Council welcomes government position over developers "paying too much" for land

Islington Council has welcomed confirmation from the Government that the value of land should reflect planning requirements.

It comes amid growing concern that developers and landowners are manipulating the development viability process to build fewer affordable homes.

Islington and other councils have seen that developers sometimes disregard planning policies about building affordable homes when bidding for land. They later claim they cannot afford to build affordable homes because they have paid so much for the land.

However, in a recent letter to Islington Council the Government Legal Department said it is the Secretary of State's "unambiguous policy position" that "land or site value... should reflect policy requirements".

In response Cllr James Murray, Islington Council's executive member for housing and development, said: "Londoners desperately need more affordable housing, and we need to make sure developers are making a fair contribution. However we, and many other councils across London, are concerned that developers are using the viability process to argue they can’t afford to provide much or any affordable housing because they paid too much for land.

"We are therefore pleased to have a clear confirmation from the Government's legal department that the value of land should reflect policy requirements, which of course includes affordable housing."

The Government's letter came after a recent planning appeal decision relating to the Parkhurst Road "Territorial Army" site in Islington.  The Inspector refused planning permission on amenity grounds, but accepted the developer's argument that only 14 per cent affordable housing was viable because of factors including the price paid for the land.

However, the developer could not demonstrate it had taken Islington's affordable housing policies into account when bidding for the site, and so the council set out the first step towards a judicial review of the Inspector's decision, by issuing a "letter before claim" to the Secretary of State.

Islington was then sent a response from the Government Legal Department which confirmed it is the Secretary of State's "unambiguous policy position" that "land or site value... should reflect policy requirements".  The letter set out no explicit defence of the Inspector's reasoning and stated that the Inspector's decision was case-specific.

The government argued that it was not appropriate for the council to bring a judicial review claim in this case because the Inspector had decided that planning permission should be refused.  Its response directed the council to the 'alternative remedy' of arguing its position in respect of viability in future applications. 

The council intends to strongly argue its case in future applications, as appropriate.

The Mayor of London has also publicly supported the council's position. When asked about the case at Mayor's Question Time, he confirmed that his draft guidance "supports the use of the 'Existing Use Value Plus' approach to viability assessments which ensures that the price paid for the land is not factored into viability calculations". "If 'Market Value' is used as a benchmark" he said, "it must take full account of policy requirements and obligations".

The council has received support from Brent, Hackney, Merton, Southwark, and Tower Hamlets councils, and the homelessness charity Crisis, in relation to its concerns over the Inspector's decision on viability.

Copies of Islington's legal advice on the matter, the appeal decision, the council's letter before claim, and the Government's response are available.