Parkhurst Road Ltd v Secretary of State for Communities and Local Government
| Jurisdiction | England & Wales |
| Judge | Mr Justice Holgate |
| Judgment Date | 07 March 2018 |
| Neutral Citation | [2018] EWHC 991 (Admin) |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 07 March 2018 |
| Docket Number | Case No: CO/3528/2017 |
[2018] EWHC 991 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
PLANNING COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Holgate
Case No: CO/3528/2017
and
Mr Russell Harris QC (instructed by Town Legal LLP) for the Claimant
Mr Tim Buley and Mr Toby Fisher (instructed by GLD) for the 1 st Defendant
Mr Daniel Kolinsky QC (instructed by London Borough of Islington) for the 2 nd Defendant
Hearing dates: 6 th and 7 th of March, 2018
Judgment Approved
Introduction
The Claimant, Parkhurst Road Limited (“PRL”), seeks to challenge the decision letter dated 19 June 2017 of the First Defendant's Inspector in which its appeal against the refusal of planning permission by the Second Defendant, the London Borough of Islington (“LBI”), for the redevelopment of the former Territorial Army Centre, Parkhurst Road, Islington, London, N7 0LP was dismissed.
On 28 September 2017, Gilbart J ordered the application for permission to apply for statutory review to be dealt with at a rolled-up hearing. He decided that ground 4 of the proposed challenge was unarguable. It had been contended under this ground that the Inspector failed to comply with his duty to give reasons (in accordance with North Wiltshire D.C v Secretary of State (1993) 65 P&CR 137) for reaching different conclusions from those in an earlier Inspector's decision dated 22 September 2015 (see paragraphs 13 and 14 below). Mr Russell Harris QC, stated on behalf of PRL that his client no longer pursued the point.
The site comprises about 0.58ha of land and has been vacant for several years. It was included in “Islington's Local Plan: Site Allocations” DPD (adopted in 2013) as site NH5 with “potential for intensification for residential accommodation to help meet housing need in the Borough”. The former owner of the site, the Ministry of Defence, invited competitive bids to purchase the freehold. PRL was the successful bidder and in May 2013 purchased the site for £13.25m.
The 2015 public inquiry
In December 2013 PRL made an application to LBI for full permission to develop 150 residential units in a series of buildings ranging from 4 to 7 storeys in height to replace the existing 1 to 3 storey buildings. The scheme was then reduced to 112 units rising to a maximum height of 6 storeys. The Council refused permission in October 2014 and PRL appealed to the First Defendant. An inquiry lasting some 6 days was held in July 2015. The Inspector decided that the main issues were the effect of the proposed scheme firstly on the character and appearance of the area and secondly on the amenity of neighbouring properties, and thirdly whether the proportion of affordable housing proposed was sufficient.
The Inspector concluded that elements of the scheme rising to 6 storeys would result in serious harm to the character and appearance of the area and that the effects on certain neighbouring properties as regards privacy and outlook would be seriously harmful to living conditions. In view of those “serious shortcomings”, the Inspector decided to dismiss the appeal.
The proposal before the 2015 inquiry was that 16 of the units should be affordable housing (14% of the total number of units). LBI contended that the proportion proposed was inadequate, relying on local policies that required each scheme to provide the “maximum reasonable amount of affordable housing” in the context of an overall affordable housing target of 50% of all new housing across the Borough.
It appears from paragraphs 62 and 63 of the 2015 decision letter that a number of inputs to the viability appraisals carried out by the two parties were agreed at that stage, notably the sales values achievable on the residential units and development costs, including £2.67m for the costs of complying with other planning obligations and the payment of the Community Infrastructure Levy (“CIL”). However, the parties disagreed upon an important input, namely the Benchmark Land Value (“BLV”), that is the price at which a reasonable landowner would be sufficiently incentivised so as to be willing to sell the site for alternative development, having regard to the requirements of relevant planning policies and obligations.
PRL used a figure updated from the purchase price it had paid for the site as an input into its viability analysis, representing “a fixed acquisition cost.” On this assumption, the resultant profit levels for the developer were below normal target values, and so PRL contended that residential development restricted to the scale proposed in the application would not be deliverable if a greater proportion of affordable housing were to be required.
LBI disagreed with that approach. Using the same values as those adopted by PRL save for the site acquisition cost, the Council carried out a series of residual valuations inputting alternative affordable housing proportions of 50%, 40% and 32% which produced residual land valuations for the site of £4.98m, £7.32m and £9.35m respectively. They contended that the price which PRL had paid for the site was excessive since it did not properly reflect the policy requirement to maximise the affordable housing component on each scheme, in the context of the 50% “target”.
It was confirmed during the hearing before me that PRL has never made available in the planning process the viability appraisal in 2013 upon which it based its successful bid of £13.25m. Given the substantial reliance placed by PRL upon that bid, that document was plainly of direct relevance to the weight that could be placed upon the actual purchase price for the appeal site. It would have revealed the assumptions made about the costs of planning obligations (including affordable housing) and CIL. It is also possible, if not likely, that that bid was influenced by the prospect of achieving a significantly larger scheme than the reduced scheme for 112 units proposed in 2015.
The Inspector who conducted the 2015 inquiry acknowledged that if viability appraisals are conducted using market prices which are inflated by bidders ignoring or diminishing requirements in development plan policies to provide affordable housing, that may undermine compliance with those policies. He said this at DL 72:
“In this context I can understand the wider concern of the Council about the possible effect of inputting purchase prices which are based on a downgrading of the policy expectation for affordable housing on the eventual outcome of a scheme viability appraisal. If such prices are used to justify a lower level of provision, developers could then in effect be recovering the excess paid for a site through a reduced level of affordable housing provision. Such a circularity has been recognised in research for the RICS, and the Council in its SPD and the GLA (in its Development Appraisal Toolkit Guidance Notes of 2014) are alive to this potential outcome of using purchase price as an input in viability assessment. The Council postulates an undesirable scenario of diminishing returns of affordable housing and eradication of the potential to achieve its delivery. It argues that the current appeal is an opportunity to return to a proper approach.”
This “circularity,” or self-fulfilling prophecy, became a central issue at the inquiry in 2017 which led to the decision now being challenged. The issue may also arise where an actual purchase price is inflated because of overly optimistic expectations about the amount of development for which planning permission might be granted in due course.
The Inspector also recognised that a residual land valuation may be unduly influenced by one party's view about the development which the site can accommodate and thus be too orientated towards a “scheme value,” rather than the underlying land value of the site reflecting its attractions to all potential bidders in the market (DL 73).
The Inspector did not accept LBI's case on affordable housing provision because it was not supported by any market based evidence (DL64). There remained the market evidence advanced by PRL. They relied upon the price they had paid to the MoD for the site and the closeness of competing bids to that price (DL65), a subsequent unsolicited offer from one of the unsuccessful bidders (DL 66), an independent valuation strongly influenced by evidence from the sale of the site (DL67), and an analysis of 21 land sales in Islington since 2010 (DL68). The Inspector recognised that the “comparables” varied in terms of location, nature, size, constraints, scheme content and affordable housing provision and also that the assumptions made by purchasers were unknown (DL68 to 71).
The Inspector accepted that each of the methods used by PRL had limitations, but nonetheless, in his judgment, they gave a consistent indication that the price paid by PRL “was not of a level significantly above a market norm” and there was no evidence to the contrary (DL69). Indeed, he considered that the comparable market evidence, which was said to indicate a value for the appeal site of between £12.98m and £16.44m, “supports a higher valuation for the site than that used by the appellant” (DL74). Accordingly, he concluded that PRL's land value figure of £13.26m “can be regarded as adequately reflecting policy requirements on affordable housing” (i.e. should be treated as the BLV) and PRL's proposal would achieve the “maximum reasonable amount of housing” for the site (DL75).
Although PRL's appeal was dismissed on other grounds, LBI were very concerned about the approach taken by the Inspector to viability assessment in order to determine whether “the maximum reasonable amount of...
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