England and Wales High Court (Administrative Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		27/05/2010

Mr Justice Nicol :

1. This is an application under s.288 of the Town and Country Planning Act 1990 to quash the decision of the Secretary of State dated 6^th October 2009 by which he dismissed the Claimant's appeal for non-determination of the Claimant's application to Forest of Dean District Council ('Forest of Dean'), the Local Planning Authority, for planning permission for a residential development of up to 750 dwellings, a site reserved for a school, ancillary facilities, open space and landscaping in Lydney, Gloucestershire. The Claimant alleges that the Secretary of State and the Inspector, on whose report he relied, acted unlawfully in refusing planning permission. The principal issues concern the treatment of the proportion of affordable housing which the scheme proposed.
2. The site is about 25 hectares and is immediately to the east of the existing settlement of Lydney. It has been referred to throughout as 'Lydney B'. To the south of Lydney B is a second site, Lydney A. A planning application for Lydney A had previously been submitted by the present Claimant. There, too, Forest of Dean failed to determine the application but on 1^st July 2008 the Secretary of State allowed the Claimant's appeal and permission was granted for no more than 320 dwellings, a neighbourhood centre, employment land, a school site, infrastructure, ancillary facilities, open space and landscaping. Importantly for the principal issue in the present case, the Secretary of State accepted that 20% of affordable housing was the maximum provision that was reasonably achievable having regard to the specific site viability assessment.
3. The Lydney B proposal, as originally put forward, suggested that 30% of the housing on the site should be affordable. Because of the credit crunch and its associated impact on general economic conditions, this was later reduced to 13% (increasing to 20% if certain grants could be arranged). The Claimant made clear that it regarded the two Lydney schemes as linked so that if permission for Lydney B was refused it would not proceed with the permission already granted for Lydney A.
4. As I have said, Forest of Dean failed to reach a decision on the Lydney B proposal. On 11^th August 2008 the appeal was recovered by the Secretary of State. On 9^th September 2008 Forest of Dean resolved that, if it had been in a position to determine the application, it would have refused permission because, amongst other reasons, it would have failed to secure a necessary contribution to affordable housing. The hearing of the inquiry was effectively conducted by the Inspector, Ms Susan Holland, in May 2009. She produced her report on 20^th July 2009. She recommended that permission should be refused. The Secretary of State accepted her recommendation in his decision letter of 6^th October 2009.
5. As a result of the Planning and Compulsory Purchase Act 2004 s.38(6) a decision on an application for planning permission must be made in accordance with the relevant development plan unless material considerations indicate otherwise. The parties were agreed that for present purposes the Secretary of State had correctly identified the development plan as comprising a number of documents. First, they included the Regional Spatial Strategy for the South West. This had been published in 2001 when it was known as RPG10. It is convenient to refer to it by its current title of Regional Spatial Strategy but to add its date ('RSS 2001'). This is because the RSS was in the process of revision. This amended form was referred to by the Inspector and the Secretary of State as the 'emerging RSS'. Because it had not at the time of the decision (or, indeed, as at the time of the hearing before me) been published by the Secretary of State, it did not have the status of being part of the development plan, but it is clear that the emerging RSS was a material consideration to which the Secretary of State was entitled to have regard. The second component of the development plan was the Gloucestershire Structure Plan (adopted in 1999). The third element of the development plan was the Forest of Dean District Local Plan for the period 1991 -2011 and which was adopted in November 2005. This was saved by the Secretary of State in October 2008.
6. Among the other material considerations which were taken into account by the Secretary of State and the Inspector were Planning Policy Statement 3, 'Housing' ('PPS3'). Paragraph 8 of PPS 3 makes clear that local planning authorities should have regard to it as a material consideration when making decisions on planning applications after 1^st April 2007.
7. It is convenient to summarise what each of these documents had to say about the inclusion of affordable housing.

i) The RSS 2001 at para 7.16 in HO3 said,

'Local authorities…in their relevant plans, policies and programmes should aim to ensure that sufficient affordable housing is provided in order to meet community needs in both urban and rural areas. This should involve:

- the identification of targets in development plans indicating the levels of affordable housing required in each area; these should be based on local housing needs assessments undertaken to consistent standards across the region, which take into account both need and supply-side consideration….'

ii) The Emerging RSS is far more specific. Paragraph 6.1.8 says:

'Good practice on the use of s.106 mechanisms should be shared. Local Authorities will need to liaise with neighbouring authorities, affordable housing providers and the development industry and be realistic in their expectations of affordable housing delivery through s.106, recognising the danger of stifling overall housing growth through over ambitious requirements. LDD [Local Development Documents] policies should routinely require more than 35% of housing to be affordable leading to at least 10,000 affordable dwellings annually.'

H1 then added:

'Housing Affordability: Within the 29,623 dwellings per annum (at least) required for the region, at least 10,000 affordable homes per annum will be provided in the period to 2026. Provision will be made for at least 35% of all housing developments annually across each Local Authority area and Housing Market Area to be affordable housing. Development Plan Documents should include policies to deliver a substantial increase in the amount of affordable housing in the region and reflect the outcome of joint working including Strategic Housing Market Area Assessments. These should:

Specify targets for and proportions of affordable housing;

….

Help to secure and maintain appropriate supply of affordable housing in the wider context of maintaining an overall five year housing land supply.'

This quotation incorporates changes which the Secretary of State had made in July 2008. These had included raising the percentage of affordable housing to 35% (from 30%) and increasing the number of affordable homes to 10,000 (from 7,500).

iii) The Gloucestershire Structure Plan is more general in its comments on the need to make provision for those unable to compete in the housing market. Reflecting the date of its adoption (1999) it alluded to an earlier version of PPS3.

iv) The Local Plan both addressed the general issue of affordable housing and spoke specifically of plans for East of Lydney. The general comments were in R(F)H.13 which said:

'An element of affordable housing will be sought by negotiation on all housing sites which are of 15 units or more or are larger than 0.5ha in towns and villages of greater than 3000 population or are of 5 units or more or larger than 0.2ha in other locations [elsewhere, this is referred to as the 'threshold']. The provision sought will be related to evidence of local need in the District, including housing need surveys, and to the suitability of the site question. The provision of affordable housing should be on the same site but exceptionally and by agreement with the developer, a commuted sum may be sought equivalent to the appropriate affordable housing share on the site in order that the affordable housing may be provided closer to where the need for it arises.'

In the commentary which follows at paragraph 2.52 the document calculates that the proportion of affordable housing which would be needed was approximately 40%. It said, 'This figure will therefore be used as a starting point in all negotiations for affordable housing, though of course the actual provision will depend on the capabilities of the individual site concerned.'

The plan for Lydney itself appeared at R(F).Lydney 1. This said that 65 hectares of land east of Lydney would be allocated for mixed development including 1250 dwellings with 600 dwellings in the phase due to run from 2003-7 and 650 in the phase from 2008-2011. The development would be required to provide (among other things) for 'An appropriate provision of affordable housing.'

8. I turn to PPS3. Primarily this is directed to Local Planning Authorities in the preparation of their Local Development Documents and Regional Spatial Strategies (see paragraph 6). It is, however, also a material consideration when Local Planning Authorities come to determine planning applications (see paragraphs 8 and 68-74). One reason for this may be if the Local Development Documents have not been reviewed to take account of PPS 3. A second reason is if there is less than 5 years' supply of deliverable sites. The Claimant in this case argued that the second reason was material here: if the Lydney B scheme was to be refused, Lydney A would not go ahead and therefore there would be a shortfall in the supply of deliverable sites. The first reason may also be apposite. Although, as the Claimant pointed out, the local plan was saved by the Secretary of State in 2008 (and so after 1^st April 2007), it had been drafted and adopted in 2005 (and so before PPS3). It is not clear from the Secretary of State's letter of 21^st October 2008 whether the local plan had been reviewed to take account of PPS3, but it is possible that it had not.
9. A recurrent theme of PPS3 is the need to expand, not just the supply of housing generally, but the supply also of affordable housing. The first of the strategic housing policy objectives is (according to paragraph 9)

'To achieve a wide choice of high quality homes, both affordable and market housing, to address the requirements of the community.'

One of the specific outcomes which the planning system should deliver is (see paragraph 10)

'A mix of housing, both market and affordable, particularly in terms of tenure and price, to support a wide variety of households in all areas, both urban and rural.'

Paragraphs 20-24 expand on the achievement of a mix of housing. As part of this, paragraph 22 says that Local Development Documents should set out

'the likely overall proportions of households that require market or affordable housing, for example x% market housing and y% affordable housing.'

Paragraph 24 comments:

'In planning at site level, Local Planning Authorities should ensure that the proposed mix of housing on large strategic sites reflects the proportions of households that require market or affordable housing and achieves a mix of households as well as a mix of tenure and price…'

10. The idea that Local Development Documents should set a target for a proportion of affordable housing is picked up in paragraph 29 which says:

'In Local Development Documents, Local Planning Authorities should:

- Set an overall (i.e. 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 [set out in Annex B]. It should also reflect an assessment of the likely economic viability of land for housing within the area, taking account of risks of 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. …'

11. In identifying suitable locations for housing development, PPS3 says that both an RSS and Local Development Documents should take into account the need to create and maintain or develop mixed communities (see paragraphs 37 and 38). Paragraph 54 is part of the section of PPS3 dealing with Local Development Documents which will identify broad locations and specific sites that will enable continuous delivery of housing over 15 years. It says:

'Drawing on information from the Strategic Housing Land Availability Assessment and or other relevant evidence, Local Planning Authorities should identify sufficient specific deliverable sites to deliver housing in the first five years. To be considered deliverable, sites should, at the point of adoption of the relevant Local Development Document:

Be available – the site is available now.

Be suitable – the site offers a suitable location for development now and would contribute to the creation of sustainable, mixed communities.

Be achievable – there is a reasonable prospect that housing will be delivered on the site within five years.'

12. In this case, the Inspector's report gave a detailed summary of the contentions of the Claimant, the Forest of Dean and other interested parties and objectors. She summarised what she considered to be the outstanding issues between the parties in these terms:

'(i) Whether the proportion of affordable housing proposed in response to viability considerations would result in a development which would comply with the development plan, and with PPS3 in contributing to the creation of sustainable, mixed communities.

(ii) Whether the contributions proposed via the executed planning obligations would provide adequately for education and community infrastructure to serve the development.'

13. The Inspector began at paragraph 206 by observing that whether considered alone or as part of the overall East Lydney site, Lydney B was a major housing site of strategic importance to Forest of Dean. Lydney B represented the principal opportunity to achieve affordable housing in the district under the adopted Local Plan.
14. She said that the Local Plan itself did not contain a specific target, although its accompanying text did say that 40% was to be used as a starting point in negotiations. That percentage derived from housing need measured in 1999, but a Strategic Housing Market Assessment ('SHMA') issued in February 2009 was based on data from 2007/8. That suggested a need for affordable housing even greater than 40%. The emerging RSS said that Local Development Documents should routinely require more than 35% suggesting that a little more than that would not be regarded as unrealistic. The decision on Lydney A was not inconsistent with this: the Secretary of State had said that he would normally expect to see the proportion of affordable housing at 40%, but then gave reasons for departing from the expectation in that case.
15. The Inspector then continued (the numbers in brackets are to earlier paragraphs in the report):

"214. The emerging RSS covers the period to 2026 (14). The proposed development the subject of this appeal is projected to cover a similar period – to 2024 (137). In the context of such a lengthy timespan, the downturn represented by the 'credit crunch', even though severe, can be regarded as a temporary and relatively short-term element. No evidence demonstrates otherwise. Though at the time of writing the RSS remains at Modifications stage, the Secretary of State has proposed no further modifications to RSS policy as a reflection of the 'credit crunch'. RSS policy is intended to provide continuity and certainty over a lengthy period, and it is not to be expected that such policy should itself be hastily amended to reflect sudden and/or temporary changes in circumstances.

215. The requirements of PPS3 ¶29 in relation to the assessment of the likely economic viability of land for housing, and of the likely levels of finance available for affordable housing relate in particular to the formulation of Local Development Documents. The Gloucestershire and Districts Affordable Housing Site Viability Study (25) has been produced in that context. Nevertheless, site viability is a material consideration in applications for the development of specific sites.

216. Initially, in 2008 the Appellant offered 30% affordable housing on the Lydney B site (52), a proportion which reflected the specification of the emerging (pre-Modification) RSS (14). This initially offered proportion could also be seen as having reflected the view then taken of overall site viability including the detailed site development costs which the Appellant now argues are 'abnormal' but which were apparently not so regarded at the earlier application stage. The Council puts forward various ways in which the balance of such costs might be reduced (144-163). The Appellant helpfully acknowledges that differences between the Parties in relation to the costs of plot abnormals are not pivotal to the viability assessments (57).

217. However, in seeking to justify its revised proposed proportion of affordable housing (and its resistance to the levels of other contributions sought by the Council) the Appellant bases (59-66) its calculation of viability on data very precisely located chronologically to emphasise the effects of the 'credit crunch'. The Appellant does so on the grounds of its witness Mr Heal's professional view that valuation assessments are to be carried out using current known costs and values, and that the RICS Valuation Guidelines are clear that 'market conditions prevailing' at the date of the valuation should be used (59). The Appellant's criticism of the Council's evidence on site viability concentrates upon the Council's use of forward projections, which the Appellant regards as fundamentally incorrect in principle.

218. That may be so. In the Godalming decision to which the Appellant drew attention (61), the Inspector (and the Secretary of State) accepted that the viability of the scheme should be determined on the basis of current values. However, that proposal concerned a site of only 1.6 hectares on the edge of the town centre, and on which residential development was to be concentrated in the form of 225 flats, together with commercial floorspace, car parking and a replacement police station. To phase development on so small a site in such a way that affordable housing would be triggered on a notional increase in market value depending on the timing and completion of the development (IR ¶402) would be impractical, and so it is not surprising that the Inspector considered that the wait for a time when values could possibly support the inclusion of affordable housing could be long and uncertain. That he did so was not wholly dependent upon his acceptance of the 'current values' basis of valuation, but encompassed wider circumstances. The Godalming site contained a former gas works and so its development involved the remediation costs of dealing with contaminated land, which represented a particular benefit to be brought by the scheme.

219. Nothing in PPS3 or elsewhere in national or regional policy guidance concerning site viability suggests that viability considerations attributable to the general economic situation (as opposed to specific characteristics of the sites themselves, as in the Goldalming case) should be used to justify significant reduction in the proportion of affordable housing to be delivered by a site above the threshold.

220. In the current case, the Appellant's own evidence shows that the development of the Lydney B site is scheduled to take place over many years (137). The effect of omitting forward projections is therefore to exclude entirely any future benefit to the balance sheet of an upturn in the housing market and in receipts. Over such a period of time it is possible, not only that receipts would be improved by an upturn, but that the need for affordable housing might itself increase. The Appellant seeks to lengthen to 10 years (and if that is not accepted, to 5 years) the period within which application may be made for the determination of reserved matters (197). This would enable a delay to the start of development on Lydney B (whatever may occur on Lydney A) and thus would lengthen the overall period of development on this extensive site, increasing the probability that development would coincide with an upturn in the housing market. Over such a long period it is likely that viability data would change significantly in comparison with the current circumstances.

221. Development of the Lydney A site was allowed on appeal with a 20% proportion of affordable housing in recognition of its heavy infrastructure costs which contribute to the overall cost of Lydney site (Lydney A+B) (51). The residential element of the Lydney A scheme was limited by condition to no more than 320 dwellings: so at the 20% already permitted the development would yield 64 affordable dwellings. At Lydney B, 750 dwellings, more than double that number, are proposed: so that, at the 13% envisaged by the Appellant, Lydney B would yield 97 affordable dwellings, less than a third of the number sought by the Council. And there would be no further opportunity to achieve any more affordable dwellings in significant numbers through the development of sites allocated in the development plan, and certainly no opportunity to recoup elsewhere within the District, within the Plan period, the numbers of affordable units that would be forfeited on the East of Lydney sites.

222. The evidence of the SHMA is that affordable housing is needed, both as a proportion of overall dwellings and in terms of numbers, in far greater quantity than could be achieved in any event (24). In these circumstances, the degree to which the current appeal proposal falls short of the proportion sought by the Council represents a highly significant disadvantage.

223. It is clear, from the paragraph read as a whole, that PPS3 ¶9 intends it to be understood that affordable housing (which it mentions both as part of the key housing policy goal to which it refers, and in 3 of the 4 subsequent bullet-points) represents an essential element of the sustainable, inclusive, mixed communities to which it also refers under the heading of strategic housing policy objectives. It is also clear that when PPS3 ¶9 defines suitable as that the site…would contribute to the creation of sustainable, mixed communities, the term sustainable, mixed communities should be understood in the same sense in which it is used in ¶9.

224. In requiring local planning authorities, in setting targets for affordable housing in their Local Development Documents, to draw 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, PPS3 ¶29 implicitly recognises that there may be circumstances in which, for valid reasons, developer contributions may not be capable of supporting the desired proportion of affordable housing. But in the current case, the financial considerations limiting the viability of the appeal site are essentially temporary.

225. The evidence is that the appeal site can be developed only by forfeiting a significant proportion of the affordable housing which has been justified in effect at all levels of policy and via a recent SHMA, leaving the overall need defined to a large extent unsatisfied, and with no opportunity to recoup affordable housing from another allocated site. I consider that if developed according to the current proposal the site would not contribute adequately to the creation of sustainable, inclusive mixed communities in the terms of PPS3; would not be suitable in those terms; and in those circumstances would not comply with the development plan, or with PPS3.

Housing Land Availability

226. The appeal proposal is for a very substantial housing development. Taken together with the 'Lydney A' site, which has already received planning permission but which according to the evidence is essentially linked to the current site and will not be developed in isolation from it (81, 83), the proposal represents by far the largest housing allocation in the Local Plan (81, 108). The Appellant's calculation of housing land availability depends upon the inclusion of an element of a Structure Plan requirement which was set at a high aspirational level. However, in the context of the housing figures set out in the emerging RSS, the requirement is substantially less. Notwithstanding the lesser requirement, it would not be possible to achieve a 5-year housing land supply without the inclusion of an element, assumed by the Council at 150, from the Lydney A site (130). The Appellant regards development of the Lydney A site as dependant upon a planning permission for the Lydney B site on the terms set out in the current appeal proposal (53, 81). To that extent, therefore, rejection for the current proposal would mean a deficiency in the housing land supply, though by a relatively small amount. On balance, the resulting deficiency in the housing land supply is not a factor of decisive weight. "

16. I turn to the Claimant's Grounds of Challenge.

Ground 1: Viability attributable to general economic situation

17. The Claimant submits that the Inspector erred in law by disregarding its arguments that the general economic situation following the credit crunch made a greater proportion of affordable housing than the scheme proposed unviable. The Claimant submits that she was only prepared to take into account specific characteristics of the site that impinged on viability. The Secretary of State accepts that if this is what the Inspector had done, there might be an arguable error of law since general economic conditions are, or may be, a material consideration. However, he submits that on a fair reading of the report, the Inspector has not fallen into this error.
18. The key to this part of the Claimant's case is paragraph 219. I agree that, taken on its own, this might indeed suggest that the Inspector dismissed the relevance of general economic considerations. However, it is axiomatic that an Inspector's report must be read as a whole and in a fair-minded manner. Read in that way, in my judgment the Inspector was saying that the current economic conditions carried little weight in view of the lengthy time scale over which the Lydney B project was planned and the reasonable expectation wasthat current economic conditions were likely to be temporary. I agree with Mr Morshead for the Secretary of State that if she did indeed believe that general economic considerations were of no account at all, there would have been no point in her emphasising their temporary character which she did in paragraphs 214, 217, 220 and 224. Furthermore, in paragraph 215 she expressly reminded herself that PPS3 paragraph 29 required an assessment to be made of (among other things) 'the likely economic viability of land for housing and of the likely levels of finance available for affordable housing.' She acknowledged that the figures prepared by the Claimant had been based on current known costs and market conditions prevailing at the present time and that the Council's efforts to use forward projections was wrong in principle (see paragraph 217 and the first sentence of paragraph 218). In the remainder of paragraph 218 she considered the decision of the Inspector and Secretary of State in a decision called Godalming. She did not say she disagreed with that case's use of general economic considerations in principle. Rather she distinguished the facts of that case because the scale of the Godalming project was much smaller and it was not realistic then to wait for a change in market conditions. A second feature of Godalming was that there were site specific remediation costs which had a bearing on the proportion of affordable housing that could properly be included. In paragraph 224 the Inspector returns to PPS3 paragraph 29. She acknowledges in terms that 'there may be circumstances in which, for valid reasons, developer contributions may not be capable of supporting the desired proportion of affordable housing.' She then repeats 'But in the current case, the financial considerations limiting the viability of the appeal site are essentially temporary.'
19. Accordingly, I do not accept the premise of the Claimant's first ground of challenge. The Inspector did not, on a fair reading of her report as a whole, fall into the error which the Claimant attributes to her.

Ground 2: Lack of viability based on the temporary character of the economic considerations

20. The Claimant submits that there was no evidence on which the Inspector could conclude that current conditions were just temporary. Furthermore, if economic conditions did improve this was likely to lead to an increase in costs of the development as well as increase in prices. It did not, therefore, follow that any change in general economic conditions would lead to a higher proportion of affordable housing being more viable. It was all speculative. Such evidence as there was indicated further decline. Mr Heal, an expert witness on behalf of the Claimant at the Inquiry, had said in his position statement in April 2009 that the latest Treasury forecasts expected a further 10% decline in house prices in 2009. Additionally, the Claimant's evidence to the Inquiry had been that unless conditions would improve somewhat it would not be able to complete the project because the returns would be too low. In other words, there had to be some improvement before the project was viable even with 13% affordable housing. There would not just have to be some but a considerably greater improvement before a higher proportion would be viable. There was no evidence that improvement of the necessary scale would take place. As Pitchford J. had said in Barratt Developments plc v City of Wakefield MDC [2009] EWHC 3208 (Admin) at [60] while it might be reasonable to expect the market to follow its usual cyclical pattern, uncertainty lay in the period of time it would take for the market to recover and the degree to which it would recover.
21. I do not agree that there was any legal error on the Inspector's part in this regard. Of course there is uncertainty about trying to predict what would happen to costs or prices in the future. That was particularly so in relation to a project which was not expected to be completed until 2024 and where the developer was asking for up to 10 years to resolve reserved matters. However, a major factor which influenced the Inspector (as, in my judgment, it was entitled to do) was the special significance of this site. As the Inspector noted at the very beginning of her analysis of the arguments about affordable housing at paragraph 206, 'the appeal site represents the principal opportunity to achieve affordable housing in the District under the adopted plan.' At the end of this section of the report at paragraph 225 she commented that if permission was given for this development it would leave 'the overall need [for affordable housing] to a large extent unsatisfied, and with no opportunity to recoup affordable housing from another allocated site.' Given the importance of the site, and given the extended period over which the proposed development would take place, in my judgment the Inspector was not obliged to recommend approval in the absence of firm evidence as to when economic recovery would take place and its extent. I consider that she was entitled to decide that the application should be refused because of the possibility that development with a higher proportion of affordable housing might be viable in the future. This is not a case of allowing speculation to prevail over an absence of evidence. Rather it is a case of treating inevitable uncertainty as a material consideration whose weight had to be judged and assessed by the primary decision-maker.
22. I add by way of footnote, that such evidence as there was about future trends was not all pessimistic. In her summary of the Forest of Dean's case at paragraph 140, the Inspector recorded that the Treasury forecast (to which the Claimant had referred) stated that it expected house prices to recover and grow at rates above national earnings once normal lending resumed. Mr Morshead was also entitled to observe that the Claimant's own assessment must have been that there would be a recovery because it was looking for a return above that which would be yielded on the projection of current costs and house sale prices. On the other hand, it is not proper for me to take into account the information in Mr Morshead's skeleton as to what had actually happened to house prices since the Secretary of State's decision. I must judge the lawfulness of that decision by reference to the information and evidence that was then available to him, as Mr Morshead accepted in the course of his oral submissions.

Ground 3: The Inspector's treatment of the Godalming decision

23. To an extent this ground of challenge is an extension of Ground 1. The Claimant argues that general economic conditions were taken into account in Godalming; the Inspector's basis for distinguishing Godalming were unsound; therefore, Godalming supports the Claimant's argument that the Inspector in this case was wrong to treat general economic considerations as immaterial.
24. I have already given my reasons for rejecting Ground 1. Since I consider that the Claimant's premise is flawed and the Inspector did not treat general economic considerations as immaterial, Godalming does not assist it. I have summarised the reasons which the Inspector gave as to why she did not consider that Godalming required her to come to a different conclusion. In my judgment they were rational and sufficient.

Ground 4: Flawed approach to SHMA percentage levels

25. The Claimant argues that the SHMA relied on a viability study which was based on housing market values from the third quarter 2007 and which was at the height of the housing market. Conditions had changed fundamentally since then and that rendered the SHMA of very little value. Yet the Inspector failed to take into account the limitations within the viability study or the dramatic changes in market conditions.
26. I do not accept that the Inspector erred in the way suggested. The Inspector referred to the SHMA as evidence of the need for affordable housing greater than that the Council's starting point of 40% (see paragraph 209). The Inspector considered but rejected the argument that the current reduction in rental levels and mortgage interest rates would reduce housing need (see paragraph 213 of her report). There is no criticism of that part of her reasoning. In any case the Inspector looked at the SHMA in the light of more up-to-date information. She observed that the evidence from SHMA was also consistent with the emerging RSS. Since the emerging RSS had last been amended in July 2008, it followed at least the beginning of the credit crunch and changed market conditions. The Inspector also commented that, when the Secretary of State approved Lydney A in July 2008, he still started from his 'expected' proportion of 40% affordable housing (although, as I have noted, he explained why that could be reduced in the context of the particular case). I find no legal error in this reasoning. The remainder of the points raised by the Claimant under this ground are a refrain of ground 2 which I have already addressed.

Ground 5: misinterpretation of 'suitability' for the purposes of PPS3

27. It will be recalled that the Inspector at paragraph 225 said,

'I consider that if developed according to the current proposal the site would not contribute adequately to the creation of sustainable, inclusive mixed communities in the terms of PPS3; would not be suitable in those terms; and in those circumstances would not comply with the development plan or with PPS3.' [the Inspector's emphasis]

The Secretary of State agreed with this conclusion at paragraph 15 of the Decision Letter.

28. The Claimant makes a number of attacks on this conclusion.

i) It argues that the Inspector and Secretary of State were wrong to treat a 35-40% affordable housing proportion as a given condition or a requirement that was in some sense being forfeited under the proposed scheme. PPS3 and the development plans make clear that if that proportion is not viable, the failure to achieve it should be no bar to development and, accordingly, it is a mistake to speak in terms of 'forfeiture' at all. On the contrary, that concept will stand in the way of delivering viable market housing.

ii) Paragraph 54 focuses on the deliverability of sites for housing. In this context 'suitability' is a function of the site's location. A site might, for instance, be unsuitable if it was distant from public transport links. This would lead to a dependence on car transport which would be harmful in terms of sustainability. Because this would also be disadvantageous for lower income residents it would also mean that the site would be unsuitable for affordable housing. But, it is only in this limited sense that the concept of 'suitability' has any link to affordable housing. The concept did not extend, in the way that the Inspector and Secretary of State applied it, to the financial viability of a development with a particular proportion of affordable housing. That was to judge the 'suitability' of the scheme not the site.

iii) 'Suitability' of a site cannot depend on the actual quantum or proportion of affordable housing that can be delivered. This quantum or proportion depends on market conditions and these will vary over time. If account was taken of deliverable quantum or proportion of affordable housing, the consequence would be that a site previously considered suitable could become 'unsuitable' because of a shift in market conditions although the need generally for housing was unaltered.

iv) This approach to 'suitability' is contrary to that which was adopted in Lydney A where the site was considered to be suitable for housing although the proportion of affordable housing was only 20%. A similar point could be made in relation to Godalming and no doubt other locations.

v) This interpretation of the meaning of 'suitable' cannot be correct. It has perverse results. The need for housing remains the same, but no other site has been identified to fulfil it. It is absurd that no housing at all can be provided on this site whilst the housing market remains depressed even though the general demand for housing remains as strong as ever.

vi) The Inspector and Secretary of State have failed to have regard to advice from the Chief Planner of the Department of Communities and Local Government to Chief Planning Officers on 30^th April 2009 and 12^th May 2009 as to the effect of the credit crunch in relation to the viability of affordable housing and the extension of time periods for planning permission.

29. I am not persuaded by these arguments.

i) I do not accept that the Inspector and Secretary of State treated 35-40% as some kind of inflexible requirement. The Secretary of State's decision to give planning approval for Lydney A even though it could support only 20% affordable housing is an example of where that was not so. However, the Inspector gave clear reasons as to why she considered that the projected need for affordable housing remained at a high level and was likely to remain unfulfilled unless at least 35% of new developments were for affordable housing. Of course either site specific or general economic considerations could mean that a percentage of that kind was not attainable for a particular site, but as was obvious, if that was allowed, it would leave a shortfall in the provision of affordable housing which would either need to be met elsewhere or go unaddressed. Because of the importance of the Lydney B site and the lack of other alternatives, the Inspector clearly concluded that the second outcome would have been the more likely. The Inspector was aware that, if permission was refused for Lydney B, then Lydney A would not go ahead and this would mean that neither the market housing nor such affordable housing as was proposed on the two sites would be built. But weighing this disadvantage against the advantage of preserving the possibility of a higher proportion of affordable housing on the Lydney B site at some point in the future called for an exercise of planning judgment. That is the quintessential task of the primary decision maker – the Secretary of State. It is not the task of this Court on an application under s.288 to second guess that judgment.

ii) The concept of 'suitability' in paragraph 54 of PPS3 expressly includes contributing to 'the creation of sustainable, mixed communities.' It is quite clear throughout PPS3 that 'mixed communities' includes the idea of an appropriate mix of affordable and market housing. I do not accept, as the Claimant contends, that this would be some aberrant interpretation of the expression 'suitable' in the Planning Policy Statement. On the contrary, it appears to me to be harmonious with the Statement's strategic housing objectives and the specific outcomes which it seeks to achieve. In the context of PPS3, the meaning given to 'suitable' by the Inspector and Secretary of State is its natural and ordinary one. I would, alternatively, find that it is a meaning which the word in that context is capable of bearing: see R v Derbyshire County Council ex parte Woods [1997] JPL 958, 967 treated as still the proper approach by Robin Purchas QC sitting as a Deputy High Court Judge in R (White Horse District Council) v Secretary of State for Communities and Local Government [2009] EWHC 1847 (Admin) [23] and R (Royal Borough of Kensington and Chelsea) v Secretary of State for Communities and Local Government [2009] EWHC 1854 (Admin) at [12].

iii) Of course, what is an appropriate proportion will depend on many factors. Starting points are to be found in the explanatory text to the Local Development Plan and the emerging RSS. As the Inspector noted, this was the approach of the Secretary of State in dealing with the Lydney A application. He would normally have expected there to be 40% affordable housing for such a site, but for the reasons which he gave and to which the present Inspector briefly referred, he was prepared to give his approval even though the proportion was less. For those reasons, the site was 'suitable' because (among other reasons) it contributed to the creation of mixed communities and in a proportion which was justified even though it was less than the expected starting point. Nor is there anything inconsistent with the Inspector's interpretation of the word 'suitable' in the Godalming decision. There were reasons which were considered valid in that case as to why a lesser proportion of affordable housing should be acceptable. Because there were such reasons, the site was 'suitable' notwithstanding the lesser proportion of affordable housing.

iv) The interpretation of 'suitable' by the Inspector did lead her to conclude that the site as proposed to be developed by the Claimant was not suitable, even though for a long time the whole of the Lydney site had been considered suitable for housing. There is nothing absurd about this. It is simply a reflection of the fact that PPS3 seeks to achieve mixed communities as well as more housing. Where prevailing general economic conditions mean both cannot be achieved, a planning judgment has to be made as to which should prevail. Because general economic conditions can change, this in turn inevitably means that the outcome of that judgment may be different from one time as opposed to another.

v) Although paragraph 54 does use the word 'site' rather than 'scheme' that may be a feature of its primary role in the formulation of local development plans. The distinction is artificial, however, when paragraph 54 is considered in the context of a specific planning application. In that context, the Local Planning Authority or the Secretary of State must necessarily consider the site as it is proposed to be developed by the applicant if permission is granted.

vi) In any case, as Mr Village QC for the Claimant accepted, paragraph 71 of PPS3 clearly applied in this case. That says that planning authorities should 'consider favourably planning applications for housing, having regard to the policies in this PPS including the considerations in paragraph 69.' Paragraph 69 in turn directs LPAs to have regard to (among other things):

'- Ensuring developments achieve a good mix of housing reflecting the accommodation requirements of specific groups, in particular, families and older people…

Ensuring the proposed development is in line with planning for housing objectives…and does not undermine wider policy objectives e.g. addressing housing market renewal issues.'

I have already noted that one of the strategic housing policy objectives in PPS3 is a wide choice of high quality homes, both affordable and market housing' - see PPS3 paragraph 9. Thus, even if I am wrong about the interpretation of the word 'suitable' in paragraph 54, the decision would not fall to be quashed. The Inspector and Secretary of State were anyway obliged to have regard to the housing objectives in PPS3 and this is what they did.

vii) With great respect to Mr Village I did not see how the advice to Chief Planning Officers in April and May 2009 advanced his case.

Ground 6: Housing Land Availability

30. The Inspector recognised in paragraph 226, as I have said, that if permission for Lydney B was refused, the development of Lydney A would not go ahead either. This, in turn, would lead to a deficiency in the contribution to housing supply which Lydney A was expected to make. The Inspector observed that the Local Planning Authority assumed that that this was 150 completions over a 5 year period. The Inspector recognised that this would be an adverse consequence of refusing planning permission for Lydney B, but she thought that the deficiency was a relatively small amount and not a factor of decisive weight.
31. The Claimant contends that the Inspector failed to take into account other advantages of the Lydney A development which would also be lost if that scheme did not go ahead. The two schemes together would have made a very positive contribution to regeneration and employment. Alternatively, the Inspector gave no reasons as to why these positive benefits of the development did not outweigh any shortfall in the provision of affordable housing.
32. I do not accept that the Inspector ignored these matters. The allusion in paragraph 226 to the link between the two Lydney developments cross refers to the earlier paragraph 81 of her Report. This is part of her summary of the case for the Claimant and in terms says:

'A refusal on the grounds that [Lydney B] site should not for the time being be regarded as suitable would inevitably prevent the delivery of any houses or employment land and other benefits from the largest development site in the District.' [my emphasis].

Paragraph 82 (which the Inspector must also have had in mind) went on,

'Any refusal of planning permission would undoubtedly contribute to delays in achieving the regeneration objectives, both for housing and employment in the Forest of Dean District.'

33. Nor do I regard the Inspector's reasons as deficient. She focussed on housing because that appears to have been the principal matter of debate between the parties. I find that she did not ignore the regeneration and employment benefits of the two schemes. The plain inference is that these advantages were not of decisive weight either.

Ground 7: s.106 contributions and obligations

34. At paragraphs 227- 234 of her report, the Inspector considered the issues arising from proposed s.106 obligations (other than affordable housing). She noted that the development of 750 dwellings in the appeal site would be likely to add some 1,725 people to the population of Lydney. At paragraph 227 the Inspector observed that apart from a contribution to Lydney library, the sole contribution that the proposal would make to community facilities was £60,000 in respect of a Youth Centre, although in the course of the inquiry, the Claimant offered to contribute a further £125,000 towards the provision of additional playing pitches. The Inspector considered that these proposals were inadequate.
35. The Claimant submits that if the proposed sums or contributions were deemed to be inadequate, the Inspector and Secretary of State were required to consider whether that inadequacy was justifiable given the lack of viability for greater contributions. I reject this criticism. The Claimant's case to the Inspector was that the Local Planning Authority had failed to justify the need for additional contributions in terms of any extra burden being created by the proposed development. It did not, so far as I can see from the summary of its submissions at paragraphs 90-98 of the Report, argue that if the Inspector found that there were such further costs, they should be borne by others because the development would not be viable if the Claimant had to pay for them. Nor, so far as I can see, did the Claimant make the supplementary argument relied upon in this ground that any inadequacy in s.106 sums or contributions could be compensated by a consequential reduction in affordable housing. I have, in any case, already addressed the Claimant's criticisms of the Inspector's analysis of the affordable housing issue.

Ground 8: s.106 contributions for community facilities

36. In essence, the Claimant argues that the Local Planning Authority had failed to quantify the additional demands which would be made by the families who occupied the housing which would be built as part of Lydney B. The LPA could not, therefore, show that any further s.106 contributions over and above those offered by the Claimant would satisfy the criteria in Annex B paragraph B5 of Circular 5/2005. This says:

'The Secretary of State's policy requires, amongst other factors, that planning obligations are only sought where they meet all of the following tests. The rest of the Guidance in this Circular should be read in the context of these tests, which must be met by all local planning authorities in seeking planning obligations.

(i) relevant to planning;

(ii) necessary to make the proposed development acceptable in planning terms;

(iii) directly related to proposed development;

(iv) fairly and reasonably related in scale and kind to the proposed development; and

(v) reasonable in all other aspects.'

37. Paragraph B15 of the same Annex to the same Circular comments,

'if a proposed development would give rise to the need for additional or expanded community infrastructure, for example, a new school classroom, which is necessary in planning terms and not provided for in an application, it might be acceptable for contributions to be sought towards additional provision through a planning obligation.'

The Inspector rejected at paragraph 217 the Claimant's argument that this was confined to circumstances where there was the need for some physical enlargement. She acknowledged that the Business Plan put forward by the Local Planning Authority might include items of maintenance and other current expenditure and she accepted that, in accordance with paragraph B19 of the Annex to the Circular, these should be borne by the LPA rather than the developer. The LPA had not specifically addressed the extra demands which would be created by Lydney B over and above those which would be generated by Lydney A (for which, of course, planning permission had already been granted). However, she concluded that this was not determinative.

38. In my judgment, the Inspector was entitled to decide that the additional burden on the community infrastructure from the creation of 750 dwellings for some 1,7250 people was significantly greater than the proposed £60,000. It may be that the evidence did not enable her to say precisely how much greater. In my judgment that does not matter. Her task was to report to the Secretary of State on the application which had been made. The Secretary of State's task was to decide that application. Both carried out those tasks and gave their reasons why the application was unsuccessful. There is no legal deficiency because the evidence did not allow them (on this particular matter) to go on and say what exactly would have been necessary for this objection to have been overcome.
39. The Claimant referred to what Lord Bridge had said in Save Britain's Heritage v Number 1 Poultry Ltd [1991] 1 WLR 153 at 157,

'Secondly, a developer whose application for permission is refused may be substantially prejudiced where the planning considerations on which the decision is based are not explained sufficiently clearly to enable him reasonably to assess the prospects of succeeding in an application for some alternative development.'

He also referred to the comment of Lord Brown in South Bucks DC v Porter (No.2) [2004] 1 WLR 1953 at [36] that,

'[The reasons] should enable disappointed developers to assess their prospects of obtaining some alternative development permission…'

In my judgment, these passages do not assist the Claimant. The primary function of reasons is to explain the decision which the decision maker has made. The Inspector's report and the Secretary of State's letter did that. It was clear that the principal reason why this application had failed (and the principal matter which would need to be addressed in any future application) was the insufficient provision for affordable housing. The matters which I am considering in this ground of challenge (and to some extent in grounds 7 and 9) were secondary. But in any case, the reasoning of the Inspector and the Secretary of State made it clear to the Claimant that some future application would only be likely to be successful if greater provision was made for these matters. I do not accept that the remarks of Lord Bridge or Lord Brown would require me to quash the decision of the Secretary of State simply because the precise amount of additional provision that would be required could not be spelt out.

Ground 9: contribution to open space

40. As I have said, by the end of the Inquiry the Claimant had offered £125,000 towards the provision of additional playing pitches. The Local Planning Authority considered that the Claimant should go further and contribute to the cost of changing rooms. The Inspector agreed that this would be reasonable. More players would need more changing facilities. The evidence on the exact cost of changing rooms was conflicting, but no changing room could be provided out of the £125,000 offered by the Claimant.
41. The Claimant's criticism under this head is similar to that under Ground 8: this conclusion was not open to the Inspector because of the imprecision as to how much extra cost would be involved. Again, I disagree. The Claimant's offer was based on the costs for 2 ½ playing pitches (see paragraphs 35 and 95). Its case was there was no requirement to provide changing rooms. In my judgment the Inspector was entitled to conclude that some extra changing room facility was required and (whatever the precise figures) the Claimant's offer did not allow for that. She dealt with the issue and gave adequate reasons for her conclusion.

Ground 10: bonding

42. The county council had sought a condition (if planning permission was to be granted) that a financial bond should be given to secure the proposed unilateral undertakings to contribute to extra costs of education and highways. The Claimant resisted this. The Inspector agreed with the Local Planning Authority and considered that a bond would have been necessary. She commented that the scale of the present development linked to Lydney A required very substantial infrastructure, including a school. This was to be developed over a lengthy period of 15 years. Another planning decision (Bishops Cleeve) had been cited to her by the Claimant. But she observed that the development in that case had been smaller (450 dwellings), was on a smaller site and did not require the provision of a school. She noted as well that the Claimant was not a house builder, but a development company which operated on the basis of providing serviced sites for development by others and would progressively dispose of its interest over time. Bishops Cleeve had involved Taylor Wimpey, which was one of the largest house-building companies in the UK and which did not intend to dispose of its interest. The Inspector recognised that the legislation provided a means for enforcing s.106 obligations, but

'the delays and difficulties of enforcement in the context of the potential commitment of the county council in the event of financial failure on the part of a developer together increase the risk of substantial and sudden demand upon the public budget if the development is to be satisfactorily and sustainably completed.' (see paragraphs 221-2).

43. The Claimant argues that this condition was unlawful. It is said to be contrary to the approach adopted in other cases where the absence of bonding was found to be acceptable. The difference in size and time scale of the present project from that at Bishop Cleeve did not justify requiring a bond in this case when none had been required there. In any case, the Inspector gave inadequate reasons for her view that the usual statutory means of enforcing a s.106 obligation were insufficient.
44. In my judgment the Inspector gave clear and adequate reasons for her view that a bond should be required if planning permission was to be granted. She was entitled to conclude that the scale of the present undertaking and the length of time involved were such that it was desirable to supplement the statutory means of enforcement with a bond. It is not, and could not be, argued that a bond can never be appropriate. Whether it should be required in a particular case is another aspect of the planning judgment which is the responsibility of the Secretary of State as the primary decision maker. It is not argued that the 'approach' of the Secretary of State in other cases was such that the principle of legitimate expectation constrained the use of a bond in this case. Consistency in administrative decision making is, of course, a desirable aim, but it is trite to observe that the factual circumstances of two cases will often differ. The Inspector gave her reasons for deciding that a bond was necessary in this case when her colleague had not thought that one should be required in Bishops Cleeve. I do not agree that the differences she pointed out were legally irrelevant. The weight to be given to them was a matter for her.

Ground 11: the attribution of motive to the Claimant

45. Mr Morshead's skeleton argument began in this way:

'Can a developer turn development on a site which fails PPS3's requirement of 'suitability' (see PPS3 para 54) into one which passes that test, simply by timing his application to coincide with a recession? The Claimant's argument understandably attempts to mask that question, but it is the central and, it is submitted, only real issue.'

46. Mr Village read this as meaning that the Secretary of State had refused planning permission in part at least because the Claimant had deliberately timed its planning application to coincide with the recession and with the intention of thereby minimising its obligation to provide affordable housing. Mr Village applied to add as Ground 11 the following:

'The Secretary of State took into account an irrelevant consideration, namely that he assumed that the Claimant timed its planning application to coincide with a recession in order to turn development which it is alleged failed the alleged requirement of 'suitability' in PPS3 para 54 into one which passed that alleged test. Alternatively, in basing his decision on the foregoing consideration, the Secretary of State acted on no evidence and/or unfairly.'

47. Mr Morshead denied that this was the proper inference from his skeleton, but he did not object to the amendment and I gave permission for it to be made. Mr Village wished to adduce a witness statement from Mr Hill, the Land Director of the Claimant, who denied that the Claimant had calculated the timing of its planning application for this purpose.
48. At the end of his submissions in reply, Mr Morshead asked for permission to adduce a witness statement from Michael Taylor who was the author of the Secretary of State's decision letter. He said 'At no time did I consider that the Claimant had deliberately timed its planning application in this case to coincide with a recession.' Without objection from Mr Village, I agreed to admit this witness statement.
49. I can understand how the language of Mr Morshead's skeleton prompted Mr Village's concern. In addition, as Mr Village submitted, I should assume that the skeleton argument was read and approved by those acting on behalf of the Secretary of State in his department. However, in the light of Mr Taylor's witness statement, I accept that an attribution of motive actually played no part in the decision itself. In those circumstances, it is not necessary for me to consider the evidence of Mr Hill as to what accounted for the timing of the planning application.

Overall conclusion

50. I have rejected each of the grounds of challenge. Accordingly, the application is dismissed.