Use Class C2 or C3? - proceed with care

Sarah Skuse and Dalee Kaur look at a High Court ruling on whether a housing developer's retirement living scheme was classed as a residential institution or a dwelling.

The Use Class debate for “Housing with Care” developments has been on-going for many years now and it is well-documented that various planning issues resulting in delay and costs to developers/investors are considered a disincentive and/or barrier to entry and growth into this undersupplied market.

The recent High Court ruling in Rectory Homes Limited v Secretary of State for Housing, Communities and Local Government [2020] provides some clarity on the interaction between Use Class C2 and the term “dwelling”.

The case considered whether a retirement living scheme was classified under Use Class C2 (residential institutions), and therefore exempt from contributing towards affordable housing, or the Use Class C3 (dwellings) which would trigger a financial contribution.

Facts of the case

Rectory Homes appealed against South Oxfordshire District Council's decision to refuse consent for the development of 78 units in a “housing with care” scheme. Although the Council agreed that the development fell within C2, it considered that the units were dwellings ancillary to the C3 use. This meant that the Council’s Core Strategy Policy CSH3 (Policy) would apply which required 40% affordable housing.

The planning inspector’s view was that although the units were within C2, they were still dwellings for the purpose of the Policy. The High Court agreed with the inspector and held that the use of the units was important to consider rather than what language was used to describe them. If the units can be used as independent dwellings, (in this case they each had their own front door and private facilities) then they can be considered as “dwellings”, irrespective of whether an element of care is provided. Having established that the units were dwellings, the Site was subject to the Policy requirement of 40% affordable housing provision.

Likely impact

An important point was made by the court in relation to the definition of “dwellings” – the fact that dwellings fall within the C3 Use Class did not preclude them from being in other Use Classes e.g. dwellings used as HMO’s are in the C4 Use Class. Therefore, how a property is used is the key element, rather than how it is described. So in this instance, where there are residential units capable of being used as independent dwellings, then they can be regarded as “dwellings”, even with an element of care provided.

This judgment does not mean that affordable housing contributions will automatically apply to all later living developments; this case was determined largely on the specific wording of the Policy which did not restrict dwellings to the C3 Use Class. The case may have had a different outcome had the Policy limited affordable housing contributions to a specific Use Class instead of “dwellings”. But the case has highlighted that developers need to check the relevant local policies carefully to assess whether their plans will trigger an affordable housing contribution.

There is likely to be more uncertainty in respect of the planning costs associated with retirement living schemes following this case – with higher build costs than traditional developments, the threat of paying affordable housing contribution only adds to the well-documented concerns that the planning process is currently a barrier to entry and/or growth in this undersupplied sector.

Sarah Skuse and Dalee Kaur are partners at Bevan Brittan.