Government Confirms Developers Overpaying for Land is not Material

RIBA

The government has confirmed that developers cannot use site purchase price to argue that local affordability requirements would make a housing scheme unviable.

Responding to a London borough’s move to seek a judicial review of a planning inspector’s decision to accept a reduced affordable housing contribution, a letter from the Government Legal Department says it is the Secretary of State’s ‘unambiguous policy position’ that ‘land or site value… should reflect policy requirements’.

In other words, developers should have regard to local affordable housing requirements when agreeing a site purchase price and cannot then turn around and use viability arguments to challenge existing local policy.

The government’s statement was sent to Islington Council after a recent planning appeal decision on the Parkhurst Road ‘Territorial Army’ site.

The inspector had refused planning permission on amenity grounds, but had accepted the developer’s argument that only 14% affordable housing was viable because of factors including the price paid for the land, even though the developer could not demonstrate that it had taken Islington’s affordable housing policies into account when bidding for the site.

Unhappy with the inspector’s decision and the signal it sent on viability negotiations, Islington set out on the first step towards a judicial review by issuing a ‘letter before claim’ to the Secretary of State.

Islington said it received support for its stance from Brent, Hackney, Merton, Southwark and Tower Hamlets as well as a public statement of support from London Mayor Boris Johnson.

In the event, the government said it was not appropriate for Islington to pursue a judicial review in the light of the inspector’s refusal, directing it instead to argue its government-confirmed position on viability in future applications.

“Londoners desperately need more affordable housing, and we need to make sure developers are making a fair contribution. However we, and many other councils across London, are concerned that developers are using the viability process to argue they can’t afford to provide much or any affordable housing because they paid too much for land,” says James Murray, Islington’s executive member for housing.

“We are therefore pleased to have a clear confirmation from the Government’s legal department that the value of land should reflect policy requirements, which of course includes affordable housing.”

Islington says it is making copies of its legal advice, the appeal decision, its letter before claim and the government’s response available.

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