusion expressed at paragraph 3.3.7 (paragraph 66 above) was adequately reasoned.
72. The Inspector proceeded to examine the contents of the policy and, in particular, the requirement for "at least" 30% affordable housing. She noted (at paragraph 3.3.13) that the SHMA indicated a gross overall annual shortfall in affordable accommodation of 971 dwellings. The precise figure had been disputed in representations "that have used different assumptions...and it is clear that the data is open to different interpretations. Nevertheless, I am satisfied that there is a significant need for affordable housing within the District that is backed up by the housing waiting list. I conclude that it is reasonable to view the figure of 971 as being a measure of the imbalance between the need and supply of affordable housing, which clearly establishes a justification for delivering additional affordable housing across Wakefield in line with the RSS". The Inspector accepted that past delivery had been poor. That is not surprising. Wakefield revealed at the meeting of 9 December 2008 that it had delivered 41 units per annum in the preceding 5 years. There had been a "significant increase in the need for affordable homes over a 5 year period" (paragraphs 3.3.14 and 3.3.15). The representations which challenged the figure of 971 were considered at the meeting. Mr Bullock of arc4 was asked to justify the conclusions of the Housing Needs Survey. He explained that the survey had been commissioned in 2005. In the meantime a new PPS 3 was issued and it had been necessary to "recast" the evidence. He accepted that the process was not in complete conformity with the guidance and had found it was a common problem amongst Councils. However, he had carried out consultation in which his data had been made available for analysis. The complaint made by Mr Keogh and others was that there was insufficient raw data with which to analyse and verify the Housing Needs Survey. Mr Bullock said he was bound by confidentiality (in interview with correspondents during his research) and he accepted that in future the material would need to be open, but he did not accept that there had been insufficient opportunity for a critique of the evidence. In my view, the Inspector was entitled to reach the conclusion she did. It was not seriously challenged that there was an increased need for affordable housing. What was challenged was the extent of the increased need. The Inspector rightly noted that the RSS had already provisionally set the need at 30%-40% in the Wakefield District. She asked the Council whether it felt constrained by the RSS figure to which it responded that it did not. Her conclusion that on the ground of need a target of 30% was justifiable was clearly rational and supported by the evidence even if there was room for dispute as to the ceiling of that need.
Interpretation of Policy CS6
(i) All but the smallest sites, even those below the trigger thresholds, should make an affordable housing contribution;
(ii) All those sites over the trigger thresholds shall between them meet identified affordable housing needs across the District;
(iii) All proposals for sites over the trigger thresholds shall provide 30% affordable housing unless the Council agrees a lower, or a higher, figure;
(iv) The actual amount of affordable housing will be negotiated on a site by site basis depending upon abnormal costs, economic viability and other requirements.
I have already accepted that if this is what the policy means it is outside the power given by Part II of the 2004 because it would be unviable, unjustified, inappropriate, undeliverable and inflexible, contrary to PPS 3 and PPS 12 and, therefore, section 19.
Compliant with the Part II Power