How much should a developer get when a vacant building is brought into use or knocked down to make way for new build? Does the vacant building credit deserve credit or a post-election re-think?

Alistair Watson

Guidance, which came into force last year, says that when a vacant building is brought back into use, or demolished to be replaced by a new building, the developer should be offered a financial credit equivalent to the existing gross floor space of relevant vacant buildings, when the local planning authority calculates affordable housing contributions.

However, many people think that there are significant flaws with this mechanism. A number of planning authorities and developers, together with the property owners lobby group the Westminster Property Association, view the vacant building credit (VBC) as being worthwhile, though only in areas where redevelopment of vacant buildings wouldn’t otherwise be viable. Where residential development activity is already strong on some sites, the VBC can be viewed as inequitable.

So, how is the VBC impacting upon development in the capital? The effect of the VBC was firmly put on the agenda at a Westminster City Council planning committee meeting earlier this year. Committee members were advised that the introduction of the VBC meant that, whereas previously an applicant for the redevelopment of a building was happy to pay a negotiated affordable housing contribution of almost £18m, VBC meant that applicant was entitled to pay less than half that amount - and the council had no choice.

Clearly, on this basis, there is the argument that the VBC will mean that councils will lose out on substantial monetary contributions for affordable housing in their area.

Beyond London, in some regions, the situation differs because of the lower rate of residential development activity. In these areas, there are signs that vacant commercial buildings are being assessed, measured up and made ready for applications to take advantage of the VBC now that it is in operation.

Landowners, developers and planning authorities know that the UK’s continuing housing crisis is not going to abate or lessen any time soon. In these regions, where it is important to kick start the conversion of commercial buildings into homes, the VBC is more fit for purpose.

Overall then, the VBC is having a divisive effect, and demonstrates that a one size fits all approach is not going to work. There is no apparent need for VBC in some parts of the country, but it is a relevant mechanism in others. Planning authorities want housing to be provided, the real estate industry wants affordable housing to be provided, and together they want to provide sustainable homes for the future - without doing each other out of long established expectations as to the provision of this.

What amendments should be made to the VBC to bring about better results for everyone?

What amendments should be made to the VBC to bring about better results for everyone? Government had declared its hand - in response to a written question in the House of Commons in February - where it made it plain that the VBC would not have a negative impact on the Affordable Housing programme. That said, however, the minister for housing explained that “planning guidance is kept under review and is updated as required, and we are open to representations on any practical areas where further assistance is needed to help facilitate the implementation of a new policy”.

We saw the next development of this story at the end of last month, when the government made two significant changes, before the break for the general election.

The government addressed two matters:

  • A planning authority now has the ability to consider whether the building has been made vacant for the sole purpose of redevelopment - or to put it another way, is the property vacant because of the plans for redevelopment, so VBC should not apply, or has the building genuinely been left empty and redundant; in which case, VBC should apply.
  • Is the building covered by an extant or recently expired planning permission? If it is, the use of VBC on that same building with a new application can be rebuffed by the planning authority.

The government’s willingness to provide initiatives is welcome, though this is another example of its inability to recognise that, across the country, viability and economic circumstances dictate that a one size fits all policy will not always work - a bespoke approach for certain areas needs to be adopted in order to secure success across the whole of the country. The amendments to VBC go some way towards allowing developers and planning authorities to engage directly with each other and recognise that circumstances can be different, on a building by building basis.

The real estate industry always works best with a united voice and government recognises that, on this occasion, it had not thought through all of the implications of this mechanism. That said, there’s still time to put the thinking caps back on now that the election is over.

Al Watson is head of planning and environment at Taylor Wessing