Vacant Building Credit and Small Sites Exemption - Cushman & Wakefield

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Vacant Building Credit and Small Sites Exemption

A second attempt at Vacant Building Credit – the key to reducing affordable housing obligations this time around? After being quashed by the High Court eight months after first being introduced in November 2014, both Vacant Building Credit and small sites exemption from affordable housing have been reinstated in planning guidance following a Court of Appeal ruling.
A legal challenge by Reading Borough Council and West Berkshire District Council had prompted the removal of relevant paragraphs in national planning practice guidance, but the previous ruling was overturned by the Court of Appeal in May. Both policies should now be a material consideration in planning decisions, and so not necessarily applied in a blanket manner.

The Vacant Building Credit means affordable housing contributions should be sought on the net increase in development floorspace only. A financial credit equivalent to the gross floorspace of any vacant building being brought back into lawful use or demolished should apply when calculating the amount of affordable housing contribution (not any other s106, s278 or CIL obligation) being sought.

The Small Sites Exemption removes the requirement for affordable housing and tariff style contributions (e.g. s106) on schemes of 10 units or less and with a maximum combined gross floorspace of 1,000 sq m. In designated rural areas authorities can choose to implement a lower threshold of 5 units or less. In such areas schemes of 6-10 units should provide contributions as a cash payment and be commuted until after completion of the development.

Application and Opportunities

Both initiatives were intended by government to get vacant property and redundant land back into use, and remove the need for small or rural sites to provide affordable housing. Developers of relevant sites are once again in a strong position to claim a reduction in affordable housing contributions and reappraise existing schemes.

The Court of Appeal ruling however does nothing to allay local authority fears that the measures will cost communities affordable homes and drastically reduce numbers being delivered, particularly in already challenged areas. Reading and Berkshire council’s legal challenge had made the point that authorities with constraints on development, such as tightly drawn green belt boundaries, mean a significant amount of new housing is built on smaller brownfield sites which can benefit from the exemption which means no affordable housing delivery.

Both the City of London Corporation and Westminster City Council have voiced opposition to the credit. Southwark Council previously estimated half of potential affordable homes would be lost per year, and has stated an intention to redraft planning policy to require evidence of active marketing for two years to stop owners intentionally emptying buildings to take advantage.

Norwich Council previously consulted on new text to their Affordable Housing SPD to clarify how the credit should be applied and Oxford City Council have confirmed they will invoke the Credit on new developments. We will monitor local authority response, and their application of both measures.


Worked example

  • One residential scheme in Westminster which will see the demolition of vacant offices to deliver quality residential apartments, has potential for a reduction in payment in lieu contribution of around £6m plus a small reduction in the number of on-site units.
  • The viability of a proposed redevelopment scheme including former institutional land in the West Midlands supports a policy compliant level of affordable housing on the net increase in floorspace, but could not support a similar percentage across the whole scheme.
Development scheme dwellings (sq m)
Affordable Housing Policy Requirement (% No.) 
Vacant Building Credit (net development) Amended Affordable Housing requirement (% No.
30 dwellings @ 60 sq m (total 1,800 sq m)
33% of 30 total dwellings (10 dwellings) 900 sq m vacant building. Total 900 sq m net development (15 dwellings @ 60 sq m)  33% of 15 net dwellings = 5 dwellings
30 dwellings @ 60 sq m (total 1,800 sq m)
33% of 30 total dwellings (10 dwellings) 1,800 sq m vacant building. Total 0 sq m net development
33% = 0 dwellings

Cushman and Wakefield are currently advising on the potential benefits arising from these changes in Government policy, and will be monitoring application of the Credit by local authorities across the country.

Contacts

Adam Pyrke, Director
125 Old Broad Street
London, EC2N 1AR
phone +44 (0)20 3296 3117
email adam.pyrke@cushwake.com

Andrew Teage, Associate Director
1 Marsden Street
Manchester, M2 1HW
phone +44 (0)161 235 8994
email andrew.teage@cushwake.com

Chris Hays, Director
Rivergate House, 70 Redcliffe
Street, Bristol BS1 6AL
phone +44 (0)117 910 6691
email chris.hays@cushwake.com

Hamish Robertshaw, Associate Director
St Pauls House, 23 Park Square South
Leeds, LS1 2ND
phone +44 (0)113 233 7465
email hamish.robertshaw@cushwake.com

Mark Jackson, Director
1 Colmore Square
Birmingham, B4 6AJ
phone +44 (0)121 697 7227
email mark.jackson@cushwake.com

Katherine Brooker, Associate Director
Central Square, Forth Street
Newcastle, NE1 3PJ
phone +44 (0)191 233 5722
email katherine.brooker@cushwake.com