Does Planning Policy Work for Social Value?

On 9 March, NEAT Developments submitted their planning application to Enfield Council for a mixed-use development on Colosseum Retail Park, what is now B&Q and Dunelm on the A10/Southbury Road junction retail park. It promises 444 new homes in high-rise towers, one a 29-storey tower block, in the first phase along with workspace, shops, creche and doctors surgery space, and parks. 325 new jobs are promised in the new neighbourhood, plus 155 jobs created during its construction: https://www.neat-developments.com/news/neat-in-the-community-1/.

 In later phases, a potential additional 1,356 new homes can be added. Of all the homes built, 35% are promised to be affordable. That’s 630 much needed new affordable homes in the centre of the borough of Enfield. And 1,800 new homes go some way, on fear of penalty, to the Council’s new ten-year target of 12,460 built by the 2028/29 financial year set by the Mayor of London in his new London Plan to be published this year.

 The Mayor’s target includes “50 per cent of all new homes being genuinely affordable” (Policy GG4 Part B). We know he is serious because he has spelt out “per cent” in the Latin words rather than use the % symbol so as to be unequivocal in what the target is if he ever has reason to challenge Local Planning Authorities (LPAs). The Mayor attributes a “significant” part of the cause of the current housing crisis in London to a lack of affordable housing. He suggests London needs 43,500 new affordable homes each year for the next 20 years to meet demand, a finding from the Strategic Housing Market Assessment and Strategic Housing Land Availability Assessment carried out by the Mayor. But two years of public consultation and pre-application negotiations with Enfield Council has resulted in NEAT Developments submitting an application with just 35 per cent.

Enfield is allowed to do this because the new London Plan defines the 50% target as “strategic”. As far as I understand the reasoning here, the Mayor has the opportunity to be strategic in his policy by determining it for a larger market, London, than might LPAs individually, for example, for the borough of Enfield alone. Just because there is a need for 50% affordable housing, it does not mean that all proposed developments, and the land upon which they will be built, are economically viable to accommodate it. Some are more viable than others and, being strategic, the Mayor can cream out of each what he can without blocking the construction of less viable developments completely. If the developer is not going to make a profit (15-20% is tolerated), then it is not going to want to build the development in the first place.

Land in different parts of London is more valuable than others and this affects the value of homes built in different parts of London. In the London Plan, the Mayor laments past protracted financial “viability debates” between developers and LPAs slowing down the building process. So, another consideration he has given to hitting the target of 43,500 is the speed at which planning applications can be granted for major developments such as NEAT’s. In a seeming equivocation on the target of 50%, the Mayor has adopted a “threshold approach” to planning applications (Policy H5). This means that, an application with at least 35% affordable homes, of which 30% are intermediate homes (priced at no more than 80% of open market value including using shared ownership models) and (depending on the policy of each borough but in the case of in Enfield) 70% are social rent, (as well as those promising to meet all of the LPA’s other s106 planning obligations) is fast-tracked through the planning process. An application that does not meet these minimum requirements will be considered if a viability assessment is attached explaining why it is not financially viable. If permission is granted for a development below the affordable housing threshold (and all phases must be considered together in one application), the LPA should consider a late-stage review after some housing units are already sold to reassess whether 24.5% socially-rented homes plus 10.5% intermediate homes within the development was, in fact, unviable. If, on reassessment, the original viability test was wrong, then the developer either has to build more affordable housing on site or make a financial contribution in lieu for the Council to commission the building of their own affordable homes.

Therefore, the target for developers, the institutions actually building our way out of the housing crisis, is 35%. For development on public land, for example, land owned by the Council, the target is 50%. Nonetheless, an application for planning permission was submitted by Enfield Council in July for Phase 2 of the Meridian Water development in Edmonton: 2,300 new homes to be built by Galliford Try on land (near IKEA) bought by the Council. The application included 40% affordable housing thus requiring a viability assessment to be included explaining why, despite years of preparation of Meridian Water, the Mayor’s minimum threshold is not possible.

 With developers obligated to build between 35 and 50% affordable homes, how this “strategy” adds up to the 50% needed in London overall is unclear. Funding is available from the GLA to subsidise housing associations to build up to 60% affordable homes, but on the publication of the last (amended) London Plan and Supplementary Planning Guidance in 2016, the Mayor claimed that the Government allocation of ￡3.15bn was not enough to reach the target: https://www.cityam.com/sadiq-khan-misses-his-affordable-housing-target-for-second-straight-quarter/

 The Housing and Planning Act 2016 requires LPAs to adopt their own Local Plan and Enfield Council will be consulting on a draft later this year. It is like a version of the London Plan for Enfield that includes the legal requirements set out in the London Plan as well as wider national planning policy and, in addition, its own policies extending the legal minimum requirement. In the meantime, targets in Enfield's Supplementary Planning Document for affordable housing is 40% (amounting to 720 affordable homes required in NEAT’s application).

Enfield Council is bound by the Greater London Authority Act (1999) to comply with the Mayor’s threshold approach to affordable housing targets and so will consider an application by these standards. NEAT’s application is for 70% intermediate homes and 30% social rent and so meets neither the Mayor’s threshold for tenure split to be fast-tracked nor Enfield Council’s requirement of at least 40% affordable homes of which at least 70% must be social rent. The only justification NEAT is allowed to offer for not meeting the requirements is that the split would make the development as a whole financially unviable. If the viability assessment is independently deemed correct, then Enfield should grant planning permission and this is what should be built. But why have a policy of 40% if Enfield is obligated to consider 35% or less?

A similar development is being built in Tottenham by Grainger: Apex House, on the corner of Seven Sisters Road and the High Road. It is a 23-storey development with 163 units, 40% earmarked as affordable, the target also set in Haringey’s Local Plan. The development also offers 929 sqm of commercial space creating up to 450 jobs. 

So, why can Grainger afford 40% in Seven Sisters but NEAT cannot in Southbury? Viability is primarily assessed on “residual land value”. This is the open market value of the development less the build cost, developer’s profit margin, the Community Infrastructure Levy (CIL) imposed by both the LPA and the GLA, and planning obligations to mitigate the social cost of the new physical infrastructure as well as the drain on resources from more people and businesses coming to the neighbourhood (s106). What is left must be the commercial value of that piece of land. Obviously, the land value in Seven Sisters, right next to a Zone 3 tube station (Seven Sisters) and in the middle of a town (South Tottenham), is going to be greater than land next to a six lane duel carriageway (the A10) and in the middle of nowhere (NEAT’s publicity claims that the development will link the east and west of the borough but, in reality, it falls between the two on top of the physical barrier, the A10, that divides them, albeit on the east side of the road).

If the open market value for rented flats in Apex House is higher, then this can offset more affordably-rented units. The constructions themselves, each a high-rise block of flats, was described to me by Grainger as “just a box”. The build cost is relatively low (per flat). CIL is ￡49.30/sqm (index-linked) in Southbury for the open market residential floorspace, and ￡73.95 for the retail space. The remaining floorspace is zero. In Seven Sisters, open market residential CIL is ￡20.96/sqm, and ￡34.94 for the commercial/retail space. The Mayor’s CIL is a flat rate across all of the two boroughs. s106 financial contributions due for Apex House, based on Haringey’s planning policy, will have been around ￡235,000, 0.4% of the build cost. For Colosseum Park, not including for affordable homes not delivered if they are deemed viable, it will be c￡7.5m, 1.6% of build cost. As well as making a lower s106 contribution (at least financial rather than in-kind), a two-bedroom flat in N15 (South Tottenham) in a new development, say Zenith House, will command ￡1,400pm in rent on the open market, and in EN1 (East Enfield), say Cosmopolitan Court, ￡1,100pm (not that viability assessments should be based on the value of comparable properties in the area).

But, if 40% affordable housing, including 28% social rented units, is not viable right in the centre of Enfield borough on a cheap piece of land in three boxes built as high rises of varying heights of 29, 18 and 9 storeys, then where is it viable? It seems unlikely that Enfield would allow three high-rise blocks of flats on more valuable land in, say, Enfield Chase, Southgate Green or Hadley Wood, and one would think using land more intensively in the less densely used areas in the centre of the borough, such as on a Dunelm and B&Q, each with their own spacious car parks, was more the basis for the Council’s thinking on planning policy.

So, too, would councillors have in mind Enfield’s long-awaited Meridian Water development to the south (in Upper Edmonton and Edmonton Green) when determining planning policy in order to pay for the social infrastructure and economic inclusion of Edmonton residents that would justify the Council’s claim to “placemaking” rather than just allowing private developers to build 10,000 new flats. For economic inclusion, Enfield recently released a press release of their “jobs strategy” which the Enfield Independent dutifully published unscrutinised: https://www.thetottenhamindependent.co.uk/news/18303823.enfield-council-launches-meridian-water-jobs-strategy/. It includes 25% of the construction jobs created “expected” to go to “local” people paying at least the London Living Wage and 10% of the supply chain investment commissioned to local businesses. In the press release, senior councillors comment on the need, in a relatively deprived area, for existing residents to benefit from the economic development of their neighbourhood, but it does not say how this will happen. In fact, it is not so much a strategy as s106 policy, and has been since the s106 Supplementary Planning Document was adopted by the Council in November 2016.

The policy alone has not resulted in local residents and businesses benefitting much from development in their neighbourhoods since then. Major developments have resulted in no or few local jobs or supply chains being reported to the Council (at time of writing) including from Chase Farm Hospital (Linden Homes), Electric Quarter in Ponders End (Lovell), SEGRO Park in Brimsdown, Ladderswood Estate in New Southgate (Mulalley), Trent Park (Berkeley) or Beavertown Brewery in Ponders End to name but a few. However, a study by the Joseph Rowntree Foundation back in 2006 found that, nationally, most s106 agreements have been implemented as originally specified (Delivering affordable housing through s106: outputs and outcomes, JRF, 30/5/06). There have also been notable successes in Enfield such as the Alma Estate renewal in Ponders End and New Avenue Estate in Oakwood (Countryside), Metaswitch office in Enfield Town (McLaren and Metaswitch) and Capitol House in Winchmore Hill (Dandara). However, this may be due to the proactiveness of the developer or planning applicant to deliver social value rather than due to efforts by the Council: the study also found that, where outcomes were not what an LPA expected, it was because the s106 agreement was not sufficiently detailed. The study reassures us that "those involved in [s106] negotiations [14 years ago] have learned from their experiences" but Enfield Council, to this day, does not have a set s106 agreement template. Different templates from different periods relating to different policies and initiatives have been mixed and matched by the Council’s commissioned lawyers, Browne Jacobson, and chosen for each development based, seemingly, on which template is closest to hand.

It is unclear why releasing the details of the three-plus-year-old planning policy as a press release, without an accompanying employment and skills strategy, or much evidence that Enfield has applied its social value policy in the past, should lead to local residents not being economically excluded from the development of Meridian Water. So, with the soon-to-be-published new London Plan, the test remains: does planning policy work for affordable housing, economic development and other social value?

For a tool to calculate all of the CIL and s106 contributions, financial and in-kind, required from a planning application to one of the four North London boroughs, Enfield, Haringey, Waltham Forest and Barnet, or Lambeth, go to www.build-local.co.uk/planningtool