Major provider of social housing loses £3m High Court battle with council over application of community infrastructure levy

Social landlord Stonewater has lost a High Court dispute with Wealden District Council over a £3m bill for the Community Infrastructure Levy (CIL).

In Stonewater (2) Ltd v Wealden District Council [2021] EWHC 2750 (Admin) Mrs Justice Thornton said that Stonewater’s interpretation was incorrect on the workings of the CIL regulations’ relief for social housing.

Stonewater argued that Wealden erred in law by requiring a planning obligation as a pre-requisite to the grant of social housing relief under conditions 2 and 3 of Regulation 49(1) CIL Regulations and by treating the terms of the planning obligation as relevant to whether social housing relief should be granted.

The landlord also said Wealden took into account an immaterial consideration by having regard to the extent to which the refusal of social housing relief would allow it to collect more of the levy and/or the council took its decision for an improper purpose, namely to obtain additional money under the levy.

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Wealden argued it was entirely rational for it to reject the Stonewater’s application for relief on all dwellings on the site.

It said insufficient evidence had been provided that all 169 dwellings in the proposed development qualified for relief in circumstances where the planning permission and accompanying section 106 agreement only permitted 35% of the dwellings as affordable housing.

Wealden said it had received no submissions in favour of exercising its planning judgment on whether to permit more affordable housing and until the council decided to approve 100% affordable housing, it could not be satisfied that all of the dwellings would qualify for relief.

The Hailsham site already had planning consent when Stonewater bought it for a residential development of 169 dwellings with 35% affordable housing.

Stonewater argued it should all qualify for relief since it intended to build 98 homes for social rent and 71 for shared ownership. It suggested that if it was required to pay the £3m, the development scheme would be rendered unviable.

Wealden’s chief executive responded: “I am sorry this is causing a delay to build out of the site. You appreciate that 100% CIL relief at this scale will have a major impact on our evolving infrastructure pot. This is a new issue for Wealden and as such, we required legal advice to provide certainty for all.”

Wealden later refused the application noting the s106 agreement limited affordable housing to 35% and that Stonewater had not sought approval for a higher proportion.

The council said it could properly have regard to the extent to which the additional dwellings would affect the provision of infrastructure.

Thornton J said: “In my assessment, the language…points to an interpretation that the agreement controls the amount of affordable housing that can come forward, by fixing a specific requirement of 59 dwellings or 35% affordable housing.

“Paragraph 2(iii) of Schedule 1 says that precisely 35% of the units in any phase must be affordable. Accordingly, if the development proceeds in multiple phases, there must be 35% in each phase and thus, inevitably, as a matter of maths, 35% in aggregate.”

The judge said this meant that a scheme which provides less, or more, units of affordable housing would not comply with the s106 requirement to provide 59 units though the council could vary the agreement or enter into a new one.

She said:”By imposing a precise number of affordable housing, rather than a ‘floor', the Section 106 is doing no more than giving effect to the planning application before it, which was for a scheme of 35% affordable housing, and hence to the expectations of both the developer at the time and the defendant in granting permission.”

Stonewater had also sought to make “an apparently illogical and unexplained distinction between development in multiple and single phases”

Wealden had proposed to negotiate a fresh s106 agreement, but Stonewater did not take this up this offer.

Thornton J concluded: “Social housing relief is mandatory relief, where the relevant conditions are met. But where, as here, the conditions could only be satisfied if the council first exercised some separate and freestanding discretion (to vary the section 106 or enter into a fresh agreement) and where it was open to the council to have regard to a matter such as infrastructure provision in exercising that discretion, the council was entitled to make the point that, in exercising that discretion, it would be entitled to have regard to the impact on infrastructure.

“But the critical and more general reason, given in the previous paragraph was simply that, unless and until the council had decided to approve 100% affordable housing, the council could not be satisfied that all of the dwellings would be qualifying dwellings.”

Mark Smulian

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