A presentation looking at the flaws in the viability system and how planning loopholes are being exploited by landlords claiming huge housing benefit payments

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Understanding planning and housing
George Turner
Investigative Journalist and Campaigner

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PLANNING
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By law a local planning authority must grant an application for
permission to develop land in line with the statutory development plan
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The development plan in London is:
– The National Planning Policy Framework
– The London Plan
– The Boroughs’ Local Plans
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The goal of the development plan is to meet demonstrated local need

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NEED VS DEMAND
“Whichever level or type of development one is dealing with, a clear distinction is always drawn
between public "need" (i.e. what is in the public planning interest), and private "demand" (i.e. what
is in the developers interest by having this particular type of development).
“The developers argued that proof of private "demand" for exclusive golf facilities equated
to "need". This proposition is fallacious. …Pure private "demand" is antithetical to public "need",
particularly very exclusive private demand... The more exclusive the development, the less public
need is demonstrated. It is a zero sum game.”
- Mr. Justice Haddon-Cave’s judgement in R (Cherkley Campaign) V Mole Valley District Council and Others
[2013] EWHC 2582 (Admin)

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PLANNING OBLIGATIONS
Local plans contain a number of obligations
– Affordable Housing
– Provision of Open Space
– The Protection of Historic Monuments
– etc

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MARKET DEMAND

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GOVERNMENT POLICY ON PLANNING AND
ECONOMIC VIABILITY
To encourage growth, if planning obligations render a
development to be so unprofitable that a developer
cannot get finance for the scheme, or acquire the land,
then the planning obligations must be removed

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VIABILITY IN PLANNING
Introduced by Ken Livingstone in London at the same time as
introducing a 50% affordable housing target. Originally targeted at
affordable housing obligations, and the goal of the policy was to
increase affordable housing obligations.
Coalition government increased the scope of the viability policy
though the National Planning Policy Framework

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HOW VIABILITY WORKS
Revenues – cost = profit
Profit must be sufficient to provide:
– A reasonable return to the land owner
– A reasonable return to the developer

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REVENUES
Extremely easy to manipulate – based on
estimated of future sales values
Surveyors will now produce two valuations for
potential revenues from a new development

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THE SHELL CENTER - REVENUES
BNP Paribas confidential review of the
submitted viability assessment – May 2013
“Through analysis of the available
comparable evidence and their own
judgment, Savills and KF have applied
average values, on a pounds per square foot
basis…. Across the entire Development the
resultant average value is £1,275 per square
foot.”
Knight Frank and Savills confidential
presentation to potential Shell Centre
investors – February 2013
Average Price per square foot £1640

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COSTS
There are no benchmarks
for maximum acceptable
costs
Almost any costs can be
and will be added to a
viability appraisal

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PROFITS
Profit benchmarks manipulated by setting an existing use value
which is too high, or by creating unreasonable profit demands from
the developer.
Battersea Power Station, Earls Court and the Shell Centre all had a
minimum profit requirement of 20% on an internal rate of return
basis.

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THE OUTCOMES
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London currently achieving 13% of new homes as affordable
housing.
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Most boroughs have a target of between 40-50%
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London losing industrial land at 3* the planned rate causing real
problems for workspace
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New buildings are deficient in terms of basic amenity, such as open
space and daylight

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THE SHELL CENTRE
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8 towers packed together in a highly sensitive area
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Loss of office space
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30%+ of building would have inadequate daylight, 40% +
inadequate sunlight
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Apartments 8m away from each other
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Damage to heritage assets of global importance
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Loss of 4,500 sqm open space
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New public square – 99.3% overshadowed
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10% onsite affordable housing concentrated at the back
of the development (all with sub standard daylight)

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SECRETARY OF STATE DECISION
Inspector concluded that the Shell Centre
redevelopment could cause no harm the setting of the
WWHS because the development was not in it’s setting.
Inspector also concluded that there was no harm to the
setting of any historic assets as a result of development

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HIGH COURT DECISION
Inspector had “not expressed himself as well
as he should have done” with regard to setting
of the World Heritage Site, but had clearly
considered the issue

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CONDUCT OF THE PLANNING INSPECTOR
“I have no doubt that the inspector’s conduct was such as to give rise to a real
concern that he was unfair to the objectors. He seriously mismanaged his
conduct of the inquiry. It may well be that the individual decisions he made were
justifiable, but the way in which he made them was unacceptable. Observations
which are against a party’s interests may be reasonable, but care has to be
taken to ensure that they do not give the wrong impression. It is of course
essential that parties to an inquiry feel that they have had a fair hearing and that
their case has been properly taken into account. That did not happen in this
inquiry so far as the claimant is concerned.”

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CONCLUSIONS ON VIABILITY
Planning policies are weakly drafted to allow them to be interpreted however the
decision maker on the day pleases
Culture, and good urban design are being traded off against the short term
economic boost of development. This is (unstated) government policy
The international market for investment property is causing particular pressure in
central London
The corruption of the economic viability policy is a key driver

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THE HOUSING BENEFIT SCAM
In 2010 government changed planning rules to allow conversions
of single family dwelling into homes in multiple occupation
Homes in multiple occupation are shared houses where residents
are unrelated, rent rooms and share facilities like a kitchen
Housing benefit rates for rooms in HMOs are less than half the
rates for 1 bedroom flats

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THE HOUSING BENEFIT SCAM 2
Landlords have been buying up 2-3 bedroom family homes, and converting
them into 6 rooms and a kitchen, they claim they don’t need planning
permission as they are HMOs.
The landlords then let the rooms to the homeless and destitute. The
landlords kindly help the tenants fill out their housing benefit claim form,
and get them to claim the higher HB rate for a self contained flat. They also
get the tenant to request that HB is paid directly to the landlord and not
the tenant.

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SCALE
In London each HB claimant can claim approx. £1000 per
month.
Each home has six rooms generating 6k per month in rent
72k a year.
London councils, looking at 6 boroughs, found 3000
properties operating this model

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THANK YOU – QUESTIONS AND DISCUSSION
www.ourcity.london
george@ourcity.london
Twitter - @georgenturner