Reaching a settlement

Planning, 22 August 2008

Housing minister Caroline Flint recently reasserted prime minister Gordon Brown's national target of three million new homes by 2020. But that is only 12 years away and we are already well into a very significant downturn in the housing market.

Amid warnings about viability from the house building industry, how can a government so committed to delivery ensure that homes are actually built? Last year, John Callcutt's review of housing delivery for the DCLG pointed to complaints about "excessive local authority demands". Anecdotal evidence suggests that what little development is going through the planning process is being delayed or even frustrated by complex or excessively lengthy talks on obligations.

Callcutt warns of the "regulatory burden" imposed by councils, particularly sustainability measures (Planning, 23 November 2007, p1). These increase costs but do not yet add value. Developers may be asked to meet, say, level 4 of the code for sustainable homes without justification. Planners do not show sufficient grasp of the cost implications and effect on overall viability.

PPS3 advises that testing viability should enable councils to "reflect an assessment of the likely economic viability of land for housing in the area, taking account of risks to delivery and drawing on informed assessments of the likely levels of finance available for affordable housing, including public subsidy and the level of developer contribution that can reasonably be secured".

The most common way parties reach agreement on the level of contribution is negotiation. The advent of the community infrastructure levy will not necessarily make the process any easier. Many developers have committed to sites at values that the housing market can no longer support. Elsewhere, lower values and slower sales will often mean that something has to give.

It is unclear how fair figures can be agreed when the scale and complexity of projects places huge strain on the development control system. Not enough public sector professionals have sufficient training or experience to understand the economics of major housing projects or how to secure their delivery. They may not have the budget to hire consultants or even know where to find the expertise.

Furthermore, bilateral talks can take too long to conclude. I shadowed a case where it took 15 months to negotiate details of a section 106 deal on affordable housing, despite heads of terms being agreed and a committee resolution to grant approval. While many councils set a cut-off date or refuse to take a scheme to committee without a unilateral undertaking or finalised section 106 deal, this does not always save time. It often just pushes difficult negotiations to an earlier stage.

One way out of this is to appeal. Recent official advice on planning performance agreements (PPAs) argues: "Where possible, project managers should seek to resolve blockages or conflicts. If this is not possible, the issue should be referred to the next steering group meeting. During the pilot, concerns about potential conflicts were resolved via the PPA project management process and it was recognised that if the approach was not adhered to, then the existing statutory procedures for applications were an alternative."

This advice needs updating urgently in the light of real problems. The Advisory Team for Large Applications (ATLAS) online guide cites the case of an urban extension in Bedfordshire, where a joint working process was established to develop a policy basis for planning applications. Initially, this worked well.

"But disagreement arose over certain aspects of the policy basis and the relationship eventually broke down. The project management structure was not able to cope with the dispute because it was not adequately resourced or led and did not have a clear structure for dispute resolution. Overall the local planning authority did not control the process strongly enough," the guide says.

"Minimal contact between the council and developer resulted in an application being submitted without any meaningful pre-application engagement or resolution of the outstanding issues. The applications were refused and went to appeal, resulting in considerable time and resources being required by all parties involved. In the end, agreements were reached during the course of the appeal process. However, many of the issues could have been more positively addressed through a continuation of the open collaborative working process."

Parties are understandably reluctant to appeal, especially where the principle of the development is not at issue. Developers do not want to open their books to prove a viability point. In a 2006 appeal at Filton Airfield in Bristol, the inspector noted that the appellants failed to offer any financial evidence to support their viability claims.

Another disincentive to appeals is that the parties cannot negotiate through the inspector. Some years ago, in the early stages of the Royal Borough of Kingston-upon-Thames's policy for pooling transport infrastructure contributions, a developer went to appeal to resolve a dispute over how much it should pay. Both sides lost. The inspector found that the appellant had offered too little but the council had sought too much. They were told, in effect, to go away and do better.

With more than 22,000 appeals a year, there is scope to reduce these more formalised disputes. There are no statistics on how many section 106 negotiations are stuck or struggling, but while they may not be numerous they are significant. Local authorities must ask for more outside help. At this spring's Planning and Environmental Bar Association national conference, Knight Frank partner Jeremy Edge illustrated how ATLAS's involvement helped to settle a viability issue, avoiding an appeal.

ATLAS encouraged Oxfordshire County Council and two district councils to engage with developers to review planning gain from a proposed urban extension of 3,200 homes west of Didcot. "Negotiations had stalled over the amount of gain that could be provided comprising a mix of social and physical infrastructure, including affordable housing. Viability modelling was used as a mediation tool to resolve the dispute," Edge notes.

Although ATLAS was not a true mediator here, the effect of introducing another party was to resolve the dispute. I was recently approached to arbitrate on a section 106 dispute over affordable housing. The documentation only provided for arbitration - a process in which only one party can win. When I explained the potential of mediation, the developer was very interested.

Mediation is a powerful alternative way to reach a settlement. The involvement of a neutral third party can bring immediate and mutually acceptable results and mediation has been an effective means of alternative dispute resolution in commercial cases for some years. It is increasingly being used in the personnel, community, family and other spheres but has still to enter the planning mainstream (Planning, 21 March, p16).

The Barker review explains that mediation is "the intervention into a dispute by an impartial third party whose role is to help the parties reach their own mutually acceptable settlement". Conflict is an inherent feature of the planning system, but this need not mean failure. Mediation is about settling or at least reducing differences. But those differences need to be diagnosed and negotiated before settlement can be reached.

There are now some 20 qualified or accredited mediators working in the planning field. Many are barristers, others solicitors, planners or surveyors. It would be helpful for planning authorities, other professionals and their clients for this group to be more easily identified, say by the formation of an official panel. The government could help in several ways. A revised costs circular, now under discussion, could encourage the use of mediation. The inquiries procedure rules could allow for mediation in the process. Finally, PPAs could be speeded up by the identification and inclusion of a named mediator at the outset.

- John Parmiter is an accredited mediator at Planning Mediation Partners.

MEDIATION OUTCOMES

The ODPM's Mediation in the Planning System study examined 48 pilot study cases that resulted in mediation.

- In 42 cases, the local planning authority was satisfied with the result.

- The local planning authority was satisfied with the process in 47 cases.

- Applicants were satisfied with the result in 34 cases and with the process in 43 cases.

- The pilot projects were regarded as successful in delivering a satisfactory outcome in 31 cases.

- In all cases, applicants selected mediation to save time, expense and aggravation. In 36 cases they felt that their expectations had been realised.

- Mediation led to substantial time savings in proceedings, with 30 cases taking less than three hours and only two cases taking more than six hours.

- Only 13 of the 48 cases eventually went to appeal following mediation.

Source: Barker Review of Land Use Planning.