Extra-Care schemes after the Rectory Homes decision

John Pugh-Smith looks at the potential to avoid further muddle and misunderstanding in relation to Extra-Care schemes, following the High Court's ruling in the Rectory Homes case.

The need to provide an adequate supply of specialist accommodation for older people is becoming increasingly important given our aging population. This was recently recognised by Helen Whately MP, The Minister of State for Care, during the current pandemic, when she enthusiastically stated: “Retirement and Extra Care housing developments across the country - whatever their size, or whether private or not-for-profit – are playing a vital role in protecting the most vulnerable in our country”.

Extra Care schemes bring very considerable benefits to the wider community and to the residents themselves; for, in effect, they are capable of meeting both the housing and care needs of older people in specialist accommodation providing a more benign alternative to the traditional care home or that older person continuing to reside in a house that is no longer suitable, with all the attendant concerns that all too frequently arise. However,  these schemes require considerable “up front” costs before they can be beneficially sold or let due to the desire of those moving into these types of facility to view them in an “as built” form – i.e. to see all of the communal facilities and to meet with the management and care teams. Moreover, local planning authorities (LPAs) have tended not to require affordable housing provision due to the wider benefits and viability sensitivities unless, on rare occasions, it has been a specific requirement within emerging development plan policy. In consequence, there has been  a blurring as to whether Extra-Care Schemes should be categorised as Class C2 or Class 3 because so much has turned on the specific scheme.

Whilst the Government resisted the opportunity to clarify the distinction between use Classes C2 and C3 in the recent revisions to the Use Classes Order, deeming it unnecessary, arguably, the recent case of Rectory Homes Limited v Secretary of State for Housing Communities and Local Government & South Oxfordshire District Council [2020] EWHC 2098 (Admin) has reached that same pragmatic conclusion in the context of what constitutes a “dwelling-house” for the purposes of whether the scheme attracting affordable housing contributions under adopted development plan policy.

The Facts

Rectory Homes had sought planning permission for ‘the erection of a ‘Housing with Care’ development (Use Class C2) for 78 open market extra care Dwellings and a communal residents centre’ in Thame, South Oxfordshire.  Both the applicant and South Oxfordshire District Council had agreed that the proposed use fell within Use Class C2, but they differed as to whether an affordable housing contribution was required because of that C2 classification. Both the South Oxfordshire adopted Core Strategy and the Thame Neighbourhood Plan required developments resulting in a net gain of 3 or more ‘dwellings’ to contribute 40 per cent affordable housing. The council had refused Rectory’s application for failure to provide affordable housing. Rectory had unsuccessfully appealed both this refusal and now challenged the Inspector’s decision to reject the appeal. The primary question to be determined by the Court was whether the proposed C2 units were ‘dwellings’ for the purpose of the specific South Oxfordshire District Council development plan policy. CSH3. 

The Decision

In his judgment, Mr Justice Holgate comments that the word “dwelling” properly describes, firstly, the physical nature of a building or property as well as, secondly, the way in which it is used. He remarks that ‘it has become well established that the terms ‘dwelling’ or ‘dwelling houses’ in planning legislation refer to a unit of residential accommodation which provides the facilities needed for day-to-day private domestic existence’, and that the term dwelling ‘can include an extra care dwelling, in the sense of a private home with the facilities needed for ‘independent living’ but where care is provided to someone in need of care’. 

He concludes that units of accommodation that allow for independent living comprise ‘dwellings’ but their ‘use’ can still be within Class C2 if (a) care is provided for an occupant in each dwelling and, critically, (b) the occupant is in need of care. Accordingly, as the South Oxfordshire adopted Core Strategy policy CSH3 required a contribution towards affordable housing where the ‘dwellings’ provided the scope for ‘independent living’ but without reference expressly or by implication to the Use Classes Order there was no legal reason why Rectory’s scheme should not be subject to this requirement just because it had been classified as Class C2.

Discussion  

While there is an apprehension amongst developers that this decision could prompt LPAs to undertake a rapid review of their relevant local plan policies to determine whether they should now be seeking contributions to affordable housing from older persons housing developments, or, to amend their affordable housing policy so that it specifically refers to “dwellings” (whether C2 or C3) this “knee jerk” reaction should be avoided; for such a  policy review must, carefully, consider the wider public interest effects as well as the unintended consequences of such a change. Otherwise, the wholesale pursuit of affordable housing contributions from all schemes that comprise ‘dwellings’ will inevitably lead to an increased reliance on viability assessments, particularly  for “senior living” schemes to rebut any policy requirement, and result in further risk at the point of land acquisition for specialist retirement developers, with potential cost and uncertainty in the planning process, giving rise to significant questions over the likely economic viability of schemes. In turn, this has the real potential to disincentivise delivery of these much needed forms of specialist accommodation in circumstances where providers are already at a disadvantage against more traditional residential developers due to those “up front” costs inherent in this type of scheme mentioned already. Moreover, often the types of sites that are most suitable for this specialist form of housing are centrally located urban brownfield sites where the commercial competition is from non-residential interests, in which case affordable housing policies should not apply. In short, the message that needs to be appreciated by Central and Local Government is that the older persons housing provider cannot always operate on a level playing field in the land market.

Nevertheless, the Rectory Homes outcome underlines the need for this sector of the housing industry to participate in the local plans process and present evidence of the consequences of requiring affordable housing contributions from this specialist form of residential development.

Secondly, and, particularly those new entrants to this market, such developers should consider carefully the precise wording of local plan policies when considering potential sites to establish whether affordable housing policies might apply to their scheme. It is also vital that providers participate in the local plans process and present evidence of the consequences of requiring affordable housing contributions from this specialist form of residential development. 

Thirdly, it is crucial that developers carefully think through the nature of their particular “offer” and its outworkings. Indeed, it is one of the sad ironies of the Rectory Homes case, that before the decision letter on their Thame appeal, (21st October 2019), another development promoted on behalf of Retirement Villages, at Lower Shiplake had received a favourable decision a week earlier but its promotional usefulness had not been sufficiently appreciated nor adequately drawn to the attention of the Thame Inspector prior to his adverse decision. Both appeals had concerned the application of policy CSH3 to similar schemes in terms of their physical layout. However, the delivery of the care packages, secured by section 106 agreements, had been different There was also a fundamental difference in terms of the indivisibility of the Communal Facilities at Shiplake when compared with Thame, and, also in the greater extent of the facilities provided at Shiplake.  

While the Thame Inspector had referred to the Shiplake decision and stated that he had taken it into account, unfortunately, Rectory Homes had not advanced a reasoned submission as to why that approach was the correct one. Indeed, as Mr Justice Holgate remarks, when rejecting a reasons challenge on this matter: “ … without any further information, such as the s.106 obligation in that case. Neither side sent any submissions on the decision. The Inspector was not given any assistance as to how it might, or might not, affect the issues in the present case.” The Judge also notes that the Shiplake Inspector took the approach that a single building on the site constituted the whole development and should not be “disaggregated" or “dissected" into its constituent parts when applying policy CSH3. Although the Thame Inspector took a different approach, as a matter of law he was entitled so to do and thereby received the resulting judicial endorsement.

Nevertheless, most Extra-Care schemes provide a range of facilities that are normally provided in one building and it would be impossible to implement the scheme without building the communal facilities as a significant element of the ‘common parts’. Following the approach by seasoned developers, provided that they are extensive, physically integrated, and, coupled with a requirement for the residents to use them then, even if the apartments still have individual front doors, the combination of integrated common parts and one main entrance will emphasise and confirm the existence of a single entity. Accordingly, the Shiplake Inspector’s approach is still capable of being endorsed by fellow inspectors as well as broad minded LPAs, and, all in the classification of Class C2. 

Concluding remarks

If Central Government wishes to continue to promote the benefits of retirement housing delivery, then MHLCG will need to resolve the C2/C3 use classification issue, provide clearer guidance on thresholds and how “First Homes” apply to retirement housing schemes. Such clarifications could be swiftly and pragmatically achieved through modest changes to the National Planning Practice Guidance now and, if further national policy is required, in the NPPF when it comes to be rewritten. Given the current MHCLG intentions to make changes to the current planning process via simple Ministerial Statements, such may even be the more straightforward and effective way of establishing an exemption from affordable housing for all forms of specialist retirement housing.

At Local Government level, now  is the time for LPAs to consider, as new local plans emerge, whether it is good planning to expect the same contributions from “retirement housing”, in all its forms, and then run the risk of such essential accommodation not coming forward with needs not addressed and benefits not realised. All forms of retirement housing give rise to significant social and economic benefits to local communities, not least in the form of savings to the NHS and freeing up under-occupied local family houses.

Finally, whether these required yet modest changes of approach are perceived to be a quiet or a loud revolution for the older people’s housing provision, when set against those being promoted by the Planning White Paper, they are essential steps to securing the future health and well-being of a sector whose members form a rapidly growing element of specialist housing need. Without such swift changes the current muddle and misunderstandings are likely to remain yet another sad legacy of 2020.

John Pugh-Smith is a barrister practising from 39 Essex Chambers. He is both a member and a legal planning adviser to RHG.UK, one of the leading representative bodies on behalf of the retirement housing sector.

He has been helped in the preparation of this article by discussions with his fellow RHG.UK members: Karen Mutton, Legal Director, Planning & Infrastructure Consenting, Eversheds Sutherland (International) LLP, Chris Thompson, Managing Director, Beechcroft Developments Ltd, Alex Child, Director, The Planning Bureau Ltd, Gary Day, Land & Planning Director for McCarthy & Stone Ltd  and John Montgomery, Tanner & Tilley Development Consultants and Planning Consultant to RHG.UK.