The Mayor of London has now formally incorporated his Minor Alterations to the London Plan into the London Plan. These minor alterations were the subject of an examination-in-public in October last year. The Mayor has also updated his Housing Supplementary Planning Guidance (SPG) to reflect both the Further Alterations to the London Plan (examined in 2014) and the Minor Alterations. The new Housing SPG updates the Mayor’s guidance on a range of issues including housing need and supply, the duty to cooperate, residential density, housing standards, build to rent developments, planning for older people, student accommodation and viability appraisals.
This briefing note will explain the main changes and features of the SPG by chapter.
The Mayor reminds the London boroughs that the housing benchmarks in the London Plan (in table 3.1) are the minimum targets that each borough must achieve to be in conformity with the London Plan (paragraph 1.1.3). These benchmarks are to be augmented where possible by additional supply to help close the gap between London’s strategic need for 49,000 dwellings a year and identified capacity for 42,000 a year (paragraph 1.1.4). The benchmarks will also need to be exceeded to meet locally assessed housing needs, because each Borough local plan will need to be prepared in accordance with the NPPF (something that some London Boroughs overlook, e.g. Bromley). The London Borough’s will still need to undertake NPPF-complaint local assessments of housing need (through SHMAs). These local assessments may entail identifying local housing market areas. These housing market areas could extend outside of London. The Mayor expects the London Boroughs to identify extra capacity and develop local policies and allocations to augment the London Plan targets (paragraph 1.1.21).
The London boroughs will also need to identify additional sources of housing land supply (SHLAAs) to close the gap between London’s strategic housing need and local housing needs. The ability of the London boroughs to do so will depend on the nature of the constraints facing them (paragraph 1.1.9). Regard will need to be had for paragraph 14 of the NPPF.
Duty to Cooperate
The SPG emphasises that it is the responsibility of the London Boroughs to discharge the duty to cooperate in terms of identifying local housing needs and accommodating these needs (paragraph 1.1.22). This may entail joint planning with other London Boroughs and local planning authorities outside of London (paragraph 1.1.5). Objectively assessed housing needs must be met within the housing market area identified (paragraph 1.1.8). The outer London Boroughs in particular will need to work with authorities outside of London, as stated in the London Plan (paragraph 1.2.7). Where there are strong commuting links and housing market links London boroughs are encouraged to assess need and identify capacity in sub-market areas (paragraph 1.2.8).
The SPG notes that the outer London Boroughs will have to make a more substantial contribution to meeting London’s overall strategic need as well as their own local need (paragraph 1.2.3). To date, inner London has accounted for the majority (60%) of supply (paragraph 1.2.2). They should focus on increasing development around transport nodes.
In accordance with the NPPG the Mayor confirms that non-conventional housing (C2 Use Class) which includes student accommodation, can count toward the housing targets (paragraph 1.1.38). Interestingly, the Local Plans Expert Group has recommended that this should not continue to be the case.
The rest of the chapter identifies the principle sources of land supply, reflects on density and sets out general development principles to be considered. The Mayor’s major transport schemes (including Crossrail 1 and 2) will provide more suitable and sustainable locations.
Small sites remain an important component of London’s housing supply, providing an average of 38% of all output between 2005 and 2013 (paragraph 1.2.25).
On the question of permitted development rights for office to residential the SPG observes that since the change was introduced in May 2013 there has been an increase in the number of residential units. However, pan-London monitoring shows that housing completions from this source have not substantially increased compared to the long term trend (paragraph 1.2.42). The Mayor also states that the planned redevelopment of offices has yielded three times more dwellings than dwellings coming forward through a change of use (paragraph 1.2.41).
Part 2: Quality
This chapter of the SPG reflects the changes made to the London Plan following the examination of the Minor Alterations to the London Plan which were found sound following examination in October 2015.
The new standards have been in place since October 2015. As the London Plan forms part of the development plan for the boroughs, the standards in the London Plan can be applied at the local level. When the London Boroughs come to review their local plans they can draw on the MALP evidence to support their approach for requiring compliance with the London Plan standards.
Nationally described space standard
The London Plan has adopted the new nationally described space standard. This replaces the previous London Plan space standard. In accordance with national policy, London Boroughs can only require compliance with the nationally described space standard.
The London Plan, however, also strongly encourages applicants to build to a more generous ceiling height of 2.5 metres (compared to 2.3 metres in the national standard). (Paragraph 2.3.22).
The nationally described space standard is not a Building Regulation. It is a policy requirement. Compliance, therefore, will be enforced through planning (paragraph 2.1.14).
Accessible and wheelchair adaptable homes (Part M4)
The London Plan has also adopted the optional Building Regulation technical standards for accessibility (policy 3.8). The Plan requires that 90% of all dwellings in a scheme are built to Part M4 (2) ‘accessible and adaptable’ homes and the other 10% are built to Part M4 (3) ‘wheelchair user dwellings’. In terms of Part M4 (3) these homes can be either ‘wheelchair accessible’ or ‘easily adaptable for residents who are wheelchair users’. The NPPG states that local plan policies for wheelchair accessible homes should only be applied to dwellings where the authority is responsible for allocating or nominating a person to live there (i.e. generally held to be social or affordable rented units). This means that the market element of the scheme is only required to meet the standard for wheelchair adaptable homes (paragraph 2.3.12).
The SPG acknowledges that complying with Part M4 could cause viability problems, especially for developments of four storeys and less which will now need to provide lifts (paragraph 2.3.9). The London Plan (policy 3.8Bc) states that the policy may need to be applied flexibly to ensure that certain types of residential scheme remain deliverable (e.g. flats above shops). (Paragraph 2.3.10).
Because the optional technical standards for accessibility are Building Regulations, compliance will be assessed in the same way as other Building Regulations. They are mandatory and all elements of the technical standard must apply.
Despite the HM Treasury’s Productivity Plan Fixing the Foundations which had announced the Government’s intention to suspend the zero carbon homes programme, the Mayor has retained his London Plan target which requires residential development to achieve a 35% reduction on Part L 2013 (see page 87). The Mayor is cagey about his reasons for doing so in the SPG (paragraph 2.3.56), but it is our understanding that his rationale for doing so is because the statement in the Productivity Plan is not legally binding.
The SPG states that the measure is necessary so that the development industry in London is prepared for the introduction of ‘Nearly Zero Energy Building’ by 2020 (as required by the European Energy Performance of Buildings Regulation). (Paragraph 2.3.57).
The Mayor has adopted the optional tighter water efficiency Part G Building Regulation (London Plan policy 5.15). This requires that all new dwellings control water consumption to 105 litres per person per day.
Part 3: Housing Choice
Owing to the uncertainties associated with the Housing and Planning Bill the SPG states that much of this chapter is provisional and remains ‘draft’ guidance.
Assessing housing need and cross-boundary planning
Expanding on the London Plan the SPG emphasises that it is the responsibility of the London Boroughs to assess their own local housing needs in accordance with the NPPF. The benchmark targets in the London plan are merely the starting point. SHMAs need to be carried out on a wider geographical level than just the local authority (paragraph 3.1.6). Boroughs should draw upon the most recent population and household projections developed by the GLA rather than the official projections since the London Plan has been accepted by PINS and the Government (paragraph 3.1.7). Annex 1 to the SPG provides the GLA’s other demographic variants and provides a comparison with the DCLG 2012 Household Projections.
The London Boroughs should ensure that their local studies take account of cross London boundary relationships as required by Policy 2.2 of the London Plan (paragraph 3.1.8).
The Mayor states that he is sharing data relating to his demographic assumptions with local authorities outside of London to help with planning for strategic housing movements (paragraph 3.2.11).
The rest of the chapter provides guidance on how the London Boroughs should account for the needs of different forms of tenure and the needs of different groups.
Build to Rent
The Mayor recognises the important role that Build to Rent (BTR) has to play in boosting housing completions and helping to meet needs. The London Plan wishes to support the growth of this sector (paragraph 3.3.3).
The SPG advises that the London Boroughs should recognise the distinct economics of the sector relative to mainstream speculative development and make allowance for this in viability assessments (paragraph 3.3.4). The SPG provides advice to the Boroughs on how they should approach viability assessments for BTR schemes which rely on annual revenue income through rent rather than capital receipts. BTR cannot compete on an equal footing with speculative build for sale as BTR has inherently lower returns.
Affordable housing on BTR schemes will often be viable, and London Plan policy encourages the provision of affordable housing onsite (paragraph 3.3.4). Covenants will need to be agreed to ensure that the units continue as private rented units for a specified period of time. The length of these covenants could increase as investor confidence in the product grows (paragraph 3.3.5)
Clawback mechanisms should be agreed if the private rental units are sold as market homes after a specific period of time (typically 15 years). The S106 agreement could base the amount to be clawed-back on the level of affordable housing that would have been viable had the scheme been developed for traditional market sale (paragraph 3.3.8). Or it could be based on an agreed proportion of the sale price of each property sold. The clawback could be provided in the form of onsite affordable homes or a commuted sum (paragraph 3.3.8).
Where viability suggests that traditional affordable housing products are unviable on covenanted schemes, the London Borough could consider including only discounted market rent (intermediate rent) as the affordable offer (paragraph 3.3.10).
Borough SHMAs should identify the need for PRS housing.
The SPG states that planning for the needs of aging Londoners will assume greater importance in future reviews of the London Plan (paragraph 3.7.2). The London Boroughs should plan positively for older people, including through local plan allocations (paragraph 3.7.9).
Most specialist housing for older people is currently in the social housing sector. However, given that over 60% of older people in London are homeowners, it is important to encourage the provision of a range of housing options which reflects the diversity of tenure among older households (paragraph 3.7.10).
The potential demand for specialist older person housing which cannot be met from the existing stock is 3,900 units per year (paragraph 3.7.11). Annex 5 of the London Plan sets indicative benchmark targets by Borough for elderly person housing. For some Boroughs, these benchmark targets represent a significant portion of their minimum housing supply benchmark target. This is likely to be an indication of how housing need outstrips supply rather than a suggestion that most new housing should be provided for older people. Local and sub regional SHMAs are therefore important to analyse need in more detail (paragraph 3.7.13).
When considering viability, the London Boroughs must be aware of the higher development costs (services and layout) associated with specialist older persons housing, which is typically more expensive than conventional housing (paragraph 3.7.20). This may require bespoke viability assessments. CIL assessments should account for this.
Student accommodation completions can count towards the housing targets. The requirement for new student accommodation over the plan period 2015-2025, including unmet demand, could be for 20,000 to 31,000 places (paragraph 3.9.1). The London SHLAA has identified land for 20,000 student units. Student housing has made a substantial contribution to overall housing supply in London, providing on average 2,700 units a year or 11% of net completions between 2003 and 2013 (paragraph 1.2.49). Policy 3.8Bh of the London Plan requires London Boroughs to meet identified local and strategic requirements for student housing. These needs are monitored separately as part of the overall housing provision (paragraph 3.9.2).
Part 4: Affordable Housing – Viability Appraisals
This section outlines the Mayor’s preferred approach to the treatment of negotiations on the viability of providing affordable housing.
The London Plan (at paragraph 3.71) requires developers to provide development appraisals to demonstrate that each scheme maximises affordable housing output (paragraph 4.2.1).
The implication of this section, although it is not directly articulated, is that a viability appraisal may need to accompany every application made in London even if the applicant is meeting the percentage of affordable housing stipulated in the local plan. This would be at odds with the plan-led approach, which the NPPF reminds us is designed to create more certainty for applicants and decision-takers. The SPG does assert that because NPPF-based local plans should be viable, negotiations should be the exception rather than the rule, but the tenor of the rest of the section, including paragraph 4.2.1 referred to above, tends to give encouragement to the London Boroughs to go further.
The SPG states that “All plans adopted post NPPF should be considered viable - negotiations to reduce obligations based on site specific viability considerations should only be necessary where the site circumstances suggest exceptional or abnormal costs that will make policy compliance unviable. Development appraisals should be provided to establish the maximum reasonable level of affordable housing for each site.”
Priorities for obligations
Policy 8.2 of the London Plan sets out the Mayor’s priorities for planning obligations. The highest strategic priority is for affordable housing and transport infrastructure. Account must be taken of other demands on development value such as schools and health facilities and the Mayor’s Crossrail CIL (paragraph 4.1.2).
The Mayor has developed a Development Appraisal toolkit that the Boroughs are encouraged to use. Applicants should provide site specific justification for their assumed profit levels with reference to up-to-date market conditions (paragraph 4.1.3). The Mayor favours an ‘Existing Use Value plus’ approach to the land value calculation. The ‘plus’ element will vary on a case-by-case basis (4.1.4).
For projects developed in phases it may be necessary to revisit viability for each phase (paragraph 4.1.10).
Developers are required to demonstrate that a scheme is maximising affordable housing. The Greenwich judgement of January 2015 (see footnote 215 of the SPG for details) has clarified that it is appropriate and in the public interest for the applicant to disclose the pricing and other assumptions embedded in a viability appraisal. Therefore:
“The Mayor encourages the transparency of information to increase public trust in the planning process and asks developers to keep confidential information to a minimum.”
Contingent obligations, review and cascades
Contingent obligations and review mechanisms will allow increases in S106 to reflect changes in the value of development from application to a later point in time to help ensure affordable housing is maximised (paragraph 4.3.2).
The Mayor provides guidance on what the Borough should consider (paragraph 4.3.5). This includes setting a ‘cap’ on additional provision based on ensuring policy compliance (if the Borough’s local plan requires 50% then the cap would be 50%). However, review mechanisms should not be used to reduce the base level of affordable housing contributions which are required to make the application acceptable in planning terms (paragraph 4.3.6).
Fixed affordable housing targets
London Boroughs may considering setting fixed affordable housing percentage rates in opportunity areas and housing zones. These can provide certainty for developers and prevent land value increases driven by hope value. If fixed rates are established, the Borough should not seek more than this (paragraph 4.6.1).
Part 5: Stock and Investment
This section addresses making the best use of the existing housing stock.
Long term empties are at an all-time low. They represent just 0.64% of the existing stock.
Research by the GLA indicates that most dwellings sold to overseas investors are lived-in as the main residence or rented out.
To achieve no net loss of affordable housing on estate regeneration schemes development at significantly increased densities may be necessary (paragraph 5.1.16). If a net gain is achieved it may not be necessary to maintain the same proportion of affordable to market dwellings (paragraph 5.1.16).
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