9 June 2015
This feature is now out of date as Vacant Building Credit was abolished by a High Court ruling recently. An update can be found here.
The Vacant Building Credit (VBC) policy looks set to significantly reduce affordable housing requirements. So good news for developers but possibly not such good news for local authorities’ affordable homes targets. But how might VBC really work in practice? WYG’s Simon Peake finds out.
Coming into effect last November (with further guidance issued this March), VBC is a Government policy to promote housing development on brownfield sites by allowing developers to offset the floorspace of vacant buildings against affordable housing requirements. The policy is now a material consideration that applies to all planning applications that have not yet been determined, although there is still much uncertainty about how it will work in practice.
Pro-active local authorities have an opportunity to shape what is a loosely-defined policy. The London Borough of Southwark has led the way so far - its recently introduced VBC policy mirrors the vacancy test for the Community Infrastructure Levy. So a building is eligible for the credit if any part of it has been in lawful use for a continuous period of fewer than six months within the period of three years ending on the day planning permission first permits the development (presumably it must also be vacant at the end of this period!).
So landowners who wish to redevelop sites should not demolish vacant buildings if they want to apply for VBC. But a building will not qualify if it has been deliberately abandoned. The Planning Practice Guidance (PPG) indicates that VBC should not apply to buildings that are vacant because of redevelopment or that are covered by a planning permission or recently expired permission for essentially the same development.
How is the credit to be calculated? The PPG says: The existing floorspace of a vacant building should be credited against the floorspace of the new development. For example, where a building with a gross floorspace of 8,000 square metre building is demolished as part of a proposed development with a gross floorspace of 10,000 square metres, any affordable housing contribution should be a fifth of what would normally be sought.” This clearly indicates that the number of affordable homes required on the site should be reduced in equal proportion to the new floorspace compared to the vacant floorspace demolished. In reality, the floorspace of vacant buildings will often be far higher than that of residential development, meaning that the affordable housing requirement will be removed on the site altogether.
Whilst this will have a negative effect on local authorities’ affordable housing supply; it may have more complex implications for developers than perhaps envisaged. Many sites with vacant industrial buildings are likely to be in lower value housing markets. Developers here are likely to be targeting the affordable market, for example with pre-lets to a Registered Social Landlord. So reducing the affordability requirement may not have as much positive impact on delivery as hoped. The local authority may also be seeking to deliver higher value homes in an area, to diversify tenure locally, and may not be seeking an affordable component.
But sites with vacant buildings may also be more likely to have higher costs associated with de-contamination. Whatever the intentions of developers and local authorities, reducing the affordable housing requirement will provide greater flexibility to support the delivery of housing on sites which may have otherwise been unviable.
The policy could have more significant implications for large institutional sites. A former large hospital or college site, in a suburban or greenfield location, is likely to be occupied with buildings that have a high gross floorspace. If the site is to be developed for residential use, the affordable housing requirement will be reduced, and may be removed altogether. These are sites where the local planning authority would typically be seeking a significant affordable housing contribution and where developers would generally prefer to deliver housing for sale across the site. Local authorities will have to consider how this is likely to impact on the mix of tenures locally and their wider affordable housing strategy.
Local authorities, particularly those covering inner urban areas, will find their capacity to deliver affordable housing reduced. But equally, a general increase in housing supply on sites that may not otherwise have been viable should have a wider, positive effect on affordability.
Interestingly, unlike most policies, VBC does not have to take into account negative impacts on viability. Consequently, there is nothing to stop the policy being applied to schemes that are already profitable and where affordable housing could have been required without affecting viability.
We will be keeping a careful eye on how VBC develops in practice. No doubt case law will have a significant role to play as the policy is tested.