Planning Briefing: Vacant building credit and reductions in affordable housing obligations

Planning Briefing: Vacant building credit and reductions in affordable housing obligations

What is vacant building credit and where did it come from?

Vacant building credit was introduced to promote development on brownfield sites. It allows the floorspace of existing buildings that are to be redeveloped to be offset against the calculations for section 106 affordable housing requirements (whether financial contribution or provision). It applies to any building that has not been abandoned and is brought back into any lawful use, or is demolished to be replaced by a new building.

It was announced by the Department for Communities and Local Government (‘DCLG’) in November 2014, following DCLG’s consultation on planning performance and contributions, and thereafter made its way into the national Planning Practice Guidance (‘PPG’). Since its introduction, the guidance has been clarified once already (in March 2015). Importantly, it now forms a material planning consideration for undetermined planning applications.

How is it calculated?

The PPG explains that existing gross floorspace (assuming it has not been abandoned) should be credited against that of the new development. Where there is an overall increase in floor space in the proposed development, the local planning authority should then calculate the amount of affordable housing contribution or provision required from the development as set out in their local plan on the basis of that additional floorspace.

The example given in the PPG is as follows: ‘where a building with a gross floorspace of 8,000 square metres is demolished as part of a proposed development with a gross floorspace of 10,000 square metres, any affordable housing contribution should be a fifth of what would normally be sought’.

How has the vacant building credit been applied?

The PPG offers little in the way of guidance as to when a building can be considered ‘vacant’, ’empty’ or ‘unused’ but not ‘abandoned’. It merely states that when considering how the credit should apply, local planning authorities should consider whether the building has been made vacant for the sole purpose of redevelopment, and whether the building is covered by an extant or recently expired planning permission for the same development (in which case the credit should presumably not apply).

No reference is made to time limits, in contrast to how the Community Infrastructure Levy (‘CIL’) operates. For CIL, an offset is available for buildings that have been in lawful use for 6 months out of the previous 3 years.

Some local planning authorities have sought to provide clarity through their own vacant building credit policies, for example adopting an approach akin to the CIL test set out above as per the London Borough of Southwark.

Evidence has already emerged of developers using the credit to achieve substantial reductions in affordable housing payments, not least in relation to the redevelopment of large industrial or institutional sites. It remains to be seen what the overall impact will be on housing supply of the credit. It seems likely that the provision of affordable housing will be hit, severely in some cases. However, it should also see previously unviable sites come forward.

Restrictions on affordable housing and tariff style contributions

Alongside the introduction of the vacant building credit, the PPG now sets out the circumstances in which affordable housing and ‘tariff style’ planning obligations should no longer be sought, namely for:

  • developments of 10 units or less
  • developments which have a maximum gross floorspace of not more than 1000sqm (gross internal area)

For designated rural areas, the limit may be lowered to 5 units or less, provided that if the policy is applied at this level, the PPG then directs that obligations in the form of cash payments should be sought for developments of between 6 and 10 units.

Tariff style obligations are those that are pooled into funding pots by the local planning authority in order to provide infrastructure for the wider area, as opposed to contributions for a specific piece of infrastructure required to mitigate the impact of the particular development.

This measure has received little resistance from local planning authorities, again fearful that affordable housing delivery will plummet, but being part of the PPG it is now a material planning consideration much like the vacant building credit. Despite this, some authorities have held firm and are applying their development plan policies for affordable housing in preference to this new national policy, reasoning that it is for them to balance competing policies.

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