UK: Losing Low-Cost Homes - Five Things We've Learned

Last Updated: 9 September 2014
Article by Roy Pinnock

The initial wave of appeal decisions under a government regime that allows developers to challenge affordable housing obligations contains some pointers on how the system is shaping up.

Affordable housing is under pressure as grant funding, planning policy and land values pull in different directions. Planning obligations under section 106 of the Town and Country Planning Act 1990 are often wrongly seen as a safer bet than conditions to secure essential affordable provision. To date, obligations have given planning authorities more control; they must no longer serve a "useful planning purpose" and until recently could not be appealed for at least five years.

However, legislative changes introduced via the Growth and Infrastructure Act 2013 are now making their presence felt. The new section 106BA, which gives developers a right to ask councils to review housing obligations, and section 106BC, which gives developers a right to appeal against review outcomes, came into force on 25 April 2013. Where a scheme is judged not to be economically viable, the planning authority must modify affordable housing obligations so that it becomes so. Crucially, the process is a numerical exercise; there is no scope to reopen the planning merits.

Exploitation of this procedure to date has been surprisingly modest. Developers' desire to maintain good relations with planning authorities for later phases and new schemes may explain its low uptake. Also, the regime has limited application to larger schemes because any uncompleted elements will revert to the original obligation after three years or from April 2016.

Eight of the first 11 review appeals made under section 106BC resulted from non-determination, rather than refusal, by local authorities. Six of the first ten appeals decided were successful, while four received straight rejections. Most have been decided within four months of the original application. The number of affordable homes lost as a result is small, at around 100 units.

  1. The direction in the government's statutory guidance that actual land costs should be used in appraisals to see whether applicants overpaid for the land is being followed by inspectors.

    In section 106BC appeals involving developments at Holsworthy Showground in Devon (DCS Number 200-001-292) and South Norwood in south London (DCS Number 200-002-000), developers' overbids were discounted by inspectors. However, identifying genuinely comparable values for specific schemes and areas remains a problem in securing agreement on appraisals at appeal.
  2. Care is needed on the viability information submitted and accepted during the initial planning stages.

    Planning authorities should be wary of accepting unrealistic cost and value assumptions at the application stage. Small changes to build costs or sales values may result in affordable provision being stripped out later. Once permission has been granted, and financial and other obligations secured, it may be easy for developers to show that the planning requirements do not stack up.

    The government guidance is clear that the assumptions used during initial section 106 negotiations will set the agenda for reviews and appeals, apart from those such as build costs that are intended to be updated. Appellants seeking a higher profit margin at a later stage have been given short shrift. In the Holsworthy case, the developer sought a 20 per cent profit margin in its review appraisal, despite having used a lower rate in its original planning appeal. The higher rate was rejected.

    In a case from Surrey, a developer's request to waive a commuted sum for off-site affordable provision to improve profitability from eight to ten per cent was rejected in light of the scheme's low risk profile. The fact that the appellant had embarked on the development using an appraisal showing a loss of £84,000 did not help. Crafting appraisals to show very low margins at the planning application stage, starting the development and then seeking a higher margin generally will not work.
  3. Many authorities will find it hard to respond robustly to appeals within the 28 days allowed by the legislation owing to time and resource pressures.

    Where councils choose to resist section 106BC appeals, they should seek good valuation and other advice to ensure it is not futile. Setting up a panel of internal or external advisers who can be called on at short notice is important.

    In the South Norwood case, the authority did its homework on build costs and the inspector saw no reason to overturn its refusal. But on a scheme in Suffolk, the council appears to have done too little too late on build costs and likely sales values, and the appeal was allowed. In a case from Blackpool, the council was allowed to submit updated benchmarked sales values, build costs and land values on the last day of the inquiry.
  4. Any modifications made to obligations must ensure that schemes "become viable" at the date of the decision. While the guide emphasises that this means at today's costs and values, the approach to uncertainty over future values has caused difficulties.

    A proposal that simply makes an unviable scheme less unviable should not succeed. The legal test requires immediate deliverability and the guidance stresses its importance. An appeal involving outline permission for a scheme in Cornwall (DCS Number 200-001-440) was dismissed on the grounds that the appellant's revised appraisal did not reflect a costed, deliverable scheme.

    By contrast, an inspector allowed a section 106BC appeal on the 100-unit Mast Pond Wharf scheme in Woolwich (DCS Number 200-001-500) despite the developer's appraisal confirming that the project would remain unviable even if all the agreed affordable provision were removed. The local authority called for a review mechanism as a hedge against future increases in sales values. The inspector did not question its ability to impose one but decided that it was unnecessary, given that relaxation of the obligation's requirements would only last until 2016. He saw this as sufficient to ensure that the scheme would be delivered in the "current market", in line with the guidance.

    The inspector's analysis was directed primarily at the guidance's impetus to get construction moving. He did not address the fact that local sales values had increased by almost 30 per cent over the preceding three years, nor the duty to apply "such other modifications" as inspectors consider "necessary or expedient" to ensure the effectiveness of obligations at the end of the three years.

    However, those points did not feature in the legal challenge brought by the local authority. Its grounds were that the inspector had misapplied the law on the need for the scheme to become viable at the decision date, misunderstood its reasons for asking for the review mechanism and given inadequate reasons for refusing to impose one. In June, the High Court dismissed these claims as unarguable.
  5. Few authorities have taken the initiative by proposing different modifications put forward by developers. A more adventurous approach is needed from councils.

    Under section 106BA(6), obligations can be modified in "some other way" from those sought by the applicant. In an appeal decision this month from east London, the inspector accepted that the scheme was unviable, though not to the extent claimed by the appellant, and imposed a commuted sum towards off-site provision. Also, the regime does not explicitly prohibit councils from modifying obligations to anticipate future increases in profitability. This is worth considering, if it can be done in way that preserves minimum levels of profitability and the ability to fund and deliver the scheme straightaway.

    Conditions can still be used to secure affordable housing, and any appeal on requests to vary them is subject to an overall judgement on the planning merits. Wider use of conditions would kill off some of the tortured drafting and negotiation of affordable housing obligations by lawyers. Where obligations are used, authorities should consider how review mechanisms can be built in more consistently. Properly drafted, this could oust section 106BA altogether.

This article appeared in Planning magazine, 29 August 2014

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
28 Sep 2017, Seminar, London, UK

On 26 July the FCA published its long-expected consultation paper on the extension of the SMCR to all FCA-authorised firms. The so-called "core regime" introduces the key concepts of regulator-approved senior managers, firm-approved certification staff and conduct rules applicable to virtually all staff.

3 Oct 2017, Conference, Zurich, Switzerland

As the founding Partner of the Europe-Iran Forum, Dentons Europe will once again support this year’s event. This compelling event which explores all Iran-related topics will take place in Zürich on 3rd and 4th October.

4 Oct 2017, Workshop, London, UK

We are hosting an interactive workshop where we will run a mock High Court trial of an employee competition case – where the members of the audience are the judges. The session, aimed at in-house counsel and HR professionals, will offer an insight as to how disputes involving employees moving to a competitor play out in practice.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.