Growth and Infrastructure Bill

Baroness Hanham Excerpts

Monday 28th January 2013 Lords Chamber

These two amendments, taken together, would mean salvaging at least something where central government overrules local authorities and allows developers to break the agreements that they have signed and reduce the levels of affordable housing. These are the first of a formidable list of amendments that aim to modify Clause 6, and perhaps they may be the most significant. I beg to move.

[The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham)]

Before the noble Lord sits down, I would draw the attention of the House to the fact that although he was making a very wide-ranging speech on Clause 6, his amendment is after Clause 5 and relates to one very specific matter. He has also coupled this with Amendment 55F, which appears in the ninth group today, way down the agenda, and which is not grouped with the first amendment. I wondered whether, before going any further, we might agree to speak to the amendment which is being moved and only that one for the moment. The noble Lord has tabled a whole parcel of other amendments to which he will want to speak to some extent, and we will get very confused if we do not go through the amendments in order.

[Lord Tope]

My Lords, I have added my name to this amendment in the name of the noble Lord, Lord Best, and will do my best to comply with the request. However, I thought it was very helpful, as it was intended to be, for the noble Lord, Lord Best, to set out fully and comprehensively the context in which we approach this. The Minister is of course right about where this amendment applies but one has to see it in the wider context and the noble Lord, Lord Best, did that very well.

The noble Lord has explained this amendment very fully. We are all too familiar with sites all over the country where planning consent has been given, somebody has come along a few months later and perhaps dug a couple of holes, and that is a “material operation” which satisfies the condition that the development shall have started. However, particularly in the current climate, nothing then happens for years and years. I have such sites in my boroughs. I look around the Chamber and see people nodding—we are all familiar with that position.

This amendment, or something very like it with the same purpose, would do great service in strengthening the intentions here—I nearly said the intentions of Clause 6, which is not quite right—to get development moving and to start getting the building. We are not really trying to start development here, we are trying to complete it. Starting by digging a few holes in the ground achieves nothing—what we want to see is the housing being built. Unless we have a clause or amendment similar to this one which requires developers and local planning authorities to decide in advance what is a “material operation” and what properly determines what starts a development, which would mean a lot more than just a tiny bit of infrastructure or my proverbial two holes in the ground—which is not just proverbial, I know places where it is quite literally that—then it is not going to be effective. The noble Lord, Lord Best, mentioned that planning consents already exist for 400,000 homes that have not been started. No doubt on many of those sites there are those two holes in the ground, but there is no sign of any homes materialising. If we had this obligation as part of the requirements that will follow in Clause 6, that would serve, to a significant extent, to ensure not just the starts but the much needed completions.

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[Lord McKenzie of Luton]

We did very well out of it in Luton, I am bound to say, but I should stress that it is not Labour Party policy to reintroduce this tax. We should get that clearly on the record.

So far as the amendment is concerned, I agree with the provision to make sure that there are mechanisms to clearly identify when there is a commencement of development. What I was not sure about, having looked at Section 56 of the Town and Country Planning Act 1990, is whether that overrides all the other things listed there as the commencement of development. For example, that section says that,

“‘material operation’ means … the digging of a trench which is to contain the foundations, or part of the foundations”.

I think that the noble Lord, Lord Best, referred to that but I am not sure whether his amendment overrides it. It would technically seem to need to do that to get the solution that the noble Lord is seeking—a solution with which I agree.

There are a range of broader points but I will forgo the opportunity now for my clause stand part debate and come back there as we go through the amendments in due course.

[Baroness Hanham]

My Lords, we are back in the situation we were in last time. I am not sure whether I am answering a Second Reading speech that went totally away from the amendment, a clause stand part or just something that everybody has made up around this amendment. While it has not been made up, I think an opportunity has been taken to have a very wide-ranging debate on the back of the amendment moved by the noble Lord, Lord Best. He will understand that I was trying to confine this debate to his amendment, although I realise now that that was absolutely hopeless and was never going to happen.

If I may start on the philosophical aspect of our whole discussion, I will pin it immediately to my thinking that everybody recognises that we desperately need to build. We need to build housing in this country for several reasons. The first, and most important, is that we have an awful lot of people without homes. As my honourable friend at the other end, Nick Boles, has pointed out, if we are not to have people in their 40s still living with their parents and still unable to buy property in the near future, we have to start building. Secondly, we are not going to jerk the economy back into life if we do not jerk the construction industry back into life. Those are two fundamental reasons why we need to make sure that the growth of housing takes place.

There are many elements to housing: housing for sale; housing that goes to right-to-buy; housing for shared ownership; affordable housing; and housing for rent. A great number of projects are all buried within Section 106. Perhaps I could remind noble Lords that Section 106 is responsible for a very great proportion of the affordable housing being built at the moment. The noble Lord, Lord Davies, said that we were getting rid of that. We are not. In this clause we are not waiving the requirement to build affordable housing. What is being said here, and what we are recognising, is that negotiations which took place some time ago when there was probably a very high market may now not be viable because of the affordable housing element, which may be a very large part of the Section 106 requirement.

We are saying to all local authorities: do what many local authorities are already doing; that is, to look at that obligation to see whether it can be reduced to make the whole project viable. If it does not become viable, developers are not going to develop—and if they do not develop, we can all wring our hands and talk about housing forever but it will not be built. If a small reduction in affordable housing brings that back into viability, it seems an exceptionally good reason to have those discussions taking place.

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[Lord Alton of Liverpool]

My Lords, perhaps the Minister could comment briefly on the proposal that local authorities should be able to retain the land itself in order to reduce the cost of houses that are built, in order in turn to bring them within the pocket range of either first-time buyers or existing council tenants. Even if she is unable to give a response today, will she at least agree to write to me about it?

[Baroness Hanham]

My Lords, I would be very happy to write to the noble Lord, but my feeling is that, if the local authority owns the land and thereby gives it without cost to the developer, by definition everything ought to be lower cost and it ought to be able to have some more control over it. I think this justifies a further look and I will come back to the noble Lord.

[Lord Best]

My Lords, I am deeply grateful to all noble Lords who have joined in this debate. By covering a lot of the ground on this now, we have saved time later. I will respond briefly to some of the key points made. With regard to the powerful speech by the noble Lord, Lord Deben, I have been discussing these things with Housing Ministers and Planning Ministers for longer than I care to remember; it was the noble Lord, Lord Waldegrave—then William Waldegrave, the Planning Minister—who first introduced the idea of planning gain paying for new housing development. I remember those conversations. It started in Docklands, where there was a need for local people to see something for themselves when lots of new housing was being built that was much more expensive than they could afford; from that came this way of paying for affordable housing for a range of people.

Perhaps it would be better if one simply taxed more deeply the landowners, the house builders and the occupiers, and put the money in a pot to pay for affordable housing, but it would not then be produced in the way that the noble Lord, Lord Alton, was commending—on sites that are now a mix of owner-occupiers and people who are renting or in shared ownership, which are socially very valuable. In a way, the way in which planning gain operates is a tax, and there are really only three people who can pay it. As the noble Lord, Lord Deben, suggests, the purchaser—who may be a first-time buyer—will actually be charged what the market can bear and the market is determined by the 85% of properties that change hands in the second-hand market rather than those that are built new. The developer can charge only what the market will bear, and the purchaser will look at other properties as well. The purchaser is unlikely to see their price increase for that reason.

The house builder themselves cannot operate at a loss—they would just not be in business at all—so they cannot absorb all the cost of this tax themselves. It is, I think, the third party, the landowner, where the tax finally lands, because there is a very wide variation in the value of land for agricultural or other purposes and land for development, and that is where the tax really has been drawn over the years. That system has worked pretty well.

The noble Lord, Lord Davies, makes the point that this could be a double bad deal for local communities unless we get some changes. The noble Lord, Lord Burnett, noted that local authorities already renegotiated a lot of deals, and he approves of the idea of a quid pro quo now if we are to tamper with the Section 106 agreements.

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[Lord Beecham]

There is, of course, also £300 million in the Government’s programme for affordable housing. I have today tabled a Question for Written Answer, which might be anticipated by the Minister, as to where that is going.

[Baroness Hanham]

My Lords, I apologise. I was not sure whether the exchange across the House had been totally completed.

[Lord Beecham]

Neither was I.

[Baroness Hanham]

My Lords, within this group of amendments we cover some of the ground we have already covered, so I will try only to fly over the top of that. These are important amendments and I want to do them justice.

Clause 6, as we have discussed, has a clear and specific purpose: to get houses built. It will deliver private and affordable homes where those homes are currently stalled. As I said at Second Reading, stalled sites represent no local growth, no community benefit and no new housing. Across the country, we have 1,400 stalled sites, with the capacity for 75,000 homes, including affordable housing. The noble Lord, Lord McKenzie, asked me whether we could say how much affordable housing was caught up in this. Local authorities hold that information; it is not necessarily passed back to central government. I therefore cannot give him a definitive response to that, except to say that we know that a good percentage of that 75,000 is affordable housing.

We know that many councils are voluntarily renegotiating to bring sites forward; we have discussed how this can be voluntary. We are in favour of this good practice. We are supporting this approach through a mediation service, bringing together local authorities and developers to help unlock sites, so that they can come together, discuss it and see how they can move on. But where authorities and developers are unable to come to agreement, developers should have a right to challenge. Current legislation prevents the developer appealing formally for five years. This is too long when we need homes.

There may need to be a fundamental review of obligations for those agreed at the peak of the market. We intend to make regulations in the coming weeks to allow earlier renegotiation of all planning obligations agreed prior to April 2010. That was a point made by the noble Lord, Lord Beecham: voluntarily, before 2010, you could do that but the regulations will make that part of legislation. These negotiations can take time and be costly and complex, so we are also ensuring that there is a rapid, focused mechanism for a review of the affordable housing element only, where the viability of the scheme is at stake, with a right of appeal to the Planning Inspectorate.

Affordable housing often comprises the largest single contribution on residential schemes, which is why we have focused there. Research in 2007-08 found that about 50% of all planning obligations are for affordable housing. There should also be capacity to vary the affordable housing provision in most cases. The noble Lord, Lord Beecham, asked what we meant by “affordable housing”. That can be found on page 50 of the National Planning Policy Framework. I will give a snapshot and then the noble Lord can look it up for himself. Affordable housing is:

“Social rented, affordable rented and intermediate housing, provided to eligible households whose needs are not met by the market … Homes that do not meet the above definition of affordable housing, such as ‘low cost market’ housing, may not be considered as affordable housing for planning purposes”.

Those are the three major elements.

It is important to understand that we are not proposing that developers can somehow avoid their obligations, which was suggested by the noble Lord, Lord Davies, earlier. We are simply allowing a review to be made to ensure a viable and deliverable scheme as agreed. Furthermore, we are not proposing that developers can ensure blanket removal of affordable housing requirements for their schemes. We are requiring an evidence-based approach that will adjust the affordable housing requirement by only the amount necessary to bring the scheme into viability. This would not be wholesale removal except in the most extreme cases.

Evidence will be key to this process. Developers will have to submit revised evidence to the local authority to justify why their current planning obligation is not viable. The local authority will be free to respond to this proposal and be able to collect its own evidence if it wishes. Concerns are often expressed about the quality of viability evidence. However, robust evidence must be the best basis on which to make a judgment on the viability.

To assist as much as we can in ensuring consistency in how developers and councils approach this new process, we intend to issue guidance to support this clause. The guidance will not advocate a single methodology for viability assessment, but it will work with industry practice. It will be clear on what developers need to do to support their application for review. We will discuss the guidance with professional bodies and it will be published in due course, but I hope that we will be able to have a discussion about it before Report. The guidance will also be clear on the flexibilities open to local authorities to encourage developers to start on site and to get development going.

Overall, this measure presents a real opportunity to stimulate local housing growth by ensuring that consents are viable and realistic. The provision will not affect those affordable housing contributions that are planned on viable sites; in other words, where the costing stacks up, the developers cannot come back and suggest that they contribute less affordable housing. However, the measure provides for adjusting unattainable levels of affordable housing on unviable sites. Those values may have been estimated during a high point in the market, and we are clearly not there at the moment.

I turn now to the amendments in this group. Amendments 55A and 55CD would limit the life of the clause to those planning obligations in place at the time of Royal Assent or three years after Royal Assent—this is the sunset clause. I understand the arguments being made that the intent of the clause is to address obligations made in different economic circumstances. It is about giving developers the opportunity to review affordable housing requirements and bring forward stalled sites. The difficulty that I have with the amendment, which allows applications in relation to existing obligations only, is that it assumes that we are now in a period of stability in the market and that any obligation made currently should not be challenged on the grounds of viability because we know that all is well in the property market. If we knew all the factors that were to be involved and their impact on a developer’s viability—namely, construction costs, sales values and borrowing costs—and if those were certain and fixed for the foreseeable future, we could focus on the past only. However, evidence from public sources, such as the Office for Budget Responsibility, indicates that we are not actually there yet. Evidence indicates varying performance up and down the country. House price growth remains subdued across most of the country. The recently announced 2.5% house price increases in England were driven by a 5% rise in London and a 3% increase in the south-east. Elsewhere across the country there is still a wide variation in house price growth.

There remains uncertainty in the housing market. The Government continue to provide strong support for housing growth—for example, the NewBuy and FirstBuy schemes—and we are making progress. Net additions are up 11%. Nevertheless, the wider market remains uncertain. While transactions are up year on year, they are down around 47% compared to pre-recession levels. So we do not yet have the certainty that we would like on the housing market and associated viability. The clause already includes, as noble Lords have said, a provision to allow the Secretary of State to switch off the provision by order. This has been drafted in a way that allows for a judgment to be made at the appropriate time, based on the state and stability of the housing market.

However, I am clear from the debate that we have had today that greater certainty on this would be desirable. I am also very conscious of the report published last week by the Delegated Powers and Regulatory Reform Committee of this House. We are giving the report and its recommendations very careful consideration, especially in relation to the suggestion that a sunset date should be considered. Therefore I think it would be more helpful if we return to this matter on Report, and I hope that I can have some further discussions with noble Lords before we get there.

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[Lord McKenzie of Luton]

I am grateful to the Minister for her detailed replies. Perhaps I may follow up on one or two points. I asked whether an equality impact assessment of this clause had been produced and, if so, whether we could see a copy of it before Report. I did not quite follow the rationale about the £300 million of additional funding for affordable housing. The Minister said that it was for new housing. If we are talking here about less housing than there otherwise would have been, it seems to me that that itself is not a logical reason not to be able to apply it to supplement Section 106 agreements, which are assumed to make a particular site incapable of being economically viable.

The Minister helpfully talked about guidance for issues around viability. I was not quite sure—perhaps I missed it—whether she said that we are likely to see a copy of that guidance before we get to Report.

I revert to the issue of the extent to which sites are stalled by affordable housing obligations. Is the noble Baroness at least able to publish a list of the 1,400 sites where the 75,000 houses are to be built, and say whether it is those plans that are causing the sites to be unviable? Local authorities may have that information but is there no central collection of it that can be shared with us? That would be particularly helpful.

Finally, perhaps I may come back on the cut-off point. As I understand it—and as I think the noble Baroness confirmed—the broader consultation on Section 106 agreements and the current five-year rule will have as its starting point agreements that were entered into prior to April 2010, on the basis that agreements entered into after that point would have recognised the current state of the market. If that logic runs for that scenario, why does it not apply equally to consideration of affordable housing? I am a bit unsure as to how those two different processes will interrelate.

[Baroness Hanham]

My Lords, I can deal with the final point first. As I have said a number of times, the clause is specifically about affordable housing. It is perfectly up to local authorities, even at the moment, voluntarily to renegotiate any aspect of Section 106 applications made before 2010. Regulations are coming out soon to make sure that that can be done anyway.

This clause relates only to affordable housing and the expectation is that this will be a pretty swift operation. Negotiating other aspects of Section 106 agreements may take quite a long time because there may be a lot of elements. However, affordable housing ought to be dealt with swiftly by the local authority or the Planning Inspectorate. We want decisions on this that generate affordable housing. That is why the issues have been separated; there is a single focus here. However, that does not discount other aspects of Section 106 being looked at voluntarily. Ultimately, there will be a statutory requirement.

[Lord McKenzie of Luton]

I understand why the Government are saying that the issues should be separated; whether I accept that logic is another matter. However, in relation to having one cut-off point of April 2010 because agreements entered into after that would have recognised the current market conditions, why does that issue not run for both scenarios—whether it relates to affordable housing or other components of Section 106 agreements? Why is it 2010 for one but an unlimited starting point for affordable housing?

[Baroness Hanham]

My Lords, I think that the answer is simply because affordable housing is such a significant element of this particular argument. I may have to write to the noble Lord about this pinch point and come back to him.

As regards the £300 million, I said that we will not make a blanket commitment to fill the gap regarding the aspiration of affordable housing, which is what we have been talking about—the idea of granting affordable housing requirements in the event of a Section 106 agreement being renegotiated. I have not ruled that out entirely but I have, more or less, said that I do not think that we could have such a provision. However, the matter is still being looked at.

[Lord Greaves]

On the question of the two types of Section 106 agreements, if renegotiation of non-housing Section 106 agreements can be done in regulations, why does it need to be in primary legislation in relation to housing?

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[Baroness Hanham]

That is because we are concentrating here only on affordable housing. Putting this in primary legislation means that the provisions come into effect immediately after Royal Assent and we do not have to spend time working out regulations. These provisions are in primary legislation because this is an important aspect of getting sites unlocked.

[Lord Best]

My Lords, this has been an important debate. My amendment and some of the others in the group are about there being a cut-off point for the provisions in Clause 6. We know that the Government’s target is, as it should be, agreements made before the peak of the market back in April 2010. I take the point that economic uncertainty—the possibility of things getting worse—prevails; however, one would hope that developers will not enter into agreements from now on without recognising the dangers that they can get into.

My housing association is trying to acquire sites even as we speak, and we keep being outbid by people who we think are paying ridiculous prices for the land. They are entering into Section 106 agreements with their local authorities. It would not be fair on those who are playing the game properly if, later, those who go out and pay far more than they should for a site come back and say, “Sorry, the scheme is not viable with this Section 106. Can we have it reduced?”. That is not a fair way to operate and I think that the Government accept that. I take comfort from the fact that on Report we will hear more about this matter. Therefore, at this stage, I am delighted to withdraw the amendment.

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[Lord Best]

My Lords, Amendment 55B in this group, which is in my name and those of the noble Lords, Lord Tope and Lord McKenzie, would enable the planning inspector to rule, after looking at the situation, that the level of affordable housing should be increased, rather than only being able to decide that the affordable housing component must be reduced. Without this amendment, the housebuilders have a one-way bet. They cannot lose by going to appeal, and they might win. This is a recipe for developers to simply “have a go”. The amendment would ensure that there are appeals only where a robust and well evidenced case can be made for a reduction, so it should deter frivolous and unsupported applications.

[Baroness Hanham]

The noble Lord, Lord Best, has spoken to Amendment 55B, which seeks to allow the modified obligation on first applications to be more onerous than the original obligation. If a developer undertook a voluntary renegotiation, he would neither expect nor agree to more onerous terms. He would expect to come out with something better than he went in with. He would revert to the original, agreed obligation if the negotiation was unsuccessful. Under this application process, we want to replicate these circumstances for the first application. It provides an important incentive for developers to come forward and review their schemes. We need housebuilders to bring sites forward and I hope that this provision will ensure that they do this.

The clause also provides an important distinction between the first and subsequent applications to encourage the developer to proceed quickly. Under the first application, the affordable housing requirement must be reconsidered if it is found to be causing the scheme to be unviable. The local planning authority must modify or remove it so as to make the development viable, and the outcome must not be more onerous than the original obligation.

In relation to a second or subsequent application relating to the same planning obligation, the authority has more flexibility in amending the affordable housing requirement. Where it is justified on the basis of economic viability, the affordable housing requirement could be made more onerous than in the original obligation. The only restriction is that the amended obligation must not make the development economically unviable.

The distinction between first and second applications provides a real incentive for developers to reach a new agreement on their affordable housing requirements on the first application and to get on with building. It discourages repeat applications unless the developer is very clear that viability evidence supports their case. It also provides an important incentive for them to come forward and review their schemes. The purpose of these provisions is to ensure that development goes ahead and is not delayed because of unviable affordable housing requirements.

This amendment prevents a developer requesting the local authority to remove the affordable housing requirement, even if viability evidence justified this. It is not our intention that developers should remove all affordable housing requirements. We want affordable housing to be justified on the grounds of viability. In the clear majority of cases, we expect that evidence will demonstrate that some—probably most—affordable housing is viable

However, there will be some cases where evidence demonstrates that no affordable housing at all can be supported by the development. The developer must have the option to apply for this and the local authority must have the option to agree to this. Stalling development with unviable affordable housing requirements serves no purpose. Stalled development brings no local benefit to anybody. I hope that I can reassure the noble Lord that this clause does not encourage applications to remove all affordable housing but looks to ensure that viable applications are agreed to enable development to proceed.

Amendments 55BB and 55BD propose a review of affordable housing after two years where land value has increased. These amendments aim to put in place primary legislation incentives to ensure that developers build their schemes. They look to allow local authorities some control where obligations have not been delivered within two years. The drafting of Clause 6 does not prevent local authorities agreeing a mechanism with developers to increase obligations should markets improve. I am aware that this is the practice in many local authorities where obligations are “staircased” according to market conditions.

We will be clear in guidance on the options open to local authorities, and I urge that this be allowed to be negotiated locally, according to local circumstances. I do not agree that a fixed period for review in primary legislation would be helpful. I hope that the noble Lord will now think that the clauses are helpful.

[Lord McKenzie of Luton]

My Lords, I thank the Minister for her response. I would like to read the record on the issue between first and second applications, but I think that I have understood the point being made. I will take this opportunity to ask again for a response with respect to the equality impact assessment, which runs through all these groups. It cropped up earlier, and I do not think that we have had a response.

I accept that there is always an opportunity to negotiate an improvement in affordable housing numbers. However, it is the extent to which, under the provisions, the local authority has a right to drive that, just as the local authority has an obligation under these provisions when lack of economic viability suggests that these affordable housing numbers are too great. If that is the analysis, the local authority clearly must do something to modify that in a downward direction. However, where land values have increased, why on earth does it not have the right to reciprocal arrangements and to obtain increased affordable housing? I accept that one can always make these arrangements through negotiations and agreement. However, we are looking for something more positive to balance the other side of the coin. Otherwise, in the words of the noble Lord, Lord Best, this is a one-way bet for developers. Having said all that, does the Minister have any more news on the impact assessment?

[Baroness Hanham]

I enjoy Committee; there is always this bobbing up and down. It seems inconceivable that developers would want to renegotiate affordable housing at the first chance, on the basis that it might end up going up. They must produce a viability assessment to prove that it has gone down. If the assessment does not prove that, they go back to the original number. If they then rethink and decide to have another go with the second application, at that stage, if the local authority assesses that things have improved a lot it can require an increase in the amount of affordable housing. From a developer’s point of view, it is therefore a bit of a gamble to come back a second time. We suspect that it is better to stick to the original commitment and to get on with it. Regarding the equality impact assessment, I apologise. It will be available on Report, and I will see that the noble Lord gets a copy as soon as possible.

[Lord McKenzie of Luton]

I beg leave to withdraw the amendment.

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[Lord Greaves]

My Lords, the noble Lord, Lord McKenzie, briefly spoke to my Amendment 55BA, which states that,

“a modification under this subsection may have an effect that the obligation is more onerous in one aspect in return for being less onerous in another or others without becoming more onerous overall”.

It is part and parcel of the feeling throughout the amendments in this group that there ought to be more flexibility in the system, and that if there are Section 106 agreements in relation to a development, they should be looked at as a whole, on the lines drawn by my noble friend Lord Tope, rather than simply in relation to obligations for affordable housing.

Earlier, my noble friend the Minister said that the question of non-housing Section 106 agreements would be dealt with by regulation, and that housing was in the Bill because it was quicker to get it into effect; regulations covering non-housing Section 106 agreements would take longer. That does not answer the question of why the Government have not done both together. Common sense suggests that they could either both be in the Bill or both be covered by regulation, whichever is most convenient. I do not understand the lack of logic in doing them separately.

Perhaps the Minister will tell me—I am not clear on this—whether the regulations for non-housing Section 106 agreements will be seen in the same light as those in the Bill. In other words, will developers be given a right to appeal against a local authority that refuses, or does not want, to relieve them of the obligation? Will the same sort of regime apply under the non-housing regulations, or will they simply state that there is an opportunity to ask the authority to look again at development plans, which of course exists at the moment? It would be interesting to know what the Government are intending.

Common sense suggests that in some circumstances it might be better to look at non-housing obligations. For example, if there is a requirement to produce a park or a play area on the edge of a development or as part of the development, for some reason that may become impractical, or it could be thought in the light of viability studies that it is not absolutely essential, but that it is a less undesirable penalty to incur than having no or less affordable housing. There might be a situation in which a Section 106 agreement required a contribution to a local bus service. The way that local bus services are going at the moment, with some county councils cutting subsidies, by the time the estate is built, the bus service might not exist. It might be that that would be an appropriate let-off for the developer. Flexibility is a good idea.

It seemed to me that some noble Lords speaking in this debate were referring to a different world from that in which some of us are trying to make the best of things. In the case of new housing developments—greenfield housing developments in my part of the world—when planning applications come in, the local authority in general does not ask for affordable housing as part of the development, because an affordable housing requirement would very quickly make that development unviable. That is a fact of life. Local authorities in my part of the world—we will debate an amendment on this later—are finding it very difficult to set up a CIL regime, because imposing CIL on developments would make them unviable. Therefore, none of this applies if development is required or is thought to be reasonable.

Coming back to the point I raised earlier in an exchange with the noble Lord, Lord Beecham, what is a local authority supposed to do when it owns a brownfield site where housing or industry has been recently cleared and the site flattened and made reasonable, when development on that site for housing for sale or rent is simply not viable in present conditions, even if the local authority has put the land into the equation for free? It is simply not viable to develop given the current equation between local development costs and local house prices. The intention was that there would be a degree of gap funding to cover this; it was assured through the housing market renewal scheme, which has now been stopped. There is no gap funding.

What do the Government expect us to do in those circumstances when development of a perfectly good vacant site—for example, on the edge of a small town with wonderful views across Pendle Hill—is nevertheless not economically viable, so development cannot and will not take place? Somebody somewhere has to provide some gap funding to allow that development to take place if an area such as that is going to contribute to the Government’s aims of more housing. That is a slight variation on this amendment but it is a point that needs to be made and I will keep making it time and again because it is a question that nobody seems to be facing up to at the moment.

[Baroness Hanham]

My Lords, I shall start by trying to answer the points made by the noble Lord, Lord Greaves, because from what he says he will come back to them again. As I understand it, these sites are unviable but are not included within a Section 106 agreement; they are outside that.

[Lord Greaves]

The sites are not viable on a commercial basis. It is not proposed to be affordable housing, it is proposed to be commercial housing sold at the market price in the local housing market. It is not possible to build houses in those locations that will sell for a price that will pay for the development. An organisation can build for virtually no profit but it is still not viable.

[Baroness Hanham]

For the moment I am going to say to the noble Lord that it is not quite relevant to this amendment but I would like to consider it further and perhaps come back to him at a later stage.

Clause 6 introduces a fast-track application and appeal process to ensure that quick decisions can be made on stalled sites. These amendments would undermine this simplicity and add complexity, for very little benefit. Amendments 55AC and 55AE seek to bring into the application process consideration of the development plan and strategic policies contained in it. The development plan will already have been taken into account when the decision to grant planning permission was first made and the development plan will presumably be the same at this stage as it was then. I am aware that local planning policies may include policies for the delivery of affordable housing to meet local needs. It is usual practice to apply these policies in the context of individual site viability. The effect of this clause is to help deliver those policies by bringing forward viable development. It does not require a revisiting of the local plan.

Amendment 55AE seeks also to require an assessment of whether an alternative form of development would be economically viable. This would tie the process into lengthy consideration of alternative schemes. The effect of this amendment would be to establish a complex and lengthy process and clearly act as a deterrent to developers. Similarly, Amendment 55AC seeks to prevent a determination to reduce affordable housing requirements if modifications to other planning obligations would be more appropriate. There is nothing to stop the local authority agreeing to vary any obligation on a voluntary basis, as has been said a number of times this evening. The authority could negotiate with the developer to alter the Section 106 agreement outside the process of this legislation if that would be beneficial to both parties. The purpose of Clause 6 is to provide a quick, targeted review process based on viability related to affordable housing only. The imminent regulation change, which provides for a full review of Section 106 agreements in pre-April 2010 obligations, will enable these older agreements to be reviewed across the piece.

I do not think it helpful to bring community infrastructure levy payments into this consideration. The community infrastructure levy has been introduced to provide a non-negotiable levy that is up front and predictable, and set at the local level in accordance with local viability. Local authorities do not have a general discretion to waive or reduce community infrastructure levy payments. The regulations make provision for exceptional circumstances relief but this is subject to strict criteria.

Amendment 55AD seeks to require that the authority must assess the affordable housing requirement to be the sole reason for the site being economically unviable before it modifies the requirement. This amendment is not necessary. The current drafting requires that if the affordable housing requirement means that the site is unviable, the council must vary the obligation. The applicant will have to present evidence to the authority to demonstrate this. The local authority will have regard to this evidence and have the opportunity to prepare its own evidence to justify any decision.

Affordable housing often comprises the largest single contribution on residential schemes, which is why we have focused there. Research from 2007 and 2008 found that about 50% of all planning obligations are for affordable housing. The local authority and the developer are free to renegotiate any aspect of a Section 106 agreement on a voluntary basis at any time. If an obligation which is not affordable housing is causing the site to be unviable, both parties are free to negotiate around that item.

Amendment 55CA would allow land transferred at nil cost to be excluded from the assessment of viability. I understand the importance that land transfers of this type play in creating mixed communities. This is particularly important in high-value areas. I can understand the temptation to think that we should exclude land transfers from the assessment of economic viability. However, the value of this land can be a significant cost to house builders. It is right that the value of this obligation is considered as part of the overall economic viability of the scheme. If the value of that land transfer is causing the site to be unviable, it should be adjusted; this does not necessarily mean removed completely but adjusted to suit economic conditions. Only where it is no longer viable to transfer the land at nil cost will an adjustment be made. Our policy for mixed communities will be upheld and delivered in a realistic and viable way by these clauses. With these assurances, I hope that the noble Lord will withdraw his amendment.

[Lord Tope]

I am grateful to the Minister for her reply. I am still struggling to fully understand why it is focused solely on affordable housing. Of course, local authorities and developers can agree voluntarily to vary any of the other planning obligations. They can agree voluntarily to vary the affordable housing obligation. We know that such negotiations are going on all over the country and we hope, believe and expect that the vast majority will be varied and agreement reached voluntarily without having to use this appeal mechanism.

However, I take it from what the Minister has said that what gets appealed to PINS—the Planning Inspectorate—can be only the affordable aspect of it and not any of the other planning obligations. For instance, would it be possible for the Planning Inspectorate to agree or determine that some other aspect of the planning obligation could be varied or reduced in order to make the scheme viable, but to retain all or the greater part of the affordable housing obligation? It is that element that is troubling us and to which I suspect we may return at a later stage, but in the absence of any further illumination on the point—

[Lord McKenzie of Luton]

I wish to raise a number of points and to refer to the matter that the noble Lord has raised. I thought that the current rule outside these new provisions for affordable housing is that if a Section 106 agreement is not implemented within five years, there is a right of appeal to the Secretary of State. I am not sure whether the same criteria would have to apply to the Secretary of State in making a determination of that appeal, but I thought that it was that process which has been the subject of the parallel consultation. For example, it had a cut-off point of April 2010. That may be wrong and no doubt the Minister or her officials in the Box will tell me if that is the case. However, I thought that that was the issue.

I want to come back on the issue of the local plan and development policies. No one is suggesting that we need to revisit the local plan, but simply to ensure that any change to the affordable housing requirement as a result of these provisions is still consistent with the plan. That does not mean revisiting it.

Perhaps I may also come back on the issue of whether affordable housing is the sole reason for a development not being economically viable. Are we saying that if two reasons of broadly the same magnitude make a development not viable, nevertheless it is right and just that it is the affordable housing that is changed as a result? That does not seem to be particularly logical or fair. If the affordable housing component is the sole reason why a development is not viable, one can see how the logic flows for what the clause provides. However, when it is not the sole reason, why is it that only the affordable housing has to take the hit?

[Baroness Hanham]

My Lords, I have tried to say several times during the course of our debate that this clause relates only to affordable housing. It relates to the developer saying that what is holding things up and why he is not developing is that the affordable housing aspect, for whatever reason, is making it unviable. Any other aspect of Section 106 can be negotiated with the local authority. A developer does not have to do it. It is absolutely only the affordable housing element.

[Lord McKenzie of Luton]

Perhaps I may press the point. I understand that the clause is focused only on affordable housing and changes and modifications to it, but if the reality is that the assessment of viability shows that affordable housing and other things are making the project not viable, you will nevertheless look to the affordable housing component as that which has to take the hit and bear the adjustment. I accept that everything else can be negotiated under the current provisions, but if it is not solely the affordable housing component, why is it that, to the exclusion of everything else in this clause, the affordable housing component is focused on to bear the consequences of the modification?

[Baroness Hanham]

It is because that is what this clause is all about. It concerns situations where it is believed that affordable housing is causing the block. Every other aspect of Section 106 can be negotiated voluntarily. Under Section 106 in its totality consideration can be given to other aspects, but it is only where affordable housing is the only aspect that is said to be causing the lack of viability that this clause will impinge.

[Lord McKenzie of Luton]

I think that that was a gem for which I am grateful to the Minister. I think she said that if the affordable housing component is the sole reason for it not being viable, that is when the clause operates. I think that that is a different position from that which I thought we debated earlier. Perhaps we should read the record because no doubt we shall come back to the issue on Report.

[Baroness Hanham]

My Lords, unless I have been deluding myself, I thought that that was what I had been saying the whole way through our debate this evening. We will check Hansard and make it clear that that is the situation. I will write to the noble Lord if I have said anything recently which does not bear out what I said before.

[Lord McKenzie of Luton]

I am most grateful to the Minister and, in the circumstances, I beg leave to withdraw the amendment.