Legal Report - Court takes tough line on viability and soundness

Planning, 5 September 2008

The judgement emphasises the importance of local planning authorities and inspectors adhering to the requirement in PPS3 for affordable housing targets in local development documents (LDDs) to be based on an informed assessment of economic viability. Moreover, it overturns the presumption of soundness contained in the 2004 version of PPS12.

PPS3, published in late 2006, advises that affordable housing targets should reflect an assessment of economic viability, taking account of risks to delivery and likely levels of finance, including public subsidy and developer contributions. A similar requirement for an informed assessment relates to thresholds.

In 2004, a housing needs study commissioned by Blyth Valley identified a need for 83 per cent affordable housing. The council eventually proposed a requirement of 30 per cent in its emerging core strategy. It then published a statement purporting to assess whether the core strategy was consistent with PPS3. However, the document was silent on the PPS3 requirement for an informed assessment of the economic viability of proportions of affordable housing.

Affordability figure challenged

The public examination heard objections from house builders relating to the target and the threshold. They claimed that the study did not provide a robust and credible evidence base for the 30 per cent affordable housing figure. They also cited the secretary of state's decision on a major allocated site in Blyth, where the same consultants had found that the 30 per cent requirement would be unviable.

In his report the inspector, referring to paragraph 4.24 of PPS12, explained that he had taken as his starting point the premise that the core strategy was "sound unless evidence considered at the examination indicates otherwise". He held that the strategy conformed to PPS3. Referring to the needs study, he found that a 40 per cent target would be unviable and a ten per cent target would not adequately reflect need. "In these circumstances, a 30 per cent target is the most appropriate option," he opined.

In the first such case to be heard by the courts, the house builders challenged adoption of the strategy under section 113 of the Planning and Compulsory Purchase Act 2004 in the High Court. Mr Justice Collins allowed their application and quashed the affordable housing policy (Planning, 30 May, p4). The council appealed.

Affirming the earlier decision, Lord Justice Keene said: "One only has to read paragraph 29 of PPS3 to see that such an informed assessment of the viability of any such percentage figure is a central feature of the PPS3 policy on affordable housing. It is not peripheral, optional or cosmetic. It is patently a crucial requirement of the policy." He found it significant that the inspector did not refer to this requirement and held that it was erroneous to suggest that viability issues could be left to planning appeals.

Policy presumption overruled

Importantly, Keene also considered the lawfulness of the presumption of soundness in PPS12. He accepted arguments for the house builders that the advice in paragraph 4.24 was unlawful, finding that there could be no such presumption. Section 20(5) of the 2004 act, he noted, requires inspectors to consider whether a plan is sound, regardless of whether evidence one way or the other is presented at the examination.

The 2008 version of PPS12 advises: "The starting point for the examination is the assumption that the local authority has submitted what it considers to be a sound plan". The secretary of state maintained that the two versions effectively mean the same thing, but the Court of Appeal found this difficult to accept. The inspector had been misled by the 2004 advice into applying the wrong test, it concluded.

In any event, the secretary of state now accepts that inspectors have an inquisitorial function and may properly find a policy unsound, even if there is no evidence to that effect from an objector. The situation may have profound consequences for many LDDs that have been to examination but are not yet adopted.

- Peter Village QC and Andrew Fraser-Urquhart of 4-5 Gray's Inn Square were counsel for the house builders in the Blyth Valley case.