On 5 March 2018, the Government began a consultation on the highly anticipated revisions to the National Planning Policy Framework (NPPF).
One potentially significant revision is the addition of 'Starter Homes' and 'Discounted Market Sales Housing' to the definition of Affordable Housing within Annex 2 of the NPPF as follows:
Starter homes: is as specified in Sections 2 and 3 of the Housing and Planning Act 2016 and any secondary legislation made under these sections. The definition of a starter home should reflect the meaning set out in statute at the time of plan-preparation or decision-making. Income restrictions should be used to limit a household's eligibility to purchase a starter home to those who have maximum household incomes of £80,000 a year or less (or £90,000 a year or less in Greater London)
Discounted market sales housing: is that sold at a discount of at least 20% below local market value. Eligibility is determined with regard to local incomes and local house prices. Provisions should be in place to ensure housing remains at a discount for future eligible households.
This is in line with the commitment given in the Housing White Paper. Starter homes were introduced in the Housing and Planning Act 2016 although the secondary legislation to bring the provisions into force has yet to be enacted.
The amendment to the definition of affordable housing broadens the potential tenure mix of affordable housing units to be provided within a proposed development with starter homes and discounted market sales housing capable of being counted towards on-site provision of affordable housing.
Discounted market sales housing are often offered in lieu of the 'traditional' on site affordable housing i.e. social rent, affordable rented and shared ownership where a contract with a registered provider cannot be secured due to lack of local interest or market for such units or, in the case of shared ownership dwellings, the restrictions in the Housing (Right to Enfranchisement (Designated Protected Areas) (England) Order 2009, may make such dwellings unappealing to registered providers and/or lenders.
The broader definition will assist local planning authorities in delivery against their Affordable Housing targets however consideration will need to be given as to how occupation of such units is to be monitored by local planning authorities.
From a developers perspective the expansion of the definition of affordable housing offers greater flexibility in respect of the composition of the affordable housing to be provided and may overcome difficulties in relation to viability, particularly for smaller scale developments. The difficulty will however remain whether such tenures are acceptable to local planning authorities as affordable housing in their administrative area and whether such tenures will meet the local need. It may be that we see starter homes and discounted market sales housing being offered on appeal where affordable housing and/or viability are in dispute. The government has previously mooted the possibility of requiring up to 20% of dwellings within a development to be provided as starter homes but no such requirement is included in the NPPF.
Landowners, promoters and developers should, however, bear in mind potential impacts of this change, as affordable housing defined by reference to NPPF is often used in a range of transactional documents including promotion agreements, options, conditional contracts and overage agreements, as well as heads of terms when negotiating deal terms. If NPPF is used in the definition of affordable housing in transactional papers, and that definition includes replacement guidance without any carve outs or conditions, the unintended consequence may be that affordable housing provision will in the future include discounted market sale housing because of NPPF2.
This may be fine for many purposes, but the use of affordable housing definitions in documents should be tracked through carefully, to ensure that minimum price payment obligations still work, planning and promotion objectives aren't adversely affected, and overage payments will catch the correct number of dwellings.
Alongside the amendments to the NPPF the Government also published a separate consultation paper - Supporting Housing Delivery Through Developer Contributions with the aim of speeding up the planning application process and reducing negotiations in respect of planning obligations. The introduction of Discounted Market Sales Housing to be provided at 20% below local market value may potentially hinder this aim as agreement will need to be reached between the developer and the local planning authority of the appropriate measure for local market value.
The consultation on the draft NPPF began on 5 March 2018 and was due to close at 23.45 on Thursday 10 May 2018.
This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.