Policy briefing: Credit lifts affordable housing burden for reuse of buildings

An incentive scheme to reduce planning gain liabilities on vacant stock has wider implications. Kevin Gibbs explains.

Q What is this incentive and where has the idea come from?

A The vacant building credit (VBC) is a new government policy intended to encourage housing development on brownfield sites. The National Planning Policy Framework (NPPF) states that policies and decisions should promote effective use of land by reusing previously developed sites.

However, brownfield development has been relatively costly for developers and viability problems have made it difficult to prioritise in the past. To encourage such development, a Department for Communities and Local Government consultation last year sought views on lifting section 106 affordable housing requirements from buildings brought back into use.

Q How is the credit expected to work in detail?

A Revised planning practice guidance issued on 28 November 2014 says where a vacant building is brought back into any lawful use or demolished for replacement, the developer should be offered a financial credit equivalent to the existing gross floorspace of "relevant" vacant buildings in the local authority’s calculation of any affordable housing contribution to be sought.

The revised guidance also specifically requires the VBC to be applied in calculating total affordable housing in adopted local plans. Interpreted strictly, the new guidance would only require affordable housing obligations to apply to any increase in floorspace.

There is no time limit on how long a building has been vacant to qualify for the credit, as long as it has not been abandoned. However, "abandonment" is a court-led concept, so any judgement on whether it has occurred is a matter of fact and degree. The time which has to elapse for abandonment to be shown is extremely variable. Use of the term is therefore likely to make calculation of the VBC site-specific.

Q How successful will the credit be in bringing vacant buildings and brownfield sites into use?

A In 2008, some owners of vacant buildings demolished them when the government increased the tax burden through its "empty rates" reforms. Contrary to intention, many of these sites have not subsequently been redeveloped and will not now benefit from the VBC.

Sites with vacant office buildings may benefit from permitted development rights for conversion into residential use. In such circumstances, the VBC is unlikely to have any impact because there is no requirement for affordable units to be provided under the permitted development regime.

However, where vacant industrial, office or other floorspace is to be demolished, VBC could prove attractive when redeveloping brownfield sites. Where a building is currently vacant but has been used for six months in the past three years, then any development should arguably not attract Community Infrastructure Levy charges either, thus doubly benefiting the owners.

Q How are developers likely to respond to this initiative?

A In areas with a high number of vacant buildings, it is possible that the credit will have a major impact in improving viability by reducing affordable housing requirements. Owners who already have permissions for sites that include vacant buildings may well want to consider whether to make immediate requests to vary any affordable housing provisions, or to submit fresh applications, to take advantage of the revised guidance.

Q What are the implications for local authorities?

A It has been suggested that introducing VBC through planning policy guidance should not affect affordable housing policies in adopted local plans. However, there is ample reference in paragraphs 173 and 205 of the NPPF encouraging local authorities to be flexible in the negotiation of planning obligations to ensure delivery.

The VBC incentive could lead to a shortfall in meeting affordable housing needs in adopted local plans. In areas with a high number of vacant buildings, local plan preparation and review could therefore involve higher overall affordable housing requirements to compensate for losses in provision arising from the credit.

Difficulties may arise in calculating the total amount of affordable housing. Local plan policies often require contributions in the form of affordable units, whereas the VBC will be calculated against gross floorspace. Clearly, more information on the floorspace of proposed residential development will be needed to accurately calculate the offset.

Kevin Gibbs is a partner at law firm Bond Dickinson LLP