Inspector allows affordable housing provision to be replaced by off-site payment

The London Borough of Lewisham granted planning application to developer Loromah Estates in 2010 for a 71-home scheme in Forest Hill. Loromah Estates made a unilateral undertaking to provide 24 of the homes as affordable housing.

Following the Council's failure to determine an application to modify that obligation within prescribed timescales, the developer submitted an appeal.

The planning inspector said in his decision letter (4-page/123KB PDF) that he gave consideration to a Statement of Common Ground submitted by the developer and the Council in which the parties had agreed it would be appropriate to modify the obligation for three years to be replaced by an obligation for a commuted sum of £200,000 towards affordable housing provision.

The inspector noted that the developer had agreed that a profit margin of 17% would be appropriate and said that, although there are instances where a developer profit of 20% is regarded as the starting point, it seemed to him that "17% fairly reflects the risk on this development, which still has a degree of unpredictability of cost, but nonetheless still benefits from an extant planning permission in an area of demand".

The inspector made reference to UK government guidance (16-page/90KB PDF) which seeks to encourage development to come forward in order to provide more homes and said that the variation in the obligation as agreed between the parties would allow that to happen.

"The modification proposed would be likely to release development in the short to medium term and free up a currently stalled site," the inspector concluded.

Planning expert Richard Ford of Pinsent Masons, the law firm behind Out-Law.com said: "The agreed 17% developer profit margin is notable in this case - a pragmatic approach taken by the developer compared to the more normal 20% as has figured in a run of section106BC viability appeals."