106 payments and the NPPF.......... “The definition of ‘sustainable’ has nothing to do with green issues or energy at all......... It means one thing: commercially viable.”

Earlier this year, this blog asked to what extent the Section 106 system of developers giving councils cash in return for planning permission amounted to 'bribery':
Futures Forum: 'Planning gain' - the replacement for S106 cash from developers - the Community Infrastructure Levy - but is it still 'bribery' by a different name?
Futures Forum: Missing out on developers' S106 funds...

Earlier in the week, the East Devon Alliance pointed to a very disturbing analysis of "The truth about property developers: how they are exploiting planning authorities and ruining our cities" from the Guardian's architecture correspondent:

DEVELOPERS, COUNCILS AND SECTION 106: THE SHOCKING TRUTH

October 23, 2014

We tried to find the most significant facts in this long and shocking article, but really it must be read from beginning to end.

It exposes the disgraceful tactics that developers use to maximise their profits and minimise their obligations.

Be afraid, be VERY afraid:

Developers, councils and Section 106: the shocking truth | East Devon Alliance

Here is a comment on the article sent to this blog from a correspondent:

The NPPF introduced a “presumption in favour of sustainable development”, which sounds innocuous enough – but as Rees points out, “the definition of ‘sustainable’ has nothing to do with green issues or energy at all. It means one thing: commercially viable.”

Here is a condensed version of the article, focussing on elements of importance to East Devon:

The truth about property developers: how they are exploiting planning authorities and ruining our cities

Affordable housing quotas get waived and the interests of residents trampled as toothless authorities bow to the dazzling wealth of investors from Russia, China and the Middle East

Oliver Wainwright

theguardian.com, Wednesday 17 September 2014 Jump to comments (333)

“I always said you should never trust a bank with property, or a property developer with money,” says Peter Rees. The former chief planner of the City of London should know about such things, having presided over the results of both. Over the last 30 years, he has ushered in a menagerie of their monuments, from the Gherkin and Cheesegrater to the Walkie-Talkie and Heron Tower, during which time he has seen a significant shift in the balance of power. “When I arrived in the job in the 1980s, the big banks were in control of London,” he says. “But now it’s the big house-builders. We’ve gone from being ruled by Barclay’s bank to being controlled by Berkeley homes.” Left unchecked, the banks went off the rails in spectacular fashion, as they sprayed money into the great mortgage mirage. And now property developers have been allowed to follow suit. Fuelled by the dazzling wealth of investors from Russia, China and the Middle East, who they turned to when the banks stopped lending, their steroidal schemes are causing irreparable harm to our cities.

Across the country – and especially in superheated London, where stratospheric land values beget accordingly bloated developments – authorities are allowing planning policies to be continually flouted, affordable housing quotas to be waived, height limits breached, the interests of residents endlessly trampled. Places are becoming ever meaner and more divided, as public assets are relentlessly sold off, entire council estates flattened to make room for silos of luxury safe-deposit boxes in the sky. We are replacing homes with investment units, to be sold overseas and never inhabited, substituting community for vacancy. The more we build, the more our cities are emptied, producing dead swathes of zombie town where the lights might never even be switched on.

Bankers have faced our collective wrath, but what about developers? The economy goes in fickle booms and busts, cycling merrily through bubbles and crises, but cities, built in concrete and steel, generally stay put. What we are making now, we will all have to live with for a very long time. The iniquities of the banking crash have been intricately unpicked, but the wilful destruction of the places where we live and work remains something of a mystery. We may rant and rage against ugly additions to the skyline, but what of the mechanisms that are allowing it to happen? How did it come to this?

The principal reason can be traced to the fact that awarding planning permission in the UK comes down to a Faustian pact. If the devil is in the detail, then the detail is Section 106 of the Town and Country Planning Act 1990, a clause which formalised “planning gain”, making it in the local authorities’ interests to allow schemes to balloon beyond all reason, in the hope of creaming off the fat of developers’ profits for the public good.

Introduced as a negotiable levy on new development, Section 106 agreements entail a financial contribution to the local authority, intended to be spent on offsetting the effects of the scheme on the local area. The impact of a hundred new homes might be mitigated by money for extra school places, or traffic calming measures. In practice, since council budgets have been so viciously slashed, Section 106 has become a primary means of funding essential public services, from social housing to public parks, health centres to highways, schools to play areas. The bigger the scheme, the fatter the bounty, leading to a situation not far from legalised bribery – or extortion, depending on which side of the bargain you are on. Vastly inflated density and a few extra storeys on a tower can be politically justified as being in the public interest, if it means a handful of trees will be planted on the street.

“Council chief executives will allow schemes to be pumped up as much as they can go before they get political push-back from councillors,” says one planning officer from a London borough that has suffered from a recent a spate of towers. “And the worst schemes happen when there is no political resistance at all.”

It is a system that is all too open to political pressure, given that any officer who advises against a new development can be conveniently framed as “anti-growth”, heartlessly preventing a promised tidal wave of new public amenities from flooding into the borough. Based on negotiation and discretion, the result is entirely down to the individual planning officer’s ability to squeeze out as good a deal as they can get, a battle that all too often ends in the developer’s favour.

The system has spawned a whole industry of S106 avoidance, with consultancies set up specifically to help developers get out of paying for affordable housing at all scales of development. Section 106 Management, set up by solicitor-turned-developer Robin Furby, is one such company that offers a service to small-scale developers, promising “to establish the profitability of your project and thereby reveal unviable Section 106 obligations”. Its website displays a list of case studies proudly showing how much they have helped developers dodge, and boasting of planning permissions achieved “without any contribution towards affordable housing” at all, saving “tens, if not hundreds of thousands of pounds”.

So what exactly does it mean when a property developer pleads poverty? “If the profit margin for your scheme is pushed to below 17.5% by Section 106 payments, you should talk to us,” says the website. Other consultants promise to safeguard 20% profit margins and upwards, before any Section 106 contributions are even considered. If a scheme is declared “unviable”, it simply means “we’re not getting our 20% profit so why should we bother”.

The power of the policy to leverage affordable housing has been further eroded since the introduction of community infrastructure levy (CIL) in 2010. A non-negotiable fixed-rate tax on new development, CIL was intended to introduce more transparency and give developers a level of certainty about how much they would be expected to contribute towards infrastructural improvements. But, in reality, it has provided another excuse to dodge Section 106 obligations. A further change to the town planning act last year has made Section 106 agreements renegotiable, allowing review and appeal of all existing obligations, in a misguided attempt to promote growth – which simply makes it easier for developers to wriggle out of their promises, as happened in Tottenham and elsewhere.

“Not surprisingly, developers are now even keener to renegotiate the S106 after they’ve got planning permission, finding they can’t negotiate the CIL,” says Peter Rees. “In most cases, they manage to prove that they can no longer afford to pay for the affordable housing that they agreed – it’s simply ‘not viable’ any more.” One planning officer puts it succinctly: “There has never been a worse time to give schemes consent, in terms of securing public benefit.”

In all cases, how developers prove what they can afford to pay for comes down to the dark art of “viability”. The silver bullet of planning applications, the viability appraisal explains, through impenetrable pages of spreadsheets and fastidious appendixes, exactly how a project stacks up financially. It states, in carefully worded sub-clauses, just why it would be impossible for affordable housing to be provided, why the towers must of course be this height, why no ground-floor corner shop or surgery can be included, why workspace is out of the question; indeed, why it is inconceivable for the scheme to be configured in any other form. Presented as a precise science, viability is nothing of the sort; it is a form of bureaucratic alchemy, figures fiddled with spreadsheet spells that can be made to conjure any outcome desired.

“Councils just don’t have the expertise to challenge viability reports,” says one senior planning officer. “We can’t argue back.” Instead, they can commission viability assessments, produced by the same consultants that work for developers, to determine whether the report is accurate – but not to propose an alternative. The figures may well stack up, but it doesn’t mean the scheme could not be designed in a different way, which would still guarantee the developer’s 20% profit margin.

“You only have to modify one of the variables very slightly to get completely different outcome,” says one planning consultant. “You can very easily go from something being rip-roaringly viable to completely unviable by tweaking something very modestly. If a planner doesn’t understand that, they’re not going to do very well.”

Evidence suggests that is all too often the case, judging by the number of planning officers’ reports that diligently conclude a scheme would simply be unviable if it was obliged to fulfil the policy objectives. With calculations often undisclosed for reasons of commercial confidentiality, councils are forced to blindly accept the developers’ figures as the ultimate de facto truth, allowing their own policies to be flagrantly breached.

“I’ve never been confident in reports that I’ve received on viability,” says one planning officer, describing how the big property consultancies operate as something of a cabal, with one wary of challenging another’s figures. “Every consultant that’s advising a local authority is hoping to advise a developer tomorrow. If they put the boot in on a big development scheme, they simply won’t be hired again.”

A relatively new field, viability has been given increasing weight by the government’s National Planning Policy Framework, introduced in 2012, which slashed 1,300 pages of policy down to 65, as part of the coalition’s triumphant bonfire of red tape. The NPPF introduced a “presumption in favour of sustainable development”, which sounds innocuous enough – but as Rees points out, “the definition of ‘sustainable’ has nothing to do with green issues or energy at all. It means one thing: commercially viable.”

Immune from public scrutiny, viability assessments have rightly come under fire for clouding the accountability and transparency of what should be a statutory public process. Their confidentiality is closely guarded, in order to preserve developers’ trade secrets, but where the sale of public assets is concerned, there is increasing pressure for the books to be opened.

One such case recently ended in victory for housing campaigners, when after two years of fighting, which culminated at a tribunal, Southwark Council was ordered to disclose the viability assessment produced by Lend Lease over its controversial redevelopment of the Heygate Estate...

“Without some commercially sensitive information remaining private, developers could simply refuse to work with councils, leaving boroughs without the housing and regeneration we all need,” says a spokeswoman for Southwark Council. The borough brought a legal challenge against a decision by the Information Commissioner’s Office last year ordering the council to disclose the full details of the viability report, after a freedom of information request was denied. Southwark argued that full disclosure would “damage regeneration”, while Lend Lease, in a defence that verged on farce, pleaded the human right to “peaceful enjoyment of its possessions”, arguing that disclosing the viability assessment would amount to “unjustified interference with this enjoyment”.

The tribunal concluded that the information must be disclosed, stating that “the importance … of local people having access to information to allow them to participate in the planning process outweighs the public interest in maintaining the remaining rights of Lend Lease”. It sets an encouraging precedent for campaign groups battling similar situations elsewhere, from Greenwich Peninsula to Earls Court – where the information commissioner has supported further disclosure of viability assessments on gargantuan regeneration schemes.

A scale model of London on show at this year’s Mipim international real estate fair in Cannes, France. Photograph: Valery Hache/AFP/Getty Images

The Heygate decision comes after increased scrutiny of Southwark council’s cosy relationship with Lend Lease, following reports in Private Eye of perks enjoyed by Peter John, the Labour leader of the borough, at the expense of the Australian giant. From a pair of £1,600 Olympic opening ceremony tickets to a £1,250 trip to the lavish Mipim property fair in Cannes, these sponsored outings were reported to have joined a lengthy list from the previous year of Proms tickets and dinners at the Ivy, paid for by at least 10 other companies.

Developers getting into bed with local authorities might usually happen behind closed doors, but at Mipim the conspicuous chumminess was proudly on show along the Croisette for all to see. In the wake of headlines decrying public money being spent on councils attending the champagne-soaked jamboree, their private “development partners” have been more than willing to step in and foot the bill. With a borough’s presence at Mipim costing up to £500,000, developers happily pay for glistening city models, trade show booths and yachts, where cakes iced with their logos are handed out by mayors. More than 20 local authorities took part this year, with developers sponsoring everything from a “Croydon on the beach” cocktail party to an entire “Manchester bar”, where public-private relationships could be cemented by free-flowing booze.

“The boroughs might be proud that they’re not here at the public’s expense,” says housing campaigner Jake Freeland, who held a protest in Cannes this year. “But that’s precisely the problem. They’re in the pockets of the investors, and they’ve come here to sell off our city.”

Developers have long thrown parties and funded foreign trips as a way of lubricating their plans through the system, but the quest for permissions now extends into the statutory planning process itself, through the rise of deals known as planning performance agreements. Introduced to help fast-track large, unwieldy schemes through the system, PPAs see the applicant pay for a new dedicated position in the council’s planning team to focus solely on their application, guaranteeing a faster turnaround and a better “bespoke” service.

“There’s nothing wrong with planning performance agreements,” says one planning officer. “It’s just like allowing people to travel club class. You pay for a better service.” Quite whether club-class planning should be offered by a statutory pubic service is questionable, but developers have few qualms about throwing money at an authority, spitting out as many applications and fees as are necessary to see a project through. “We pay vast sums of money to have things determined quickly,” says the director of one major development company. “We pay the planner’s salary, cover their lawyers’ fees and everything, but we wouldn’t expect preferential treatment. It’s not a bribe.”

Under the coalition’s localism agenda, the wheels for private-sector encroachment into public planning have been further oiled, with the introduction of neighbourhood plans. Presented as a means of empowering communities, they have in fact left the door wide open for canny developers to move in, host a few community coffee mornings with felt-tips and post-it notes, and engineer a plan to their own advantage. There is no requirement for those who draw up the plan to even reside in the neighbourhood and, although they need a 50% “yes” vote at referendum, there is no requisite minimum turnout.

But such a tactic would require at least cursory engagement with the community and the council, something which many developers are increasingly choosing to bypass altogether. Since the introduction of the NPPF, there has been a sharp rise in the number of planning applications won on appeal, as many applicants choose to go straight to the inspectorate, conscious of the new “presumption in favour” of development.

Rather than being the last resort option, after negotiations with the local authority have broken down, the process of planning by appeal has become a tactic in itself. One developer is particularly candid on the matter: “Planning decisions are so often the result of political wrangling at committee anyway,” he says. “Why would you waste months negotiating something to get the planning officer on side, when they can’t guarantee delivery at planning committee?” On appeal, it comes down to a battle between planning lawyers, the judgement often determined by who can afford the best representation. When the Rolls Royce legal team of the private developer meets the quivering case officer of the emasculated public sector, its not hard to guess the outcome.

Developers with bigger ambitions are choosing to bypass the local authority in a different way, by going straight to the top and playing for a “call-in” – waving their schemes under the nose of the mayor of London or secretary of state... 

Many of the worst offenders are the result of our slippery two-stage planning system, in which general outline permission can be given, while further details are postponed to a later “reserved matters” application. In a system based entirely on negotiation, it is a fair way of allowing developers to test the water and see what they can get away with, before spending money on detailed work. Yet it also allows crucial elements, like ground-floor uses, the location of entrances, the nature of materials and even massing and bulk, to slip through the net, allowing designs to be watered down to pale imitations of what had been agreed. And the hands of the local authority are hopelessly tied.

“Once an outline permission is granted, it makes it very difficult for us to refuse a scheme further down the line,” says one officer...

Conditions that have been agreed are relentlessly renegotiated at reserved matters stage. Good architects are employed to win outline planning, then ditched for a cheaper alternative; high-quality materials are substituted for flimsy plastic panels – all in the name of viability.

Just like the banking crisis, the problem of botched urban development has long been encouraged by a system that is open to exploitation and all too susceptible to careless regulation. But it is also not something that can be easily fixed. “There’s only so much mileage in vilifying developers or planners,” says Brearley. “Making cities is imperfect and messy, and has been for thousands of years. But we should be able to do better than this.”

It comes down, he thinks, to the fact the UK planning system is overly reliant on individual negotiation between private developer and public servant, which is usually far from a level playing field. “It makes a very opaque and confusing system that relies on having people that are very sophisticated at brokering deals,” Brearley adds. “And those people will generally settle in places where they’ll earn more money. The people negotiating on behalf of the public are simply not sophisticated enough.”

One former planning officer is frank about the reality of the imbalance in our confrontational system. “If you throw enough resources at a planning application, you’re going to manage to tire everyone out,” he says. “The documentation gets more and more extensive, the phone calls get more frequent and more aggressive, the letters ever more litigious. The weight of stuff just bludgeons everyone aside, and the natural inclination is to say, ‘Oh yeah okay, I’ve had enough of this one,’ and just let it through. It’s like a war of attrition.”

And it is a war in which the side representing the public interest has been systematically drained of expertise. The number of architects employed in the public sector has fallen from over 60% to less than 10% over the last 30 years, while planners have been relegated to third- and fourth-tier officers, with some boroughs contracting the service out altogether. As part of the Farrell Review into architecture and the built environment, a “Plan First” initiative has been proposed, by GLA regeneration manager Finn Williams, on the model of Teach First, to try to lure the best graduates into planning. But it faces an uphill struggle to overturn the years of neglect and transform a system that is fundamentally anti-plan-making.

“To this day our planning system is the wrong way around,” says Rees. “It evolved to protect the countryside from the encroachment of the towns, rather than to make the cities better. It isn’t about building great places, it’s about protecting non-places.” And in the process, it has allowed our cities to cannibalise themselves and become those non-places it set out to protect.

Bullied and undermined, planning authorities have been left castrated and toothless, stripped of the skills and power they need to regulate, and sapped of the spatial imagination to actually plan places. As one house-builder puts it simply, “The system is ripe for sharp developers to drive a bulldozer right through.” And they will continue to do so with supercharged glee, squeezing the life out of our cities and reaping rewards from the ruins, until there is something in the way to stop them.

The truth about property developers: how they are exploiting planning authorities and ruining our cities | Cities | theguardian.com
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