England and Wales High Court (Administrative Court) Decisions

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

		The Court House Oxford Row Leeds LS1 3BG
		7 February 2014

Judge Behrens:

1 Abbreviations

1. In this judgment I shall adopt the following abbreviations:

City of York Council	the City Council
Secretary of State for Communities and Local Government	the Secretary of State
Water Lane Limited	WLL
Town and Country Planning Act 1990	the 1990 Act
Inspector John Gray	the Inspector
Inspector Mrs K Ellison	The First Inspector
Affordable Housing Viability Study	AHVS
National Planning Policy Framework	NPPF
Existing Use Value	EUV
Gross Development Value	GDV

2 Introduction

2. This is an application under section 288 of the 1990 Act by the City Council which seeks to quash an appeal decision dated 3 July 2013. By the decision the Inspector granted outline permission for residential housing development at Water Lane, Clifton Moor, York, subject to 26 conditions.
3. The main issue in the appeal before the Inspector related to the level of affordable housing which would be appropriate to be included in any grant of permission. The Inspector decided to grant permission without any requirement for affordable housing but with a proviso for the inclusion of a proportion of affordable housing in the future in the event of improving economic circumstances.
4. Condition 25 was in the following terms:

On submission of reserved matters applications for the whole of the residential development or for any phase of it, affordable housing provision shall be calculated in accordance with the provisions of Appendix 4 of the February 2011 Annex to the City of York Council Affordable Housing Viability Study, based on zero provision on the date of this permission. Any affordable housing that is required shall be provided shall be in accordance with condition no. 26 below.

5. The City Council seeks to challenge the decision on two grounds. First it contends that the reasoning of the Inspector was inadequate and does not enable the reader to understand why the matter was decided as it was. Secondly it contends that the decision was irrational.
6. Both the Secretary of State and WLL resist the challenge. They contend that the reasoning was sufficiently clear to enable the City Council to understand the reason for the decision. They also contend that the decision was not irrational. It was the exercise of a planning judgment by the Inspector with which this Court should not interfere.
7. It will be seen therefore that the issues in this application are very narrow. Despite this I would like to express my gratitude for the way this case has been prepared and advanced. The bundle is commendably brief comprising a mere 85 pages. The skeleton arguments from Counsel were concise, clear and relevant. Although the case was listed for 1½ days the oral arguments were completed in ½ day.

3 Background

8. There is no dispute as to the relevant background. In those circumstances I substantially adopt the summary in paragraphs 3 to 7 of Mr Evans' skeleton argument.
9. The challenged decision relates to a site at Water Lane, Clifton Moor, York ("the Site") which is owned by WLL, having been acquired by it in 2005.
10. The Site was originally purchased as an investment asset with the objective of providing rental income from warehousing and storage in buildings on the Site which had originally been aircraft hangars but had latterly been utilised for grain storage.
11. However, on 15^th September 2008 outline planning permission was granted on appeal to WLL for "the demolition of existing warehousing units to form class B1c [business], C1 [hotels and hostels], C2 [residential institutions], C3 [dwellinghouses] and D1 [non-residential institutions], plus parking and new access arrangements" ("the Original Permission"). All matters were reserved save for access. A condition provided that application for approval of the reserved matters was to be made not later than three years from the date of the permission.
12. The relevant element of the Original Permission for present purposes is the residential component (C3) of the scheme, estimated to be some 200 dwellings, and, in particular, the affordable housing contribution which it should make. A unilateral undertaking which accompanied the Original Permission provided for 75 affordable units.

4 The Application and First Appeal

13. No application for approval of reserved matters was made within the three year period specified under the Original Permission but, on 21^st April 2011, WLL made an application to the Claimant to extend the time limit for its implementation ("the Application").
14. The Application was made under the procedure recognised in Article 18 of the Town and Country Planning (Development Management Procedure) (England) Order 2010 which allowed for the issuing of a "replacement planning permission" with an extended time limit for permissions granted before 1^st October 2009. This provision was introduced in recognition of the fact that, because of the recession, developers and landowners may not have been able to implement planning permissions for residential development.
15. The City Council did not determine the Application within the requisite time limit and WLL appealed under section 78 of the 1990 Act. The appeal proceeded by way of a public inquiry which was held from 17^th- 19^th January 2012.
16. By a decision letter dated 28^th February 2012, the First Inspector dismissed the First Appeal.
17. The main issue before the First Inspector was whether the proposal made appropriate provision for affordable housing, a matter on which the City Council and WLL were unable to agree.
18. In the period which had elapsed since the Original Permission the City Council had, in 2010, adopted an AHVS which introduced a fresh approach to affordable housing and which, inter alia, allowed a target set in respect of an outline permission to be adjusted at the point of reserved matters submission to reflect movements in costs, house prices and land values in the meantime. The adjustment mechanism is called the dynamic viability model. The AHVS provided for a target of 25% affordable housing provision on brownfield land (as was the Site). That target would then be subject to regular review under the dynamic viability model. The City Council's case was that it should, as a starting point, provide 25% affordable housing linked to the dynamic viability model. WLL's case was that it was not viable to deliver housing on the Site which incorporated any affordable housing provision and its position was therefore that the affordable housing requirement which should be linked to the dynamic viability model should be 0% although, if that case were not to be accepted, a different figure could be inserted into a condition.
19. The First Inspector found that the evidence established that affordable housing provision of 25% would be viable. However, she concluded that provision of this level of affordable housing would produce a situation where the Site would not be sold by WLL for residential development. She considered that, in these circumstances, it would not be appropriate to grant planning permission with a condition requiring the provision of 25% affordable housing and, as the evidence did not support the provision of some lesser amount, permission was to be refused.
20. On 3^rd April 2012 WLL made an application under section 288 of the 1990 Act to quash the decision. By a consent order dated 3^rd August 2012 the parties agreed that the decision should be quashed. The consent order recited that the First Inspector erred in law by taking into account an irrelevant factor, namely, that the applicant had stated that it would not sell the land at a loss.

5 The Second Appeal

21. In the result the Appeal had to be re-determined. It is common ground between the parties that the findings in a decision which has been quashed in its entirety are not a material consideration when the matter comes to be re-determined.
22. Thus the matters set out above are no more than explanatory factual material which introduces the issue which lay between the parties.
23. Following a hearing which took place on 12^th March 2013, the Inspector allowed the appeal. The Inspector concluded that there was no present requirement for the provision of any affordable housing and thus imposed condition 25 set out above.

6 The Decision letter

24. In the light of the nature of the challenge it is necessary to consider the decision in a little detail. The decision letter is 6 pages long and comprises 32 paragraphs divided into 9 sections.
25. It is not necessary to refer to the first 2 sections which summarise the decision and clarify the appeal site. It also not necessary to refer to section 9 which deals with the Conditions.

6.1 Section 3 – The Main Issue

26. In paragraph 3 the Inspector summarises the main issue as being:

… bearing in mind the purpose of the application and any changes in circumstances since 2008, including the supply of housing land in the City of York, is what level of affordable housing provision, if any, would be appropriate were a new planning permission to be granted to replace the planning permission granted [in 2008].

6.2 Section 4 – The Development Plan

27. In paragraphs 4 and 5 the Inspector points out that (save for policies relating to the Green Belt which are not relevant) there is no statutory Development Plan for the City of York. As a result the appeal had to be determined against the provisions of the NPPF. He referred in particular to paragraphs 14, 47, 50 and 173 as being particularly relevant. Although not set out in the Decision Letter I set them out for convenience:

Paragraph 14

At the heart of the National Planning Policy Framework is a presumption in favour of sustainable development, which should be seen as a golden thread running through both plan-making and decision-taking.

For decision-taking this means:

…

•     where the development plan is absent, silent or relevant policies are out of date, granting permission unless:

–– any adverse impacts of doing so would significantly and demonstrably outweigh the benefits, when assessed against the policies in this Framework taken as a whole; or

–– specific policies in this Framework indicate development should be restricted

Paragraph 47

To boost significantly the supply of housing, local planning authorities should:

•     use their evidence base to ensure that their Local Plan meets the full, objectively assessed needs for market and affordable housing in the housing market area, as far as is consistent with the policies set out in this Framework, including identifying key sites which are critical to the delivery of the housing strategy over the plan period;

•     identify and update annually a supply of specific deliverable sites sufficient to provide five years worth of housing against their housing requirements with an additional buffer of 5% (moved forward from later in the plan period) to ensure choice and competition in the market for land. Where there has been a record of persistent under delivery of housing, local planning authorities should increase the buffer to 20% (moved forward from later in the plan period) to provide a realistic prospect of achieving the planned supply and to ensure choice and competition in the market for land;

•     identify a supply of specific, developable sites or broad locations for growth, for years 6-10 and, where possible, for years 11-15;

Paragraph 50

To deliver a wide choice of high quality homes, widen opportunities for home ownership and create sustainable, inclusive and mixed communities, local planning authorities should:

•     plan for a mix of housing based on current and future demographic trends, market trends and the needs of different groups in the community (such as, but not limited to, families with children, older people, people with disabilities, service families and people wishing to build their own homes);

•     identify the size, type, tenure and range of housing that is required in particular locations, reflecting local demand; and

•     where they have identified that affordable housing is needed, set policies for meeting this need on site, unless off-site provision or a financial contribution of broadly equivalent value can be robustly justified (for example to improve or make more effective use of the existing housing stock) and the agreed approach contributes to the objective of creating mixed and balanced communities. Such policies should be sufficiently flexible to take account of changing market conditions over time.

Paragraph 173

Pursuing sustainable development requires careful attention to viability and costs in plan-making and decision-taking. Plans should be deliverable. Therefore, the sites and the scale of development identified in the plan should not be subject to such a scale of obligations and policy burdens that their ability to be developed viably is threatened. To ensure viability, the costs of any requirements likely to be applied to development, such as requirements for affordable housing, standards, infrastructure contributions or other requirements should, when taking account of the normal cost of development and mitigation, provide competitive returns to a willing land owner and willing developer to enable the development to be deliverable.

6.3 Section 5 – The supply of housing land

28. In paragraphs 6 – 10 the Inspector considers the supply of housing land in York.
29. In paragraph 7 he concludes that at best there is little more than a 4 year supply of housing land – inclusive of the site.
30. In paragraph 9 he sets out WLL's position:

… the land will not come forward for residential development if the amount of affordable housing required on it does not allow an acceptable return on the investment already made in the site. If no affordable housing were required, then the land could be expected to come forward quickly; if the appellant's suggestion of a fixed number of 30 affordable dwellings were applied (15% of the agreed estimate of 200 dwellings on the site), then it would not come forward immediately but might not be long delayed, depending on the state of the economy; but, if 25% affordable housing was sought, then it was highly unlikely to come forward at all.

31. In paragraph 10 he refers specifically to paragraph 47 of the NPPF. He points out that the appeal site might not come forward because of the amount of affordable housing the City Council expects it to provide. He concludes that the absence of a 5 year supply of deliverable housing land by a substantial amount must carry significant weight in the appeal.

6.4 Section 6 – The provision of affordable housing

32. In paragraphs 11 – 13 the Inspector considers the provision of affordable housing.
33. In paragraph 10 he comments that the AHVS approved in 2010 set a target of 25% provision on brownfield sites. This figure had recently been reduced to 20% on brownfield sites yielding more than 15 houses.
34. In paragraph 12 the Inspector points out that it might be said that the City Council were adopting the flexible approach indicated in paragraph 50 of the NPPF but he queried whether the flexibility represented an adequate response in the absence of an appropriate supply of housing land.
35. In paragraph 13 he set out WLL's argument:

for viability, the starting point for this appeal proposal should be 0%, not 20% (or the original 25%), but that some level of provision could become justified in the future, through the use of the dynamic model. Alternatively, the appellant suggests a planning condition requiring specifically 30 affordable dwellings (15% of the total of 200 dwellings anticipated by both the appellant and the Council to be provided on the site), a number which would not be susceptible to the workings of the dynamic model.

6.5 Section 7 – The viability of the proposal

36. In paragraphs 14 – 23 the Inspector analysed the viability of the proposal under 3 subheadings:

Background

37. In paragraph 14 the Inspector points out that the cost of acquisition of the relevant part of the site in 2005 was £4.6 million. In paragraph 15 he accepted as reasonable the EUV of the site at around £1.3 million.

Viability Appraisal

38. In paragraph 16 the Inspector accepts that the GDV for a scheme of 200 dwellings including 25% affordable housing is £28 million. Development costs are estimated at £20.5 million. Allowing a return of 20% the residual value for development purposes is around £2.9 million.
39. In paragraph 19 he points out that development would be viable with affordable housing at 25%. In paragraph 17 he points out that the target for affordable housing has been reduced to 20% which would increase the GDV and the residual value of the site.

Return on Investment

40. In paragraph 19 the Inspector points out that a return of £2.9 million leaves a substantial shortfall against the purchase price of about £4.6 million. He referred to WLL's stance that the site would not be sold at a loss of £1.7 million and asks what weight this carries in the appeal decision.
41. In paragraph 20 he refers specifically to paragraph 173 of the NPPF and makes the point that a return of well over twice the estimated EUV must be considered competitive.
42. After referring to the RICS Guidance on Financial Viability in Planning he concludes in paragraph 23 that the return of about £1.6 million to WLL is competitive and viable. He considers that the fact that the sale price is lower than the original purchase price cannot carry any significant weight.

6.6 Section 8 – Conclusion

43. The Inspector reaches his conclusions in paragraphs 24 – 28.
44. In paragraphs 24 and 25 he points out that:
45. The viability evidence shows a competitive return to WLL based on 25% affordable housing.
46. It is not the role of the planning system to insure the landowner against loss. On the face of it to grant planning permission without a requirement for any affordable housing would amount to underwriting WLL's business loss at the expense of well established local policy on the provision of affordable housing. He points out that support for the provision of affordable housing is contained in the NPPF and flexibility of application has been shown by the City Council.
45. The reasons why he allows the appeal are set out in paragraphs 26 to 28 of the decision letter:

26. There is, however, the underlying question of the deliverable supply of housing land in the City of York. There is a shortage of housing land of some 10-20%, ignoring any buffer percentage required by way of para. 47 of the NPPF. The appeal site is, in locational terms, an eminently sustainable one. Para. 14 of the NPPF sets out the "presumption in favour of sustainable development". Para. 50 elaborates on that in relation to housing – the aim is to "deliver a wide choice of high quality homes" and "create sustainable, inclusive and mixed communities"; and, in so doing, flexibility in affordable housing policy is urged.

27. The first priority must be to deliver an acceptable amount of housing land. If possible, and if supported by evidence, the number of dwellings thus delivered should include a percentage of affordable housing. There is evidence of affordable housing need but flexibility must be applied in assessing the amount to be sought in order to ensure that the total number of dwellings that can be provided is not unacceptably depressed. The shortfall of housing land in the City of York means that the need to identify deliverable housing land is inescapable. Development on land such as the appeal site, which is deliverable in the short term, and which is already included in the Council's 5-year supply assessment, should not be unduly delayed by seeking too high a percentage of affordable housing.

28. The appellant suggested a compromise condition to secure 30 affordable dwellings, about 15% of the total number of dwellings and not susceptible to the dynamic viability model. That, however, would not see the land coming forward immediately and would not alleviate the shortage of housing land to any acceptable degree. Accordingly, the appeal may be allowed and outline planning permission granted without, at this stage, any requirement for the provision of affordable housing. It is reasonable, however, that permission should be susceptible to a proportion of affordable housing in the future, in the event of improving economic circumstances; that should be calculated in accordance with the workings of the dynamic viability model operated by the Council.

7 The Law

46. There is little if any dispute as to the relevant law. It is not in dispute that the City Council are entitled to challenge the decision of the Inspector under section 288 of the 1990 Act. It is not in dispute that under section 288(5)(b) the challenge may be made on any of the conventional public law grounds.
47. The leading authority on the duty to give reasons is to be found in paragraph 36 of the well-known speech of Lord Brown in South Buckinghamshire DC v Porter (No.2) [2004] 1 WLR 1953:

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 was resolved. Reasons can be briefly stated, the degree of particularity required depending entirely on the nature of the issues falling for decision. The reasoning 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 inference will not readily be drawn. The reasons need refer only to the main issues in the dispute, not to 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 they 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.

48. In his skeleton argument Mr Whale drew my attention to part of the passage from Lord Brown's speech cited above and 3 other uncontroversial propositions of planning law:
49. If there is one principle of planning law more firmly settled than any other, it is that matters of planning judgment are within the exclusive province of the decision-maker; Tesco Stores Ltd v SSE [1995] 1 WLR 759, 780 per Lord Hoffmann.
50. An applicant alleging that an Inspector has reached a Wednesbury unreasonable conclusion on matters of planning judgment faces a particularly daunting task; R (Newsmith Stainless Ltd) v SSETR [2001] EWHC Admin 74 at [8] per Sullivan J (now Sullivan LJ).
51. Inspector's decisions are to be read in a straightforward down-to-earth way without excessive legalism or exegetical sophistication; Clarke Homes v SSE (1993) 66 P&CR 263, 271-272 per the late Sir Thomas Bingham MR (later Lord Bingham).

8 Submissions

49. Mr Evans' submissions as to the inadequacy of the reasons are contained in paragraphs 36 and 37 of his skeleton argument. After noting the Inspector's conclusion that the proposed development was viable and that the fact that WLL would make a loss did not carry any significant weight, Mr Evans criticises the Inspector for not explaining how those conclusions carried forward into his overall conclusion.
50. He submits that the reasoning is unintelligible in that it

does not enable the reader to understand why the Inspector should have been concerned about the prospect of "undue delay" or the Site not "coming forward immediately" were affordable housing to be required, these concerns being the foundations of his conclusion that no such housing need be provided so as to ensure that the general housing shortfall was addressed swiftly…. The prospect of such delay or that the Site would not come forward immediately could only be linked to the fact that the value of the Site for residential development was well below the original purchase price in 2005 and the Second Defendant's stance that the Site would not be sold at a loss. That, however, was the very matter which the Inspector had already determined could not carry any significant weight.

51. He further submits that the City Council has been substantially prejudiced by the deficiencies in the reasoning because it is simply unable to understand what the Inspector's approach has been and how it may impact upon future applications for residential development and the delivery of affordable housing, particularly in cases where viability and site purchase price issues arise.
52. Both Mr Whale and Mr Sauvain QC challenge this analysis.
53. In paragraph 11 of his skeleton argument Mr Whale drew my attention to a number of findings in paragraphs 26 to 28 of the decision letter which I have already set out in full. He submitted that as an exercise of planning judgment, the Inspector decided that the appeal should be allowed and outline planning permission granted without "at this stage" any requirement for the provision of affordable housing. However, two conditions (25-26) were imposed to provide for a proportion of affordable housing in the future depending upon the prevailing economic circumstances and applying the Council's model.
54. In paragraph 13 he put his argument on the inadequacy of reasons in this way:

Read in a straightforward and down-to-earth way, as it should be, it is obvious from the Appeal Decision that the Inspector afforded significant weight to the Council's substantial shortfall in terms of five year housing land and that he regarded the delivery of an acceptable amount of housing land as being the first priority. The NPPF does stress in paragraph 47 the aim of boosting significantly the supply of housing. It is equally obvious that he concluded that the imposition of any requirement for affordable housing at this stage (which would not reflect any adopted development plan) would not see the land coming forward for housing immediately. That is why he granted outline planning permission without any requirement for affordable housing at this stage, but still with a mechanism for future affordable housing provision if the economic circumstances improved.

55. Mr Sauvain QC's submissions were to much the same effect. After summarising the provisions of the NPPF he summarised the Decision Letter. He drew my attention to the findings in paragraph 9 and 10 in relation to the supply of housing. He then made the point that the Inspector found against WLL on the viability point. He went on to submit that the conclusions in paragraph 27 and 26 were the exercise of planning judgment by the Inspector.
56. In the result he submitted that the reasons given were sufficiently clear, and precise. Far from being irrational he submitted that the decision was rational, understandable and sensible.

9 Conclusion

57. All of the parties agree that the issues raised in this application are very narrow. In those circumstances I can express my views quite shortly.
58. I prefer the submissions of Mr Whale and Mr Sauvain QC to those of Mr Evans. In my view the reasons given by the Inspector are sufficiently clear and precise and the decision made by the Inspector was not irrational.
59. He identified the Main Issue – what level of affordable housing would be appropriate on the grant of permission.
60. He identified 5 sub-issues relevant to the main issue:

1) The principles set out in the NPPF

2) The lack of a 5 year supply of housing land – a matter that he felt must carry significant weight in the appeal.

3) The City Council's approach to affordable housing including the AHVS and the downgrading of the requirement to 20%. He queried whether the flexibility represented an adequate response where there was a shortage in the supply of housing land.

4) The viability of the proposal. He held that the proposal was viable with affordable housing at 25%

5) The loss to WLL in relation to the purchase price. He held that this was a matter which could not carry any significant weight.

61. He came to his conclusion in paragraphs 24 to 28. I have set out paragraphs 26 to 28 in full in this judgment. I agree that the Inspector is there carrying out a balancing exercise. His conclusion (supported by the NPPF) was that the first priority was for the City Council to deliver an acceptable amount of housing land. Furthermore development on land such as the appeal site, which is deliverable in the short term, and which is already included in the Council's 5-year supply assessment, should not be unduly delayed by seeking too high a percentage of affordable housing. Both of these were planning judgments which are not open to challenge. He also accepted (in paragraph 9 of the decision letter) that

If no affordable housing were required, then the land could be expected to come forward quickly; if the appellant's suggestion of a fixed number of 30 affordable dwellings were applied (15% of the agreed estimate of 200 dwellings on the site), then it would not come forward immediately but might not be long delayed, depending on the state of the economy; but, if 25% affordable housing was sought, then it was highly unlikely to come forward at all.

62. In those circumstances the decision to ensure that the site did indeed come forward quickly is readily understandable. It also emerges sufficiently clearly from the Decision Letter.
63. I do not accept Mr Evans' ingenious argument on irrationality. In particular I do not accept that the Inspector has attached weight to the loss made by WLL as a result of the price paid in 2005. In paragraph 23 the Inspector says in terms that the loss is not a matter that can carry any significant weight. Furthermore the Inspector does not mention the loss in the balancing exercise in paragraphs 24 to 28. Mr Evans seeks to avoid this difficulty by asserting that the reason that the land will not come on the market is because WLL will not sell at a loss. Thus the Inspector has taken into account the loss contrary to what is said in paragraph 23.
64. In my view the Inspector has not directly given weight to the loss to be made by WLL. His first concern as expressed in the decision letter was to deliver a sufficient amount of land. Once he had accepted the fact that this housing would not be immediately delivered with more than 0% affordable housing at present he could only meet his concern by coming to the decision that he did. He was not in my view giving weight to the loss that WLL had suffered.
65. The fact that there is a loss may indirectly affect the availability of the land which in turn affects the shortfall of housing land identified in the decision letter. To my mind the indirect connection between the loss and the supply of land does not mean that the Inspector has given weight to the loss when reaching his decision.
66. Furthermore I think there is force in Mr Sauvain QC's oral submission that paragraph 23 of the decision letter is in the section concerned with viability. Thus the effect of paragraph 23 is that the fact that there will be a loss is not a factor of weight to determine the viability argument.
67. For these reasons I would dismiss the application.