Guide Viability Guidance Notes

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5. Viability Guidance Note 5: Viability and Exception Sites

Viability Guidance Note 5: Viability and Delivering Exception Sites

This Guidance Note sets out some additional advice and information that aims to assist community groups and others seeking to promote new housing development under Strategy 35 of the Local Plan-Exception Mixed Market and Affordable Housing At Villages, Small Towns and Outside Built-up Area Boundaries.

What is a Rural Exception Site?

Rural exception sites are sites for affordable housing development in rural locations where market housing would not normally be acceptable because of planning policy constraints. Homes can be brought forward on these sites only is there is a proven unmet local need for affordable housing evidenced by a housing needs survey. 

The Council believes that the best way to deliver affordable housing in rural areas is by working in partnership with local communities, landowners and parish councils. EDDC work in partnership with Devon Communities Together who work with local communities and parish councils to establish affordable housing need.

 What is Strategy 35 and what does it allow?

In general terms housing outside of built up areas boundaries or allocated sites is restricted. Strategy 35 enables housing development subject to strict criteria, and only where there is robust evidence of housing need.

 Where can Strategy 35 sites be considered?

In terms of location, exception site mixed affordable and open market housing schemes can be considered at villages and outside of Built-up Area Boundaries, as long as they comply with the other requirements of the policy and where there is robust evidence of housing need.  There should also be clear community support for the scheme. 

 What constitutes robust evidence of Housing Need?

Robust evidence of rural housing need is provided through a local Housing Needs Surveys produced by the Rural Housing Enablers (RHE) at Devon Communities Together.  Where not undertaken by an RHE any survey should use their methodology and be undertaken in partnership with the Town or Parish Council(s) and/or Neighbourhood Plan Group.  EDDC commission three surveys a year, the choice of where these are undertaken is informed by anticipated housing need and potential development opportunities.  If your scheme is not one of the three annual surveys EDDC supports, the RHE will undertake additional surveys for a fee.

If an affordable housing need is identified through the survey the report will give an indication of the number, type and tenure of affordable homes that are need by people with a local connection.

 How many houses can be provided on a Rural Exception Site?

Planning policy states that rural exception sites can provide “up to or around 15 dwellings”, in total, as long as they comply with the other requirements of the policy; in particular there will need to be a proven need for the resulting affordable housing.  However, the number of units that could be supported will be determined by the local housing needs survey.

How many houses have to be affordable?

The policy is clear that 66% or more of the houses have to affordable.  If the proposal is for ten houses, we would expect 7 to be affordable, as 6 would be below the 66% policy requirements, as so would be contrary to the adopted Local Plan.  Sites can be 100% affordable housing.  The open market housing is justified in terms of enabling affordable housing, through cross-subsidy, to be delivered, not the other way round.

What counts as Affordable Housing? 

Affordable Housing is an umbrella term that covers a wide range of housing options for people who are unable to meet their housing needs on the open market.  The National Planning Policy Framework published in March 2012 defines Affordable Housing as:

Social rented, affordable rented and intermediate housing, provided to eligible households whose needs are not met by the market. Eligibility is determined with regard to local incomes and local house prices. Affordable housing should include provisions to remain at an affordable price for future eligible households or for the subsidy to be recycled for alternative affordable housing provision.

Social rented housing is owned by local authorities and private registered providers (as defined in section 80 of the Housing and Regeneration Act 2008), for which guideline target rents are determined through the national rent regime. It may also be owned by other persons and provided under equivalent rental arrangements to the above, as agreed with the local authority or with the Homes and Communities Agency.

Affordable rented housing is let by local authorities or private registered providers of social housing to households who are eligible for social rented housing. Affordable Rent is subject to rent controls that require a rent of no more than 80%of the local market rent (including service charges, where applicable). Intermediate housing is homes for sale and rent provided at a cost above social rent, but below market levels subject to the criteria in the Affordable Housing definition above.

These can include shared equity (shared ownership and equity loans), other low cost homes for sale and intermediate rent, but not affordable rented housing. Homes that do not meet the above definition of affordable housing, such as “low cost market” housing, may not be considered as affordable housing for planning purposes.

Do starter homes count as affordable housing? 

Although the Housing and Planning Act 2016 provides a statutory framework for the delivery of starter homes, at the moment, starter homes are not included within the definition of affordable housing.  Although the Government has signalled that they expect Starter Homes to fall within the definition of affordable housing, as yet no amendments to guidance or legislation have occurred to facilitate this.  In fact, the publication of the Housing White Paper 2017 indicates that the original proposed definition of a Starter Home will now be changed, but is unclear as to what exactly it will be changed to.  Therefore, there is currently no way of pinning down what counts as a Starter Home in a legal agreement seeking to include them.

We also currently have no evidence of the housing need for Starter Homes, at either the District wide, or more local, level. 

The Housing and Planning Act 2016, in relation to planning permission: provision of starter homes states:

  1. The Secretary of State may by regulations provide that an English planning authority may only grant planning permission for a residential development of a specified description if the starter homes requirement is met.
  2. Where the Secretary of State makes regulations under this section, the regulations must give an English planning authority power to dispense with the condition requiring the starter homes requirement to be met where-
    • an application is made for planning permission in respect of a rural exception site, and
    •  the application falls to be determined wholly or partly on the basis of a policy contained in a development plan for the provision of housing on rural exception sites.

It is therefore currently not possible to include starter homes on excerption sites as affordable housing.  If starter homes were proposed they would be considered as a component of the open market units.

How long are housing needs surveys valid?

Local need surveys represent a snapshot in time.  As such they are considered valid only for three to five years, as circumstances change.

What if another scheme has already met the need?

If the proposer of an exception site scheme is working closely with the local community it would be extremely unlikely that this situation would arise.  Although in theory it could happen if the community is considering several potential sites, all of which have some merit.  In practical terms if there were competing applications, if the first application permitted met all of the identified housing need, and there would then be no further need remaining to justify the second application.  If it only met some of the need, a second scheme that met the remaining need could be supported.

Can I argue viability on an Exception Site? 

Strategy 34 sets out the affordable housing targets that will apply to residential development in different locations in East Devon.  The targets set in this policy include provision for the amount of affordable housing permitted under this policy to be subject to viability.  In practice this means if an applicant wishes to argue that their scheme cannot afford to make the required on-site provisions or off site affordable housing contributions in lieu of on-site provision, they can seek to make their case through the submission of detailed viability assessments and evidence to the Council.  The Council will consider this information and may decide to accept a lower amount of affordable housing where viability issues have been clearly demonstrated.  However, as Strategy 35 sites, are by definition, an exception to the standard housing delivery, the option to make a viability argument in this case does not apply. 

What about the additional benefits of new housing development?

Although the Council recognises the benefits that additional housing can bring to this district, such benefits are conditional on the development being an appropriate and sustainable location, and meeting a local housing need.   The Council currently has a five year land supply and this reaffirms the prioritisation of a plan-led system for meeting housing need.

Who gets to live in the houses provided on Rural Exception Sites?

The affordable housing will go to persons who are deemed to be in housing need and are registered on Devon Home Choice, the Council’s waiting list for rented properties and Help to Buy Southwest for shared ownership houses.

Housing on exception site will be subject to a local connection policy.  Strategy 35 sets out the meaning of local connection in the context of the policy. Local connection means one or more of the following connections in priority order in respect of parishes or the parish groupings:

  • persons who have been permanently resident therein for a continuous period of three years out of the five years immediately prior to the Affordable Dwelling being offered to them; or
  • being formerly permanently resident therein for a continuous period of five years at some time in the past;
  • having his or her place of permanent work (normally regarded as 16 hours or more a week and not including seasonal employment) therein for a continuous period of at least 12 months immediately prior to being offered the affordable dwelling; or
  • persons who can demonstrate a close family connection to the district in that the person’s mother, father, son, daughter or sibling has been permanently resident therein for a continuous period of five years immediately prior to the affordable housing being offered to them and where there is independent evidence of  a caring dependency relationship.

How do the houses remain affordable?

The houses will be subject to a perpetuity restriction in the Section 106 meaning the homes will remain affordable for a period of at least 80 years.

The majority of East Devon is classed as a Designated Protected Area (DPA) which means that shared ownership properties will be subject to stair-casing restriction that prevent the purchasers acquiring the full freehold. The stair-casing restriction limits ownership to 80%.

What if the Exception Site is not viable?

Strategy 35 includes very clear policy criteria including the minimum level of affordable housing set out 66% for such sites.  It is very clear sites can be considered in locations where development would not normally be accepted, and as such the value of the site must therefore reflect this policy position, and will never reach full residential value.  The delivery of exception site assume a reduced land value, and allowance of up to 34% open market housing is intending to offer cross-subsidy needed to make the scheme stack up.  This cross-subsidy is needed for the scheme viability and cannot be used to justify a higher land value, or seek to justify a value reflecting full residential use. Rural exception sites are sites for affordable housing development in rural locations where market housing would not normally be acceptable because of planning policy constraints.  Any valuation of the land must therefore be based on delivery of an exception site scheme.

The Council is required to review any information submitted with an application.  We have received viability appraisals for exception site housing seeking to use viability to justify a lower that 66% amount of affordable housing.  However, if you are seeking a lower than 66% of affordable housing you cannot be approved under this policy.  Any such proposals would therefore be seeking residential permission in location that would not normally be supported by planning policy.  In terms of considering the levels of affordable the policy that would apply to such scheme would be Strategy 34: District Wide Affordable Housing Provision, which includes a requirements for overage if an applicant was demonstrate and justifying a lower amount of affordable housing. 

What if Rural Exception Site has delivery issues? 

It is important to be aware that exception site delivery is by its very nature likely to be marginal.  The open market houses are being allowed only to ensure that there is cross-subsidy within the scheme to ensure that the affordable housing units are viable and deliverable.  Exception site houses will be subject to restrictions to comply with the planning policy requirements, and these can be expected to make it more difficult and/or expensive to secure finance.  Not all housing associations are interested in, or able to get involved in, the delivery rural exception sites.  Those who are, tend to be most specialist rural providers.  

Community Land Trusts are one of the ways of delivering Rural Exception Sites and they can currently access funding specifically set aside to help community-led housing projects.  This is additional money to the funding available to Housing Associations. 

In relation to the open market housing, the small numbers permissible under the Rural Exception Site policy, cannot benefit from economies of scale, and as such are likely to be more expensive to build and less attractive to funders and developers. 

The Council can provide advice on which Housing Associations are likely to be interested in working in partnership with you on a Rural Exception Site.  Please contact us for further information.