Providing schools can mitigate affordable housing requirements

Out-Law Analysis | 28 Jan 2013 | 8:00 am | 2 min. read

FOCUS: Housing developers are increasingly being required to build schools on their land as part of their schemes. This need not damage the viability of schemes, as long as developers can negotiate down other planning costs. 

There are signs in the market that this will be possible, and already some local authorities are prepared to waive all or most of the affordable housing requirement previously attached to a scheme in return for the provision of a school by the developer.

This is because the provision of schools is an increasingly high priority for local authorities. They are facing pressure on school places brought about by population growth and the movement of families into their areas.

Add to that the dynamic changes in the education sector in England and Wales with the extension of the Academies Programme and there exists a clear opportunity for the private sector to work with local authorities in innovative ways.

Local authorities have seen the opportunity, too, and are already in some cases waiving all or part of the affordable housing requirement in return for developers building schools. Developers have successfully argued that the additional development costs associated with providing the school and the opportunity cost of not providing residential accommodation justify this approach, as the cumulative burden of providing a school and providing affordable housing would make a development unviable.

This is supported by Government policy. The National Planning Policy Framework (NPPF) instructs local authorities to be flexible in meeting the Government aim that "a sufficient choice of school places is available to meet the needs of existing and new communities.".

"Local planning authorities should take a proactive, positive and collaborative approach to meeting this requirement, and to development that will widen choice in education," it says. It goes on to say that the cumulative impact of planning obligations and policy burdens should not put the viability of development at risk.

This all supports local authorities substituting the building of a school for contributions through section 106 contributions or the community infrastructure levy (CIL), where that meets the authority's aims.

For a developer there are advantages, too. If it is building the school then this provides certainty about the timing of delivery and can lead to cost savings through efficiencies in the construction supply chain. On-site provision can also increase the value of the housing, because of the proximity of school facilities with capacity to accept new children.

To take advantage of this, though, developers will want to seek assurances that school places will be made available to the residential occupiers of their mixed-use schemes, for example by reserving spaces or by giving occupiers rights of first refusal.

This approach has also had the backing of planning inspectors. In public examinations on local planning policies where proposals to allocate and safeguard private sector land for education facilities have proved particularly contentious, planning inspectors have been willing to recommend adoption of such policies on the condition that other planning requirements, including affordable housing, are scaled back or even omitted entirely. 

There are some issues that developers should be aware of if they are going to ask local authorities to reduce other planning-related commitments because of the provision of a school.

Developments providing residential or commercial floorspace alongside a new school may be liable for CIL, depending on local circumstances. The additional CIL tax charge can be the difference between a scheme being viable and unviable. Implementing effective CIL mitigation strategies will become increasingly important for developers as CIL becomes chargeable in more areas of the country. CIL liabilities can be avoided or reduced through the use of appropriate planning strategies and structures and CIL can even be reimbursed using available planning powers under the CIL Regulations.

The contractual documents that will govern a scheme's construction will also need to be examined in the context of the planning strategy being used. Delivery of a new school requires the preparation of a number of contractual documents, including design and build contracts, sale/lease agreements and funding agreements. All of these need to be fully aligned to the planning strategy to ensure that development objectives are achieved.

Tom Johnson is a real estate expert at Pinsent Masons, the law firm behind Out-Law.com