A number of amendments were made to Part V by the Urban Regeneration and Housing Act 2015 (the 2015 Act) with the aim of making more social housing available and to provide for transparency in the Part V process. With increasing construction in the property market, it is more important than ever for developers to be aware of these obligations and how they can comply with Part V.
Application of Part V
Part V obligations arise where an application is made for planning permission for a development of nine or more housing units or where the development is on more than 0.1 hectares of land. Prior to the 2015 Act, Part V did not apply to developments of four or less housing units. This threshold was increased to nine with effect from 1 September 2015.
Where a planning permission was granted before 1 September 2015 and no Part V agreement (Part V Agreement) was made with the local authority, the developer must comply with the requirements under the 2015 Act. Where a Part V Agreement was already reached before 1 September 2015, it may be re-negotiated with the consent of the developer and the local authority (provided no commencement notice has been lodged).
Obligation to reserve land for social housing
The local authority has the discretion to decide what percentage of a development must be reserved for social housing but this is subject to a cap of 10% of the development.
Prior to the 2015 Act, the cap was higher at 20%. The cap was reduced to take account of the change in the economic climate since Part V obligations were first enforced. Furthermore, the hope was that by reducing the cap, it would encourage more construction and increase the overall number of social housing units available.
Making a Part V Agreement with the Planning Authority
Prior to the 2015 Act, when planning permission was granted it did not state the mechanics of how or when a Part V Agreement was to be reached between the developer and the local authority. It is now compulsory to enter into a Part V Agreement before lodging a commencement notice. This is a welcome change as it is important for developers to understand their obligations at an early stage so that this can be taken into account when designing and planning their developments.
How to comply with Part V
Where a developer now wishes to comply with Part V, the default option is to transfer undeveloped land within the relevant application site, which must be accepted by the local authority.
The 2015 Act reduces the number of alternative options which may be available in order to comply with Part V. These are as follows:
- build and transfer the housing units within the application site
- transfer units on other land within the functional area of the local authority
- grant of a lease of houses within the application site or the function area, or
- a combination of the above
The 2015 Act also allows developers to comply with Part V through rental accommodation availability agreements, however, this section of the 2015 Act has not yet commenced.
Developers are no longer permitted to discharge their Part V obligations through a financial payment, making available serviced sites on the development or by transferring undeveloped land outside of the application area.
Consideration of alternative options by the local authority
When considering whether to accept one of the alternative options, the local authority must ensure that it gets an equivalent planning gain. The compensation paid for the lands procured by the local authority is calculated by using the “existing use value” of the lands. The 2015 Act provides that the relevant date for calculating the “existing use value” is the date of the grant of the planning permission. Prior to the 2015 Act, the relevant date was the date of the transfer of the lands to the local authority.
Planning for a Part V Agreement
A Part V Agreement can have huge implications for a development. As the local authority still have quite significant discretion on the manner in which these obligations are fulfilled, it is essential for developers to understand their responsibilities at an early stage.
It may be worthwhile entering into discussions with the local authority, even before an application for planning permission is made, to ensure that the plans for the development reflect the social housing needs of the area. If developers do not plan for the Part V Agreement in advance, they may need to change their proposals which could delay the development.