In Stonewater (2) Limited v Wealden District Council [2021] EWHC 2750 (Admin), the High Court’s judgment considers the way that Social Housing Community Infrastructure Levy (CIL) relief for a development with 100% affordable housing interacts with a Section 106 Agreement that secures a policy-compliant amount of affordable housing.

Whilst this may seem a devastating blow, all is not lost when bringing forward 100% affordable schemes. In fact, the court’s judgement would in principal support the position that Social Housing Relief can be available when delivering 100% affordable schemes.

Below, we summarise how the decision was made and what you can learn from it to make an effective application for CIL relief.

The case

Planning Permission was granted in 2020 for the development, described as follows:

Residential development of 169 dwellings including enhanced junction and access arrangements at Ersham Road/Coldthorn Lane, 35% affordable housing and play areas

The Section 106 Agreement also provided that the development was to consist of 59 affordable units (being 35% of the total amount of units on the development rounded up to the nearest unit) and that a Private Dwelling Unit(s) means “any Dwelling(s) which is not an Affordable Housing Unit”.

Stonewater subsequently purchased the site, intending to use the whole development as affordable housing. They submitted an application for Social Housing CIL Relief (in accordance with Regulation 51) on the basis all of the units would be “qualifying dwellings” as per Regulation 49, which was twice refused by Wealden District Council.

The Court’s judgment

The Court reached the decision that the Council was correct in refusing Social Housing CIL Relief, for the following reasons:

1. The description of affordable housing in the Section 106 Agreement only permitted a total of 59 affordable housing units in the planning permission;
2. The decision notice setting out the description of the development also states that the development will consist of 35% affordable housing;
3. The Court is only entitled, in very exceptional circumstances to imply terms into planning documents. The Claimant’s contention to imply the words “at least” 35% was not accepted;
4. Regulation 51(3)(d)(ii) of the CIL regulations states that an application for social housing relief must be accompanied by evidence that the dwellings would be “qualifying dwellings” for the purposes of Regulation 49;
5. The applications for Social Housing CIL Relief were not supported by any evidence that the dwellings would be “qualifying dwellings” other than the application form which contained a breakdown of the tenures which Stonewater intended to deliver;
6. In order to increase the amount of affordable housing on the development above 35%, an application would need to be made to the Council. Under that application, the Council is entitled to consider all the circumstances (including the provision of infrastructure);
7. In the absence of the Council’s approval to increase the percentage of affordable housing, it cannot be said that Stonewater have provided sufficient evidence that the dwellings would be used as “qualifying dwellings” because to do so would put them in breach of planning.

Key takeaways from the judgment

The issue here hinged on the evidence that the units which were not bound by the Section 106 Agreement would amount to “qualifying dwellings” for the purposes of Social Housing Relief.

The Court is very clear that a Section 106 Agreement is not a pre-requisite to Social Housing Relief; but that it holds weight when the Council considers whether sufficient evidence has been provided that the dwellings will be used as affordable dwellings. The adequacy of the evidence is “a matter for the decision maker having regard to the specific facts and circumstances of the case” which will be challengeable by judicial review. There was no discussion in the judgement as to what (in the absence of the Section 106 Agreement) would amount to sufficient evidence or any submissions as to what evidence Wealden (or any other Council) have accepted in the past, if anything.

The Court also did not fully consider whether the requirement to incorporate more than the policy compliant amount of affordable housing into the Section 106 Agreement would meet the Regulation 122 tests for planning obligations.

What does this means for registered providers (RPs) going forward?

Assuming this decision is upheld, it will have a significant impact in the delivery of 100% affordable housing schemes. In particular, those developments with existing planning permissions and Section 106 Agreements need to consider whether the wording falls foul the High Court’s interpretation, limiting the development to a specific percentage of affordable.

When you are in the process of obtaining planning permission, you need to carefully consider the descriptions of development and the section 106 to ensure that it meets the objectives of the development.

Early engagement with the Council can assist in determining what would amount to evidence that the units will be used as “qualifying dwellings.” The inclusion of 100% of the units within the Section 106 Agreement is not often a feasible option as it creates issues with grant funding and charging. You will need to consider whether there are any additional documents, internal decisions or title covenants that might assist in supporting an application for relief.

How Capsticks can help

Capsticks aims to be the firm of choice to registered providers, offering a full service across development and planning law, corporate and securitisation, housing leasehold and asset management. We are experts on all aspects of planning law including s106 agreements, CIL advice, planning appeals, Compulsory Purchase Orders and all general matters to do with planning a development.

If you have any queries around what is discussed in this insight, or the steps that you can take in any given case, please speak to Suzanne Smith, Jennifer Eng or Ella Jones or any of your contacts at Capsticks to find out more about how we can help.