Government inspector approves key areas of Reading Borough Council's housing policies

After significant delays, an Inspector has approved Reading Borough’s new Local Plan with minor amendments. This sets out the overall planning policies within Reading Borough for the period running to 2036.

For developers, there is a need to review existing and proposed projects to take into account the impact of the new plan policies which will be applied to any future decisions.

Key headlines are:

House numbers increase

During the overall plan period running from 2013 to 2036 the target for new homes has been increased to 689 annually, to a total of 15,847 homes. This compares to 671 homes per year in the proposals submitted by the Council in March 2018.

Zero carbon on larger developments

Developments of more than ten units will be expected to be zero carbon.

This will lead to significant review of construction costs and environmental performance generally. Inevitably there will be increased oversight by the Borough to ensure that the zero carbon target is achieved, which in turn means more work for developers to ensure that the appropriate data is collated and then supplied. It remains to be seen whether the added costs from such procedures will find their way into higher prices for new homes or in the alternative, act as a limit on land values of any sites that become available for development.

Zero carbon targets put Reading in the forefront of the evolution of such policies. It is too early to say whether the market will respond to allow Zero Carbon homes to attract a premium price or cause ‘standard’ homes to become less attractive? Whilst larger developers may have the resources available to address the zero carbon targets and the reporting this will involve, SME developers will need to review carefully how to manage these requirements.

Affordable housing contributions on all small sites

Reading has successfully achieved approval for its policy of requiring affordable housing contributions from all housing developments, however small. In this context, the battle between Reading Borough and the Government has been won by Reading. National policy remains that small sites should not face demands for affordable housing contributions either on site or in kind but this policy was always subject to the caveat that it could be overturned if specific local circumstances dictate it was necessary.

Reading Borough has successfully campaigned and demonstrated to the Inspector that the shortage of affordable homes and the high cost of new homes in the mainstream market are such that local circumstances do exist to justify the departure from the standard policy and enable Reading Borough to seek contributions on even the smallest sites.

For mainstream developers dealing with larger sites this will make no difference to their approach to development. For the SME developers whose focus tends to be on the smaller sites, this will have a direct impact on current and future planning applications. The additional costs of contributions are equivalent to 20% of the housing units for developments of 5 to 9 dwellings and the equivalent of 10% by value on small developments of under 5 units. However unwelcome for developers, there will at least now be greater certainty over the costs involved, which will provide a clear framework when negotiating to acquire sites and prepare budgets for the development of smaller schemes.

This policy is, with the rest of the new Plan, expected to be adopted formally by the Council in November. It will make it harder for any developer to bring forward arguments to reduce or avoid making contributions on viability grounds.

Looking ahead, it remains to be seen whether the adoption of this policy will further reduce the number of small sites coming forward for development, either because developers will conclude that there is little or no economic margin in such schemes or because landowners are not willing to accept reductions in land values which take into account this added cost of development. As Reading have been applying their ‘special circumstances’ arguments to insist on contributions in relation to individual planning applications for some years, it could be argued that the local market has already adjusted.

A vibrant SME development sector is desirable. Without the contribution made by small sites, estimated to be 25% of the total, that Reading enjoys, the result may be greater pressure for higher numbers of units within the larger schemes or a greater number of larger schemes. There is perhaps a greater risk of the Council falling short in delivery of housing numbers. One feature of smaller schemes is that they are often brought forward for development quicker than the larger sites, not least because SME developers don’t have the luxury of tying up their limited resources in long planning wrangles or (worse) land-banking. Inevitable delay in delivery, arising from increased reliance on larger and more complex sites, remains a threat to achieving the required housing numbers. The average annual housing target of 689 units under the new policy is substantially larger than the historic housing target of 532, so the pressure will only increase. Undershooting the new targets will threaten to bolster house prices and exacerbate the affordability problem that Reading has been struggling to address.