The government’s policy of exempting developers of small sites from paying contributions towards building affordable homes has been ruled unlawful by the High Court.
The Department for Communities & Local Government has vowed to challenge the decision, which lawyers said could undermine the Conservative’s manifesto pledge to build 200,000 starter homes by 2020.
Changes to national planning policy introduced in November 2014 meant that developers building on sites with fewer than 10 dwellings in urban areas - and five dwellings in rural areas - were exempt from paying section 106 agreements.
In a judgement handed down last week, Justice David Holgate said the exemptions were “incompatible” with the Town and Country Planning Act 1990 and the Planning and Compulsory Purchase Act 2004 which set out requirements for councils to adopt local plans.
He branded the policy changes “unlawful” and ruled that the consultation on changes to planning policy was “unfair” as not all of the information at the government’s disposal was made available to councils.
The judge said that the policy could lead to a reduction in the amount of land available for affordable housing, an “unacceptable risk of unlawful decision-making” and that councils might have to submit revised local plans to the Planning Inspectorate to factor in affordable housing shortfalls.
He said it was “surprising” ministers had been “silent” on the impact of the policy, despite being “informed” four months prior to its implementation that the exemption thresholds would result in an annual loss of £693m in developer contributions, court papers stated.
The High Court decision is also likely to have implications for the manifesto pledge, which featured in last month’s Productivity Plan, and aims to ensure 200,000 starter homes are built by 2020.
Housing minister Brandon Lewis said in March that those sites should also be exempt from section 106 affordable housing contributions.
Rory Stracey, a senior associate in the planning team at legal firm Trowers & Hamlins, told LGC this was one of the ways the government was seeking to make starter homes cheaper.
“Clearly the government is going to have to look again at how it might deliver on this given the high court ruling,” he said.
The High Court challenge was brought by a cross-party coalition of Labour-led Reading BC and Conservative-controlled West Berkshire Council.
Hilary Cole (Con), West Berkshire’s executive member for housing, called the judgment a “significant victory”.
Tony Page (Lab), Reading’s deputy leader and lead councillor for strategic environment, planning and transport, said: “There is an acute and increasing need for affordable homes in Reading, which is demonstrated by the fact there are around 10,000 people on our housing waiting list, and the changes to the planning system would have made matters worse.
“The judge’s decision also means an estimated £650,000 per year will be saved for community benefit, including improvements to local roads, schools and playgrounds.”
Responding to the judgment, a DCLG spokeswoman said: “We are disappointed by the outcome of the judgment and will be seeking permission to appeal against the judge’s decision. This will have a disproportionate impact on smaller builders [which] are important in providing homes for local communities.”
In July, research by the Local Government Association found the introduction of section 106 developer contribution exemptions had hampered the ability of 80% of councils in England and Wales to build affordable homes.