Vacant building credit – affordable housing relief for conversion or redevelopment of vacant buildings

Published on: 23rd December 2014

Richard Dunn, Partner at Sanderson Weatherall, has teamed up with indigo planning to talk about these important changes in Planning Practice Guidance.

On 1 December 2014 an initiative aimed at getting empty or redundant land and property back to use was announced by Minister of State for Housing and Planning Brandon Lewis.

Earlier in 2014 the CIL regulations were amended to ease the burden on conversion or redevelopment of existing buildings. An exemption to the levy applies to conversion or redevelopment where no additional floorspace is proposed; only additional floorspace will attract a CIL liability.

In the statement he confirmed a similar provision in respect of affordable housing with the introduction of a vacant building credit. Where redevelopment or reuse of a vacant building is proposed, affordable housing contributions will only apply to an increase in floorspace. However, where a vacant building has been abandoned the affordable housing relief will not apply.

We anticipate that the Government will issue detailed advice in the very near future and this will clarify when a building is abandoned or merely vacant.

It is clear that the new provisions will help bring vacant buildings back into use, and conversion schemes requiring planning permission will benefit from the same nil-affordable housing requirement as currently benefits office-residential permitted development.

What is the vacant building credit?

Where a vacant building is brought back into any lawful use, demolished to be replaced by a new building, the developer should be offered a financial credit equivalent to the existing gross floorspace of relevant vacant buildings where the local planning authority calculates any affordable housing contributions which will be sought. Affordable housing contributions will be required for an increase in floorspace.

What is the process for determining the vacant building credit?

Where there is an overall increase in floorspace in the proposed development, the local planning authority should calculate the amount of affordable housing contributions required from the development as set out in their Local Plan, A ‘credit’ should then be applied which is the equivalent of the gross floorspace of any relevant vacant buildings being brought back into use or demolished as part of the scheme and deducted from the overall affordable housing contribution calculation.

Does the vacant building credit apply to any vacant building being brought back into use?

The vacant building credit applies where the building has not been abandoned.

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Is the Vacant Building Credit an election gimmick or long-term game changer for residential changes of use and conversions?

What is the Vacant Building Credit (VBC)? The VBC is a new form of affordable housing relief for the conversion or redevelopment of vacant buildings which have not been abandoned. It was introduced on 28 November 2014.

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What is the Vacant Building Credit (VBC)?

The VBC is a new form of affordable housing relief for the conversion or redevelopment of vacant buildings which have not been abandoned. It was introduced on 28 November 2014.

[fulltext] =>

Where such buildings are proposed to be brought back into use for residential purposes, developers should be offered a financial credit equivalent to the existing gross floorspace of relevant vacant buildings when the Local Planning Authority (LPA) calculates any affordable housing contribution which will be sought.

Notional Example for Calculating the VBC

For a scheme where 26 dwellings are proposed and the Development Plan requires 33% to be affordable. There is an existing vacant floorspace of 865sqm and a proposed residential floorspace of 1,607.1sqm (net increase of floorspace of 742.1sqm). The average floorspace of the proposed residential units is calculated at 61.8sqm. Therefore 12 dwellings can be provided on the net increase in floorspace (741.1sqm / 61.8sqm = 12).

Before VBC was introduced 9 affordable dwellings would need to be provided on-site or a financial contribution equivalent to 9 dwellings for off-site provision. However using the VBC only 4 affordable dwellings need to be provided (33% of the total dwellings (12) provided on the net floorspace increase).

What are the implications?

I think the VBC has been introduced just before the General Election to secure votes from the development industry. Whilst this is not guaranteed, if the Conservative win the election, or form part of a new Coalition Government, I suspect guidance on this matter will be issued soon after to clarify how the VBC should be applied in practice. If another party is elected I think the VBC will be scrapped.

At a time when grant funding to deliver affordable housing is hard to come by, the VBC is unlikely to be welcomed by LPAs or indeed those in need such as families and individuals who cannot afford to buy a house at open market value.

It will clearly result in less affordable housing coming forward. This has already happened in some parts of the Country including Westminster where at a recent committee meeting where the affordable housing contribution for the redevelopment of 20 Grosvenor Square office building dropped from £17.5m to £8.5m because of the VBC .

One would think that developers would support the VBC however this is not the case. For example, the Westminster Property Association, which represents British Land, Land Securities, the Crown Estate and Grosvenor Estates, recently wrote to the current Housing and Planning Minister Brandon Lewis MP urging him to scrap the plans because the policy is flawed . I anticipate a number of resubmitted applications that essentially seek to apply the credit to already approved schemes.

National PPG is not policy but merely guidance which is a material consideration. I therefore expect some LPAs will test the credit at appeal and argue that their Development Plan policies relating to affordable housing take precedence over the guidance and should be given greater weight as a material consideration. The VBC is also likely to lead to more disagreements between LPAs and developers about what constitutes abandonment.

In cases where development is profitable and there is a not a question mark over viability I suggest a positive spin of proposing more affordable housing than is required under the VBC, but less than is required by Development Plan policy, could be acceptable to developers and LPAs.

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We provide a complete planning service to a range of private and public sector clients including property owners, occupiers, developers, investors, institutions and local planning authorities in the residential, commercial, renewables, leisure and agricultural sectors.

Our advice is based on extensive knowledge of the ever-complex and fast-changing UK planning system.  This enables us to provide bespoke and cost-effective advice at all stages of development from project inception, spatial master planning to negotiating final project delivery.

We pride ourselves on always offering one principal point of contact which means our advice is always consistent and provided in a timely manner.  It also means that each member of our team embraces responsibility.  Our collaborative way of working with other technical specialists means we are experts at finding solutions to assist in unlocking latent value.

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The basis for decision making is set out on planning legislation, that is, “if regard is to be had to the development plan for the purposes of any determination to be made under the Planning Acts the determination must be made in accordance with the plan unless material considerations indicate otherwise". We apply this approach to each of our planning services. 

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We offer the following services:

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Our award winning property agents provide transactional services across the UK to owners, occupiers, investors and developers.

Our agency teams specialise in regions and industries around the country, providing local insight and technical knowledge that's relevant to your business, property and location.

We add value by offering commercially astute advice, and alerting you to the opportunities and threats that might affect your transaction.

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