In this High Court case the judge stated that "whilst affordable housing is generally desirable in policy terms, it does not follow that more affordable housing is always desirable without limit".
In this case the Claimant, Stonewater (one of Britain's leading social housing providers), intended, in line with common market practice, to deliver an entirely affordable housing scheme, despite the section 106 agreement and permission for the site only requiring 35% of the 169 homes to be affordable housing.
Stonewater applied for CIL relief (amounting to just over £3 million pounds) for all 169 units, and were required by Regulation 51(3)(d)(ii) of the CIL Regulations 2010, to provide with the application evidence that the chargeable development qualified for social housing relief by reference to Regulation 49.
The Council refused the application, concluding that Stonewater had not provided sufficient evidence in accordance with Regulations 49 and 51. The Council argued that it had seen no evidence (other than an assertion that the units would all be provided as affordable housing, in apparent non-compliance with the section 106 agreement) that all the units would be secured for affordable housing use.
The Court concluded that whether the evidence was sufficient was a matter for the decision maker, and although a section 106 agreement securing the units as affordable was not a requirement for the CIL relief to be granted, it was a material consideration. The Court therefore saw no reason to overturn the Council's decision and Stonewater's claim failed.
The decision confirms that evidence provided with affordable housing CIL relief applications needs to be robust; being an established registered provider is unlikely to be enough.
The case is significant and creates a concern for clients and practitioners working on transactions, due to the Court's interpretation of section 106 agreements and the circumstance in which they may be breached.
The decision may seem rather a strict interpretation since until now, it has been assumed that section 106 agreements that impose a requirement to provide a specific percentage or number of affordable housing units, do not also provide, implicitly, a cap on the number of affordable housing units that may actually be provided if an owner/operator wishes to voluntarily use units which are defined as private or market in the section 106 agreement, as additional affordable housing units.
The consequence of this decision is that Councils could take action against registered providers for voluntarily providing private units as additional affordable units.
A likely consequence of the Court's decision, is that other Councils will follow this Council’s example and refuse CIL relief applications unless s.106 agreements are amended so that they require what would have been voluntary affordable housing units to be affordable.
In order to mitigate the risks which arise from this case, early engagement with funders and the Council to confirm an agreed approach would be sensible, along with, where possible, the inclusion of specific wording in section 106 agreements to clarify that the affordable housing provisions are not intended to restrict any private/market units from being used as affordable housing.
How can Tozers help?
Our Affordable Housing team have over 25 years’ experience in this sector, forming close working relationships with their housing clients. To find out more about the areas they advise on and their bespoke services please visit their hub page or contact a member of the team.