22 June, 2020
Vacant Building Credit (VBC) is a policy that entitles developers to a financial credit in relation to the affordable housing contribution. The calculation is set out in the Planning Practice Guidance as "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." Despite being first introduced in 2014 to encourage the re-development of vacant buildings, the benefits offered by Vacant Building Credit are yet to be taken advantage of. It can be said that a likely consequence of COVID-19 will be more vacant buildings, therefore there are likely to be more opportunities for developers to consider if VBC can be applied.
The difficulties arise in applying the policy in practice. The Planning Practice Guidance (PPG) does not set out criteria for the policy, however it does outline certain questions and factors to be taken into account.
It has been made clear that the credit can only be applied to vacant buildings but cannot be applied to abandoned buildings. There must be a building for the credit to be applied so if the building has been demolished, VBC cannot be claimed. The credit cannot be applied if the building is subject to a recently expired planning permission that is for substantially the same development.
The developer will need to provide evidence to demonstrate to the local authority that the relevant questions have been satisfied. The difficulties arise as the questions are open to interpretation by each individual local authority.
The PPG does not provide a definitive answer. There is no specific period of time that a building needs to be vacant for it to qualify for VBC. Some local authorities have chosen to rely on the requirement under CIL regulations which states that the building must have been in lawful use for a period of at least six months out of a three year period. However this then poses the question of when the date of vacancy will be calculated from. This length of time to prove vacancy could deter developers from applying VBC to their development.
Local authorities should also consider if a building has been made vacant specifically to qualify for VBC.
For some time, the Government has encouraged the redevelopment of brownfield land. The "Planning for the Future" paper published on 12 March 2020 further made it clear that the Government is "backing brownfield". Clearer guidance on the practicalities surrounding the application for VBC. Now may be the right time, following the Lockdown, for the Government incentive to be filtered down to local levels. As there are few policies on VBC, local authorities will need to introduce these to provide some clarity to developers. Some local authorities have made reference to VBC in their local plans, clarifying their position although there are many still to do the same. Those that have successfully introduced the policy would be best placed to share and provide guidance to others to encourage the use of VBC.
The guidance does not make any reference to the question of viability. It can be argued that VBC should only be applied to a scheme that is not viable to make it viable, however this would appear to contradict the Government's intention.
A developer will need to consider the costs of a vacant building against the benefits of applying for VBC. They will need to ensure that they have the history of the building to support the application. Other considerations will be the potential delays and the uncertainties that may come with an application. As VBC is a relatively new concept for local authorities to implement, developers may prefer to proceed with the development without taking these risks. Demolishing the building may be the easier option in terms of both time and cost.
VBC should be considered by developers on their schemes before disregarding as there is no doubt that for some, the credit will be invaluable to the developer by reducing the affordable housing requirement and in some cases removing it entirely. It is important to note that it may be specified within the section 106 agreement that the affordable housing contribution would only be payable where there is no affordable housing on the scheme. An alternative to the application of VBC could be to negotiate deals involving affordable housing with Registered Providers. Both options could affect the decision of the developer when considering the viability of their schemes. Now is certainly the time for policies to be put in place to allow developers to have all options set out before them in order to make the most informed decisions.
For more information contact Zayna Ibrahim in our Housing & Regeneration department via email or phone on 0333 207 1130. Alternatively send any question through to Forbes Solicitors via our online Contact Form.