Planning - the value, incidence and impact of developer contributions: research

11. Annex 4: Case Study Template

Urban Morphology

Major Conurbation Edinburgh

Key Characteristics

Extensive developer contributions experience.

Established policy and guidance on developer contributions and affordable housing.

Site Specific Issues

Case Study 1

Large-scale mixed-use development.

Off-site affordable housing provided and tram contribution. Developer bought land for AH, which was then delivered by a contractor and handed over to an RSL. 41 units provided, in excess of 25% requirement. Also, DCs for education and car parking.

Successful development and DCs collected.

Case Study 2

Affordable housing successfully delivered – built by developer and bought by RSL on BC basis with budgeted price. DCs also to the new school and transport

Case Study 3

Large residential site.

Affordable housing, education and transport contributions provided – successful development and multi-phased.

Case Study 4

Site won on appeal.

Example of a greenfield site won on appeal but not in LDP and therefore not part of a plan-led process. Council believes DCs were weak as a result of no Action Programme.

Interviewees

City of Edinburgh Council

Theme/Sub-Theme

Policy

Developer contributions policy supported by development industry

Developers clear that there is more certainty and transparency around DCs than used to be. Guidance and policy clear and the process is more assessment than negotiation, particularly for smaller sites. DCs factored in at bid stage given the policy & guidance available. Agreement on smaller sites usually quick with minimal legal fees.

Tram contributions now accepted as applying if the development is in the relevant zone.

However, some developers would like more clarity on the evidence behind the assessment/policy/guidance.

Practice

Regional variations in land value

Much of Edinburgh is a high LV area and policies are applied fairly consistently across the city.

Council policy is preference for 70% of AH to be Social but can be flexible. One of the case study sites was all MMR.

AH S75 can cost RSLs over £30k per plot, especially if in City Centre. RSLs have little land control in the city and need S75 land to develop AH. To avoid competition, there is a 'gentlemen's agreement' between RSLs that certain territories are covered by certain RSLs and, in areas where there is more than one active RSL, the S75 land is shared, usually with direction from CEC.

Delivery

Section 75 effectiveness

CEC has 2 monitoring officers who examine development progress across the city and secure DCs at the right times.

S75 has been good for funding the tram in Edinburgh. A lot of AH is also being delivered through S75.

Education is more challenging, but there is greater clarity now on costs and DCs required.

Transport is more challenging still and a levy may be a better mechanism to secure. If DCs are not in sufficient sums, the Council may struggle to provide and sometimes has to return DCs if the required infrastructure has not been delivered.

S69s and planning conditions are seldom used for DCs. Believed not to be suitable for schools or AH. Using in planning conditions not thought to give CEC the protection it needs e.g. if site is sold, need to tie new owner to the title.

Alternative policies

CIL approach may be better than the case-by-case approach. A city-wide tariff or area-based tariffs could enable CEC to be more proactive with infrastructure.

A levy could provide more certainty for developers and the public purse as well as reduce land speculation. However, Council believes need to be retained by the relevant local authority to undertake the improvements rather than go to a national pot.

Guidance does not support cumulative assessment and phasing, while an Infrastructure First approach does.

Assessment process v. negotiation

There is clear guidance on AH, education, transport, trams, etc., so clarity on DCs and assessment process straightforward. There is room for negotiation but from the starting point of the assessment.

Guidance is evidence-based e.g. HNDA, school rolls. etc. However, some developers bemoaned the lack of evidence to support some guidance e.g. around schools.

AH and education tend to be the most straightforward. Appeals can be instructive and are learned from.

Transport appraisals can be more tricky and contentious and are subject to negotiation around appraisals. Tram contributions more straightforward and have been supported by appeals (Infrastructure First approach).

New evidence e.g. on school rolls, can also lead to negotiation on some developments, although not common, e.g. falling school rolls may mean fewer education DCs needed.

Sometimes developers pay too much for the land and try to mitigate through the S75, but this will be resisted by the PA. There are legitimate reasons for flexibility to get development to work, especially when dealing with trickier sites, e.g. with listed buildings. The Council can also sometimes see the benefit of a certain development and be prepared to give some leeway on DCs.

S75a quite frequently used for modifications.

Scope creep of section 75

Affordable housing requirements

AH to be 25% of all sites with 12 or more housing units. Preference is for a least 70% of this to be Social Rent.

AH can be on-site or off-site but Planning Committee now prefers on-site as better guarantee of delivery.

Negotiation parties/participants

Local infrastructure v. strategic/regional infrastructure

Difficulties of appeal sites

Application for a case study site was for a neighbouring site to an existing development. It came forward in advance of the current LDP being adopted. The LDP allocated this neighbouring site, in part, as a result of the initial site being in place. A contribution of £3.8M for education infrastructure was required. This much higher sum was a result of the development being included in the LDP and part of the Action Programme.

Had the Action Programme not been in place, it may have been more difficult to secure the required sum for education infrastructure. CEC believes that this demonstrates the benefit of having an Action Programme and guidance on DCs in place and therefore emphasises the need for a plan-led approach to the delivery of housing. This contrasts with the situation in the case study area won on appeal, where the Council did not secure the sum it considered appropriate.

Urban Morphology

Urban West Lothian

Key Characteristics

Extensive developer contributions experience.

Established policy and guidance on developer contributions and affordable housing.

Site Specific Issues

Case Study 1

Winchburgh New village. Large scale residential, mixed use development including new schools and associated infrastructure. Long-term vision and timescale to 2035 (25-year vision). 'Unique approach' to funding education – Tripartite Agreement between West Lothian Council, Winchburgh Developments Ltd and Scottish Government. 'Guarantor Approach'. Forward funded enabling infrastructure based on guarantees.

Case Study 2

Former coal mine

Case Study 3

Former mining town

Case Study 4

Affordable Housing Theme considers five delivery methods through Section 75s:

i) Direct provision by development.

ii) Transfer of 'serviced' land from developer to planning authority.

iii) Commuted sum.

iv) 10% uplift (above 15% baseline) in Core Development Areas (CDAs).

v) Developer partner approach with a registered social landlord (RSL)/housing association (HA).

Interviewees

West Lothian Council (WLC)

Winchburgh Developments Ltd

Theme/Sub-Theme

Affordable housing requirements

1. Direct Provision by the Developer

Ogilvie at the Former Vion Site in Broxburn. This was a windfall site which became available for redevelopment falling the closure of the Hall's food factory. As it was a windfall site, there was no anticipated affordable housing contribution from the site, and consequently it was not included in the council contracts for its new build programme. Facilitating direct provision allowed earlier delivery of the social housing that would ordinarily have been possible. Delivery is via a separate contractual arrangement between the developer and the council. The overall requirement is secured via a Section 75 agreement.

2. Transfer of land to WLC

This, until recently, was the most common for provision and generally involved 15% of the developable area to be transferred to the council. There are numerous examples. The largest scale transfers have been in the core development areas at Calderwood and Winchburgh. These are relatively straight forward transactions which are secured through Section 75 agreements with trigger dates for the transfer built into the agreement.

The Section 75s require the site to be free of all infrastructure constraints and with services provided up to the boundary of the site to ensure that the site is essentially 'oven-ready'.

The expectation was that the land would be delivered at nil value to the council, although the Affordable Housing Policy never set that as an absolute requirement. Provision was always available to agree a value through the District Valuer. The current approach is now to obtain a value from the DV.

3. Commuted sum

There are a number of examples of this delivery as it was the preferred approach for sites of between 4 and 20 units under the previous version of the policy. The current policy takes the same approach although the 20-house upper limit is variable from settlement to settlement depending on need in that settlement, that is, if it is a low demand area for council housing a commuted sum can be secured for larger developments.

Previously there could be disputes about the calculation of the commuted sum. The value was set at the value necessary for the council to purchase an equivalent area of land. This ballpark calculation used was 15% of the purchase value of the site from which the commuted sum arose. However, this could lead to fluctuating values even within the same community. As a consequence, the price is more commonly agreed with the assistance of the DV.

4. 10% extra in CDAs

The policy allowed the extra 10% to be delivered by any means which was demonstrated as being affordable in perpetuity. In early cases gold shares, shared equity and discounted sales were all deemed acceptable provided that there was an 'in perpetuity' clause. In practice this proved difficult to secure. Consequently, in all cases the 10% top up has either been secured through transfer to an RSL or an additional 10% land transfer to the council.

In Winchburgh the current phase of the 10% requirement is being delivered by the Wheatly Group. The terms of that agreement are commercial between Winchburgh Developments Ltd ad Wheatly. The council's only involvement is in confirming that the delivery meets the requirements of the Section 75 agreement.

5. Developer approaches WLC with an RSL

This is an increasingly common approach given that the council's Affordable Housing Investment Programme recognises the role that RSLs will play in meeting housing need in the future. The council does not place any specific constraints on such partnerships – those arrangements being commercial between the developer and the RSL. As with (4) above the planning interest is in ensuring that the terms of the planning consent and legal agreement are being met.

This most recent agreement of this nature is with Greentown Heartlands Ltd who are the lead developers at Heartlands and Winchburgh. Greentown are using an RSL partner to deliver the full affordable housing requirement on the site.

Examples of where the Council is being flexible to affordable need and demand

There are a number of aspects to this but mainly under three headings

The policy itself

First and foremost, the policy allows flexibility where there is a convincing appraisal which demonstrates that the application of the policy makes development of a site non-viable. That said, given that the policy has been in place for the best part of 15 years the council takes some convincing that the requirements of the site were not known prior to the developer purchasing the site. The council will always require the purchase price for the site to be part of any development appraisal.

More recently the policy has been revised to apply different contribution requirements in different settlements to reflect differing demands across the council area.

Involving Developers in the Affordable Housing Solution

The revised policy is much more flexible in terms of the possible means of discharging the requirement which allows more scope for the developer to be involved in agreeing the solution. Earlier iterations of the policy required in most instances the transfer of the land to the council (which was appropriate at the time as the council was, by far, the biggest housebuilder operating in West Lothian). However, the current policy allows the developer to present a solution to the council rather than the council defining the solution for the developer.

Being Flexible about when Land has to be transferred or Commuted Sum Payments Made

The council recognises cashflow challenges for developers with bringing forward a development site and it will be as flexible as possible with payment or transfer dates. In short, the council has no interest in acquiring land well in advance of when it can build on that land – not least because it creates a maintenance liability for the council. Similarly, it will only require the payment of commuted sums at a point where these are needed to support the council's new build programme.

That said, the council will generally not allow payments or transfers to be deferred beyond the point that the contributing site is 75% complete. Beyond that point there is a risk that the outstanding liabilities on a site exceed the remaining profit for the developer. In such circumstances there is a risk that a site is abandoned rather than progressed to full completion.

Other requirements

Assessment process v. negotiation

West Lothian Council (WLC) – seek an 'open book' accounting approach from the developer to demonstrate the value of the land and inform costs/values/returns; a standard matrix approach to development appraisals. The Council's Property Services will review and verify development appraisal. If there is a significant difference in opinion than the District Valuer (DV) is approached (or an independent valuer) to advise. This process generally only occurs where the developer is expressing concerns with regard the impact of developer contributions (DCs) upon the viability of the development. Under current new affordable housing policy (past 18 months approximately), if commuted sums are pursued than the DV advises on values at the outset. Generally, fewer challenges as a result of this change in process with the involvement of the DV. The cost of using the DV is shared between the developer and the Council (included in the new policy). Occasionally, the developer will volunteer to meet the entire cost of the DV.

Case Study 3 – to enable progress of development WLC deferred DC in advance of the first 192 dwellings. Assisted in kick-starting development but made the subsequent phase of development more expensive. In 2014 modifications to Section 75A submitted. Extensive discussions took place between WLC and developer in advance of S75A to define contributions to 450 units. Several subsequent discharges and modifications. Key issue was the payment of the primary school and cumulative impacts. £1.8 million contribution to the primary school plus some funding from WLC in recognition of an existing capacity issue within the school catchment. Primary school subsequently developed and opened on site. Currently approximately 300-400 units on site. Development stalled due to arrears in development contribution payments.

Negotiation parties/participants

Winchburgh – in terms of values/costs WDL made available their full business plan and cashflow to SFT/WLC/SG. SG/WLC advisors carried out due diligence on WDL's business model and SFT managing/brockering the business negotiation.

Guarantors & risk share

Wincburgh – Tripartite Agreement between West Lothain Council, Winchburgh Developments Ltd and Scottish Government sits alongside the Section 75.

Actors involved

Winchburgh Developments Ltd (WDL) – got involved in 2010 (recession). Significant corporate changes in response to recession. 2010 context was paired down business plan in association with the draft Section 75 Agreement. Winchburgh 'minded to grant' (3450 houses et al) subject to S75 in late summer 2010. Section 75 took two years to negotiate and was agreed in 2012. Public/private participation & collaboration was needed at the outset to deliver a viable project. Key developer contribution issues in relation to education and transport (new motorway junction and railway station). Initial S75 applied to Phase 1 (up to 550 dws) and was 'silent' in terms of DC funding delivery mechanism thereafter to 3450 dws. Further S75 negotiations during 2013/14 between WDL and WLC seeking a different funding mechanism that would guarantee the funding and construction of the non-denominational (ND) secondary school. 2017 SFT involved and Edinburgh City Region Deal (identified funding for Winchburgh infrastructure). WDL drafted Heads of Terms proposal to WLC/Scottish Government (SG)/SFT outlining amendment to S75 based on SG support to the delivery of Winchburgh secondary education capacity (co-joined school campus at Wincburgh). In 2018 WLC signed the Tripartite Agreement (based on the HoT Agreement proposed by WDL). Tripartite Agreement incorporates a £15 million contingent liability guarantee to WLC borrowing for £61 million for schools infrastructure. WLC able to go to Public Works Loan Board to borrow money to build secondary school on serviced land transferred to the Council by WDL. WLC used HubCo South East to appoint Morrison Construction currently on-site building school estate (two secondary school buildings and first new build primary school). Tripartite Agreement involves a series of guarantors to mitigate risk (primarily in relation to borrowing for ND secondary education contributions, as the denominational contributions covered by a 'roof tax' in the Supplementary Planning Guidance (SPG) and WDL would pay for the first new build primary school) – WDL, WLC and SG.

In 2018 in parallel with Tripartite Agreement, WDL submitted a S75A application seeking modification to S75 whereby ND secondary education contribution is £5760 per house occupied at Winchburgh derived from negotiation on the Tripartite Agreement (not based on plan-led policy/SPG). WLC now applying this charge on other housing developments across within the school catchment area subject to ongoing review. The Tripartite Agreement was a 'bespoke' solution, but some key learning for future mechanisms, such as development economics and finance (especially in context of funding major infrastructure). A component of the funding requirement (need for working capital) was the Housing Infrastructure Fund (HIF) loan (avoid bank debt – banks don't like lending for major infrastructure, especially in shared public/private domain). In 2018 WDL took out a £27 million infrastructure loan from HIF to enable progress into Phase 2 and deliver the whole Winchburgh Masterplan. In effect, SG is investing in WDL as either lender or guarantor for the Council's school infrastructure borrowing to the tune of £42 million (i.e. £15 million Government loan (contingent liability on the SG's balance sheet) and £27 million HIF loan). This was considered and agreed by Scottish Parliament in September 2018.

Policy

Developer contributions policy supported by development industry

West Lothian Council (WLC) – Affordable Housing Policies (including Supplementary Guidance) well established – plan-led approach.

Case Study 2 – former Polkemmet opencast site. Two permissions granted at the same time: restoration of opencast site; housing development (2000 dws) and associated works (2004). Cost Regeneration initial developer, subsequently taken over by RBS and subsequently sold to Greentown Heartlands Ltd. subsidiary of WeLink (initially a renewables developer, but now includes a housing arm (esp. modular housing). 500 dws consented on the site when GHL involved; now consented approximately 800 dwellings and 500 dwelling occupations on-site. 2011/2012 development progressed in earnest shortly in advance of motorway junction (2013). Subsequent activity in 2019/20 (approximately 150 completions). Limited number of DCs included in Section 75 due to older consent and less mature planning obligations policies. The scope of the S75 was for: the provision of serviced land for 75 affordable housing units tiggered by the 500^th unit; education contributions for three classrooms – first classroom triggered by 1100^th unit and second classroom triggered by 1500^th unit; funding for a travel plan co-ordinator (subsequently removed from S75); provision of a travel strategy to secure funding for public transport; town centre improvements; and open space maintenance.

Wincburgh – plan-led. Application submitted in 2005 originally by Cala as the developer. Masterplan-led development incorporating two major estates – Hopetoun Estate and Cadzow Land Holdings Ltd (local farmer). Winchburgh consented for 3450 units (2010) with 2050 in Broxburn with a total development of 5500 units.

Case Study 3 – was a CDA. Allocation in Local Plan divided into three 'bubbles'. South Armadale bubble comprised two different developers that operated separately. Southdale development (southern part of South Armadale) is the case study area. Application consented for 1000 dwellings (submitted late 2008 and granted in 2010). Section 75 Agreement took several months to negotiate and agree.

DC related policies rooted in the development plan and supplementary guidance (SG). In terms of affordable housing policy GC consider that there is some discrepancy in terms of how West Lothian Council (WLC) apply policy. For example, 10% uplift in affordable housing requirement in Core Development Areas (CDAs), such as in Armadale CDA. GC also concerned that historic SPG is simply being 'rolled forward' into new SG without due consideration and update (new assessment work), despite Reporter's recommendation for the Council to 'review' SPG. GC do not consider that this is sufficient, based on case law, to justify the DCs; still need to demonstrate Circular compliance which is clear from Elsick and other case law examples. Affordable Housing Supplementary Guidance has now been approved by Scottish Government and adopted (including CDA percentage uplift), although GC retain concerns. WLC also progressing adoption of several other SG, including Education SG. It has been in draft form for approximately 18 months. GC concerned that WLC continue to apply rates set out in the non-statutory supplementary planning guidance which are up to 10 to 15 years old. Therefore, applying infrastructure requirements that are out-dated by virtue of changes in the draft SG on Education, and applying significant indexation. For example, Armadale CDA in the draft Education SG contributions in Q42017 is £11,645 per unit. By taking existing rates the Council is applying from the Education SPG it is on face value £13,381 (£20,159 including indexation). Other adopted DC-related SG includes cemeteries (approximately £100 per unit), transport, town centres

Practice

Regional variations in land value

Case Study 3 - GC consider that the extensive 'shopping list' of DCs in the CDA (e.g. Armadale) is actually curtailing development due to impact on viability, rather than taking advantage of better land values in CDAs compared with non-CDA areas.

Delivery

Section 75 effectiveness

West Lothian Council utilises a Planning Obligations Tracker ('Execom' related to Idox) introduced approximately 3 years ago (2017). Legal agreements are inputted into system including triggers which are checked by the monitoring officer. It is a 'tracking tool', but Finance will confirm payment and spend (cost code – project driven) which completes planning involvement in the process. 'Execom' procured by West Lothian on a partnership basis with Midlothian Council with the potential scope of sharing services/resources broadly based on the Aberdeen City/Shire model.

Case Study 2 – limited Section 75. Several modifications to S75 including: trigger date for provision of affordable housing removed retaining unit nos. as the trigger; level of affordable housing contributions (current application). Currently, no affordable housing yet provided on the site. Ongoing discussions with regard education contributions to three new classrooms. Town centre improvements money transferred approximately 9 months ago (originally £50k but actual £59k in response to indexation). Council members currently considering how to disperse monies across relevant town centres.

Developer has put together a monitoring matrix of requirements/contributions from Heartlands.

Wincburgh - Winchburgh Section 75 took 2 years to negotiate and agree (2010-2012). Market conditions partly responsible for protracted negotiation. Lead developer changed from Cala to LXB (linked to Regenco) and now Winchburgh Developments Ltd (recently contracted back with Cala). Section 75 includes a large tranche of developer contributions informed by West Lothian Local Plan (2009) (including funding for improved public transport strategy, provision of land for two secondary schools, fund majority of non-denominational secondary school (both schools started on site in 2020), town centre improvement fund, full provision of denominational primary school which has started provision of two or three primary provision classroom streams going forward, affordable housing and public art strategy). Particularly complex phasing and triggers.

In terms of the negotiation of the original S75, WDL covered WLC's legal costs. For the Tripartite Agreement WDL made a contribution to the legal costs.

WDL undertake monthly review/updates of financial model and business plan (established in 2010/11).

Case Study 3 – original Section 75 Agreement was 2010/11 and took several months to negotiate and agree and subsequent modified S75 Agreement in 2014 (in response to Council's wish for early provision of primary school). Scope of S75 comprised: affordable housing (10% CDA uplift plus 15%); contributions to four schools – transfer of land for one of the schools; library contributions; train station P&R contributions; town centre improvements; cemeteries; public art; and dualling of the A801 (subsequently deleted following appeal). Education contributions currently being challenged by the developer (Burgess Salmon/GS on behalf of the developer). GC also recently submitted S75A re. town centre contributions based on concerns of application of a generic DC rate per dwelling towards undefined list of town centre improvements in Armadale which are considered unrelated to the development, and no assessment underpinning that. For example, DC towards CCTV cameras, park benches, library etc.

Affordable housing to be delivered at Armadale (Southdale) through an area of land on-site safeguarded by the Council for transfer for affordable housing should there not be an alternative means for the delivery of the affordable housing. Understood to be largely RSL-led rather than a transfer of land to the Council. The developer has had RSL interest, but RSL did not progress due to delay in progress.

Scope creep of section 75

DC towards GP services/healthcare not formally requested as yet. WLC have asked for Health Impact Assessments to be submitted in support of some planning applications to establish healthcare capacity.

Local infrastructure v. strategic/regional infrastructure

1. Urban Morphology

Major Hinterland Renfrewshire

Key Characteristics

Limited experience of developer contributions.

Relies upon planning conditions to determine infrastructure requirements for development. Infrastructure funded by developer (developer/landowner negotiation).

Site Specific Issues

Case Study 1

Strategic, brownfield redevelopment project. Landowner and developer. Vision aligned with Renfrewshire Council's ambitions for the site. Positive working relationship between landowner/developer and Renfrewshire Council.

Place-based approach.

Case Study 2

Former hospital and mental health facility. Developer/housebuilder led (3 volume housebuilders).

Development capacity increased from allocation/masterplan/planning application.

Case Study 3

Former large, strategic farm. City Region Deal project. Renfrewshire Chief Executive Office lead with support from Planning Service.

Masterplan approach/infrastructure requirements defined.

No Section 75 in delivery of the site.

Landowner-led vision. Relatively straightforward planning process. Dedicated planning officer funded by planning fees working closely with City Deal Team.

Case Study 4

Former older people's care hospital and facility.

Interviewees

Renfrewshire Council

Theme/Sub-Theme

Assessment process v. negotiation

Renfrewshire Council 25% affordable housing requirement starting point in the process, but then subject to housing need requirements in the local area and negotiation on 'place' needs in response to site size, local characteristics and land value (LV).

If there is a viability issue, developer to provide viability assessment to demonstrate evidence.

Negotiation parties/participants

Renfrewshire Council negotiate planning obligations on a site-by-site basis, rather than on a pre-subscribed basis. Focused on the specific infrastructure requirements that is fairly and reasonably related to the development.

Negotiation of the DCs tends to happen during the post-submission/pre-determination stage of the planning application to avoid protracted negotiations and delay following ''minded-to-grant'. Aim is to enable the timeous delivery of approved developments. Therefore, conditions process preferred to Section 75 mechanism by Renfrewshire Council.

On large-scale developments (e.g. Dargavel) Renfrewshire Council request annual progress updates from the developer (including current market conditions, Scottish Government funding (if applicable)).

Case Study 1 led by a single, controlling landowner with a vision which helped in the negotiation process (landowner and PA working together), as opposed to other sites where there may be several negotiating parties with varying objectives.

Actors involved

Renfrewshire work with a broad range of housing associations (HAs). However, only a few have the capacity to develop. The SHIP identifies affordable housing targets. Renfrewshire seek local HAs to develop affordable housing, but national HAs have the development capacity to deliver.

Case Study 1 – collaborative approach with landowner helped in the successful delivery of this large, strategic site (effectively a new town). Also, a series of working groups (roads, education etc.) organised and facilitated by the Council helped to identify infrastructure requirements, phasing and delivery. WGs met monthly during peak process, and WGs still ongoing to consider infrastructure issues, such as bus penetration.

Case Study 3 – no Section 75 associated with the delivery of the site. Infrastructure delivered through City Deal monies conditioned by the planning permission. Landowner-led development facilitated the process. PPiP and subsequent AMC's for subsequent phases of development, and PPiP for the bridge crossing the Clyde. All City Deal applications monitored on Council website. Also dedicated Development Management officer (partly funded by City Deal planning application fees) using monitoring tool.

Policy

Developer contributions policy supported by development industry

Renfrewshire Council principally use planning conditions to define infrastructure funding requirements for developments rather than developer contributions (DCs). Planning conditions also used to secure affordable housing. Such conditions can leave detail to be agreed pursuant to a scheme to be approved later. Conditions need to be suitably detailed and cover the points that would need to be caught in a scheme for subsequent approval (e.g. location, mix, tenure etc as well as a mechanism in place to secure the transfer of housing to a housing association (HA), and also a back-up mechanism for delivering the affordable housing if there was not a HA available to take the affordable units). [Addendum - see recent Court of Appeal decision in England with regard delivering affordable housing by condition – R (Zins) v East Suffolk Council [2020] EWHC 2969 (Admin)].

Renfrewshire also use Section 69 DC when it is a simple contribution process. Otherwise, limited use of Section 75s as premise is that a plan-led system should minimise the need for such a mechanism.

Renfrewshire adopt a collaborative, inter-service approach with planning being core in terms of the process by which developer contributions policies/requirements are identified and evidenced. Community, Housing and Planning Services, as well as Roads and Education services. Also, Regeneration service which sits within the Chief Executives Department and provides the economic development function. In the development plan preparation process early collaboration with the Council services and Key Agencies on infrastructure capacity and requirements for development sites. In terms of housing related contribution, planning being a joint service with housing it is very clear that the whole Strategic Housing Investment Plan (SHIP) facilitates engagement with housing associations; sites not progressed if not part of the SHIP programme. Developer has flexibility to choose their preferred housing association/development partner in the context of the SHIP.

Renfrewshire did not have an affordable housing policy until the current LDP2 (2019). The Reporters have now completed their examination into the unresolved issues raised in representations to Proposed Renfrewshire Local Development Plan. The Council will now consider the Reporters Recommendations and modifications to the Plan.

The scale of the development informs the infrastructure requirements. For example, large-scale developments the infrastructure requirements were identified early in the planning process (e.g. motorway junction improvements, education etc.), whereas with medium/small scale developments the infrastructure requirements emerged from pre-application/post-submission negotiations.

Case Study 2 – allocated site in the adopted LDP (2014). Envisaged a masterplan-led development and carried forward into LDP2 (2019). NHS landowner who engaged with housebuilders to progress planning in principle planning application (603 dwellings and associated access, parking and landscaping) (Ref.No.19/0810/PP). Also 'agent' for NHS providing development expertise. Different from initial masterplan proposal. Infrastructure requirements of the site detailed in the adopted LDP (2014) and subsequently updated by Council's Services and Key Agencies and carried forward into the LDP2 (2019). Developer-led planning application was refused by Renfrewshire Council (against officer recommendation to grant subject to Section 75 Agreement) on the 2^nd February 2021.

Case Study 3 – plan-led, collaborative approach. Greenfield site adjacent to Glasgow Airport facilitated and supported by the Airport resulting in a 'partnership' approach. City Region Deal funded infrastructure and development. Led by Renfrewshire Chief Executive Service supported by other Services including Planning Service delivered in a collaborative way – masterplan and project-led development. No Section 75 associated with the delivery of AMID. The first planning permission (National Development) was granted in 2019 and first two phased on site – National Manufacturing Institute for Scotland and Manufacturing Medical Institute. Infrastructure being delivered through City Deal monies conditioned by the planning permission. Landowner-led development facilitated the process.

Case Study 4 – former NHS hospital that became vacant during the preparation of the adopted LDP (2014) and subsequently allocated for housing in the Plan (50-70 units indicative capacity). Subsequent application by housebuilder for 110 units. Infrastructure capacity/requirements identified through the plan-led process. Sufficient education capacity to accommodate proposed development. No Section 75. Planning conditions used to identify and deliver infrastructure requirements – principally roads and connections.

Case Study 4 - former NHS hospital that became vacant during the preparation of the adopted LDP (2014) and subsequently allocated for housing in the Plan (200 units indicative capacity). First application for 276 units from housebuilder and subsequently increased to 330 units. Infrastructure capacity/requirements identified through the plan-led process. No Section 75. Planning conditions used to identify and deliver infrastructure requirements – principally roads and connections. Major planning application granted within 4 months. The infrastructure requirements (roads only i.e. access via new roundabout, pedestrian crossing and new slip road) identified during pre-application. No education requirements as sufficient capacity.

Practice

Regional variations in land value

Case Study 1 – brownfield contaminated site influenced the level of DC. However, scale and time period (over 20 years) allowed for reasonable DCs to be achieved.

Renfrewshire looked initially to the landowner to provide costs/values associated with the development. Landowner to demonstrate the viability of the development. Renfrewshire did not have a financial value to the Section 75 but rather a series of projects. Landowner/developer generated the initial costs/values against each of the projects identified by Renfrewshire. Renfrewshire subsequently used own in-house services to verify costs/values (or external independent consultants where required) in context of 'legal tests' of planning obligations (Planning Circular 3/2012). For example, initial capital cost for motorway junction was estimated at £12 million, actual cost was £27 million. Also, initially the Council was to let a contract to build a primary school, but landowner eventually delivered school based on Council's specification, as more cost effective.

Landowner ultimately 'pays' for infrastructure not the developer. The developers 'take it off' the landowner. Therefore, more appropriately referred to as 'landowner contributions' rather than developer contributions. The market operates on the basis of gross price based on greenfield value, followed by consideration of ground conditions and abnormal costs and cost of planning gain to mitigate impact of the development on the local infrastructure.

Delivery

Section 75 effectiveness

Renfrewshire Council principally use planning conditions to define infrastructure funding requirements for developments rather than developer contributions (DCs). Renfrewshire seek to avoid Section 75's on SHIP projects as they should be in the plan already.

Section 75 template developed in collaboration with Homes for Scotland and several housebuilders, as well as the Council's in-house legal team.

Proposed LDP2 (2019) contains an Infrastructure Constraints Map (evidence-based) that identifies existing capacity and therefore where development would need to make a contribution to mitigate impact. Timescales in negotiating and securing DCs should therefore be reduced.

Limited number of Section 75 agreements are modified or re-negotiated after signing, partly due to the careful negotiation at the planning application post-submission stage and the fact that planning conditions are the preferred mechanism for securing DCs.

Section 75s allows for phasing of infrastructure provision and potential flexibility in timing of infrastructure delivery in response to changing market conditions subject to evidence provided by applicant. Success is dependent upon the 'reasonableness' of all parties – a 'partnership approach'.

Case Study 1 – Masterplan and Design Guide underpinned place-based approach and infrastructure delivery through a Section 75 phasing development.

Due to the scale of development at Dargavel there were a series of planning applications and subsequent modifications to the Section 75 to respond to changing market conditions over a 20-year period (e.g. timing of motorway junction triggered by number of houses built).

Land transferred to Renfrewshire Council and nil value to develop affordable housing. Land was received in a remediated and 'shovel-ready' state.

Section 75 included funding for a dedicated remediation and contamination officer within the Council due to the significance of this issue which helped in the timeous process (e.g. review and sign-off of technical remediation and decontamination strategies and reports associated with the site). Position still exists within EHO service working with landowner/developer.

Renfrewshire has a dedicated officer monitoring Section 75. Developed a Section 75 'tracker'. In addition, Renfrewshire monitoring initial evidence base for infrastructure, enabling rephasing as required.

Case Study 2 - developer-led planning application was refused by Renfrewshire Council (against officer recommendation to grant subject to Section 75 Agreement) on the 2^nd February 2021. S75 Heads of Terms refers to a financial contribution required to ensure education requirements associated with the development are delivered. No affordable housing requirement as defined by SHIP. The private housing planned for the site was largely affordable within market context providing a mix and range of house types.

Case Study 3 – no Section 75 associated with the delivery of the site. Infrastructure delivered through City Deal monies conditioned by the planning permission.

Case Study 4 – no use of Section 75s. Developer contributions delivered through planning conditions.

Scope creep of section 75

Renfrewshire Council The key infrastructure requirements relate to affordable housing, transport and education. Increasing request for health contributions, but not yet delivered anywhere in Renfrewshire due to complexity of the GP services delivery model. Also challenge to define GP capacity and gaps to justify GP contribution.

Local infrastructure v. strategic/regional infrastructure

1. Urban Morphology

Rural Aberdeen City/Aberdeenshire

Key Characteristics

Extensive developer contributions experience.

Established policy and guidance on developer contributions and affordable housing.

Wide consultation within Council on DC requirements on specific sites.

Site Specific Issues

Case Study 1

Elsick ended up going to Court to be settled over regional transport contribution (found in developer's favour).

Affordable housing contributions previously waived, leading to what the local authority termed 'a double hit'.

Little in way of DCs achieved due to slow rate of sales. In turn, lack of infrastructure has made site less appealing to target markets.

Case Study 2

Former greenfield site in Aberdeenshire. Small residential site where housing was remixed to accelerate AH delivery.

No HAG used, with 25% AH paid for by DCs through Aberdeenshire Council's shared equity scheme. Developer built and handed over turnkey to an RSL.

Total other DCs of £300k (mainly contribution to secondary school).

Case Study 3

Affordable Housing Theme considers:

i) Acceleration of City Centre development through waiving AH contributions;

ii) AH still provided in some cases due to availability of HAG funding; and

iii) Scheme extended after initial pilot demonstrated good delivery results and increase in developer activity.

Case Study 4

Large, greenfield site in Aberdeenshire with 2 residential developments. Aberdeen urban extensions allocated in LDP.

DCs are heavy at c.£45m for both sites combined given significant infrastructure needs. As well as AH, includes DCs to community facilities, health, schools and sports & recreation, and calculated on a per unit basis.

AH being paid as part land payment and part build, with developer building product for an RSL.

Interviewees

Aberdeen City Council

Aberdeenshire Council

Theme/Sub-Theme

Other requirements

Political priorities can influence the capital plan and therefore the DCs that are sought.

Negotiation parties/participants

Actors involved

Look to agree HoT during determinative period. Process works in parallel with other aspects of application. Drafting legal agreement after Minded to Grant usually takes 2 months due to iterations between developer and PA.

Developers can delay signing S75 to maintain consent but will usually go back to Cmtte if not signed in 6 mths.

Developer found S75 difficult at one of the case study sites – long and costly in terms of legal fees. Cumulative impacts of transport and DC of land for new school were the particularly testing points. S75 took a year after Minded to Grant. Contribution to STF was removed after Elsick ruling.

Another developer also thought that a major problem for S75s was time in negotiation.

Another issue for a developer at this case study site is the DCs on AH – £21k per plot. The developer makes a loss on the AH unless they can achieve this price. Costs are also increasing in a declining market, tightening margins. The developer is negotiating with the Council on the AH as a result and the Council is engaging on this.

In one of the case study areas, more than 25% AH is currently being delivered as this part of the development is front-loaded. This is helping to accelerate other provision, such as the new school.

Risk re. forward funding

Standard legal agreement usually requires DC payments on a per unit basis each quarter in arrears. This can mean that not all infrastructure is provided until after the development is completed, which can cause issues with the local community.

Some infrastructure e.g. a new school, may need to be delivered alongside the development, which the council has to forward-fund and then recoup through the DCs, which represents a risk if not all DCs are paid or the development stalls or ends prematurely. Councils less likely to build new schools on this basis going forward due to finance concerns.

Councils considering other possibilities e.g. S-curve distribution, where more DCs are paid during active construction phases and less at the beginning and end. May also look at performance bonds as way of insuring against non-delivery. However, these alternatives will have costs for developers/landowners and may lead to increased mistrust.

A 'campus approach' to new infrastructure could help to deal with requirements more

DV valuations and squeeze on land value

DV valuation in one of the case study area was an issue for the developer. They believed it was valued using comps in higher value and more established areas.

On another case study site, the developer believed that DV was trying to squeeze as many DCs out of scheme as possible and applying a threshold greenfield value to a brownfield site. Developer argued that brownfield land should have a book value in relation to existing use. This seems to be an issue down south too e.g. Harman report on London Mayor's Guidance and SLC Enabling Development report (2019) also references this.

Policy

Developer contributions policy supported by development industry

Developers like certainty and a clear assessment process allows S75 to be calculated and included in the bid price for the land.

Practice

Regional variations in land value

DCs are tied to the LVs – areas with high LVs can afford more. Hence can extract high levels of DCs in strong markets but not when they turn. Aberdeenshire is a good example of this.

Areas with low LVs, e.g. regen areas, don't tend to seek much in DCs.

Variation also caused by issues such as existing capacity. Areas well-provided for will tend to have less DCs.

DCs are then looked more at on a case-by-case basis rather than strict policy assessment.

Delivery

Section 75 effectiveness

Developers report every quarter on completions and council then invoices for the DCs.

Councils use building warrant records to check on site completions, which inform DC requirements.

Developers also monitor the delivery of infrastructure that DCs pay for.

Market conditions in Aberdeen have deteriorated and face other threats from Covid and Brexit. One of the case study sites has high DCs. Viability is a developer concern and ACC will have discussions on what can and cannot be provided.

S69 also commonly used – more standard, easier and less costly. Planning conditions don't tend to be used. S75 will be used where AH is being delivered.

Affordable housing requirements

AH seen as the main contribution of development.

Policy guided by HNDA, which informs SPP and LHS of both PAs. LDP informed by SDP and SPP.

Aberdeen – Requirements set in LDP and with SPG alongside (latter gives details on delivery mechanisms ad terms). 25% on sites of 4 or 5 or more units (4 in Aberdeenshire and 5 in Aberdeen). On-site provision preferred.

Aberdeen waived AH requirements in the City Centre in 2018 to accelerate development there, which has lagged in recent times as a result of viability challenges and the market downturn. Policy emerged from City Living strategy. Other DCs remain in place and are being delivered. Policy seen as significantly increasing City Centre housing activity. Developers have to use consents in 12 months or lose waiver. Was to last to 2020 but has been extended to 2022. AH still being delivered in the City Centre because some sites (or parts of sites) have been sold to RSLs to deliver AH through available HAG funding. Policy impacts will be examined at end of pilot.

Assessment process v. negotiation

Process is assessment-led. Requirements such as AH, education, health and open space are clearly set-out in the assessment process and can be quantified and costed easily. Community facilities can be more difficult to justify in terms of evidence e.g. existing capacity, pipeline, actual needs.

Small sites seem easier, with pre-app advice and SPG clearly setting out requirements. DCs usually not onerous and can easily be subsumed within the development. Case Study 2 S75 was agreed prior to Planning Committee.

Limited instances where viability of development is a factor in negotiation. Will consider if some adjustment can help development be built but need to be mindful that development may simply be unviable in any case. The DV has a specialist team that can examine viability.

Elsick a good example of AH being waived under viability issues, but Council admits should have interrogated this more.

Councils have also been pragmatic on remixing of sites and increasing densities to meet changing market conditions.

Education less likely to be waived. Community facilities and sport & recreation more likely to be waived in negotiation. However, education (and other elements) can be challenged on deliverability, esp if not in capital plan.

However, some developers believe that education evidence is weak for DCs e.g. pupil per household ratio.

Little use of modification. Only accounts for c.10-15% of agreements in last 3 years. When it does happen, usually a technical exercise e.g. developer wants to vary original consent and this has an impact on S75.

Scope creep of section 75

Local infrastructure v. strategic/regional infrastructure

DCs tend to focus on local physical infrastructure. Can't really use for electronic infrastructure but this should probably be considered, especially with digital solutions now being more used in provision of services.

Future Infrastructure Requirements for Services (FIRS) is a group of infrastructure providers and councils to identify 'big ticket' items need, including education, health and roads. The LDP lists infrastructure needs for big sites and developers have understanding of general requirements.