At the beginning of the summer, the Government published a revised National Planning
Policy Framework (NPPF), which in almost all respects immediately supersedes the
2012 edition. This was followed more recently by an update to the Planning Practice
Guidance (PPG), which sits under the NPPF and provides detailed guidance as to how
the policies of the NPPF should operate.
These changes have significant implications for the build to rent sector (BtR) in England
(they do not apply elsewhere in the UK), but they have been widely overlooked.
This briefing therefore seeks to raise awareness of the changes and to consider their
implications for the sector.
A planning definition for BtR
BtR is now recognized in national planning policy as a
distinct asset class within the private rented sector as it has its
own planning definition set out in the NPPF:
"Purpose build housing that is typically 100 percent rented out. It
can form part of a wider multi-tenure development comprising
either flats or houses, but should be on the same site and/or
contiguous with the main development. Schemes will usually
offer longer tenancy agreements of three years or more, and will
typically be professionally managed stock in single ownership and
A new policy approach to BtR
The new section of the PPG on BtR sets out clear
guidance as to how the Government expects BtR to be
dealt with by the planning system. For example, local
planning authorities are required by the guidance to
consider whether there is a need for BtR in their area
and if so, to bring forward local plan policy that sets out
their approach to promoting and accommodating BtR
schemes. The policy should identify the locations and
circumstances where BtR schemes will be encouraged.
This is helpful in paving the way for specific recognition of
the need for BtR in local plans and even for BtR specific
allocations. If the industry engages with this process
then it could result in specific BtR allocations, eliminating
competition for those sites from other sectors of the
Affordable housing and BtR
The change most likely to have an immediate impact
relates to affordable housing requirements.
The PPG recommends a 20% benchmark for the level
of affordable housing required to be provided in BtR
schemes, a figure significantly below the levels typically
sought by local planning authorities.
At the same time, the PPG sets out in detail what the
NPPF means by the new BtR specific affordable housing
tenure. The key points are;
- Housing must be offered at a discount (inclusive of
service charge) of not less than 20 percent against market
rents (the discount, along with the proportion of
affordable units within the scheme can be varied
across the development and over time)
- BtR affordable housing is under common management
with the market units (ie no housing association is
- It is possible to negotiate a trade-off between the level
of affordable provision and the extent of the discount
on a specific scheme
- Tenancies should be of not less than three year duration
(although with shorter terms offered to tenants at their
- Councils should not have nomination rights and while
eligibility criteria should be agreed between the
developer and the local planning authority, "Final decisions
over the occupancy criteria for affordable private rent homes
should be made by the build to rent scheme operator, working
with the authority," taking account of the detailed criteria
set out in the PPG
What happens when units within a
BtR scheme are sold?
The PPG makes clear that affordable private rented homes,
secured by planning obligation, are to be provided as a
specific community benefit in perpetuity. The planning
obligation ought to provide for situations where operators
need to sell all or part of the scheme, whether into owner
occupation or converting the units to another tenure. The
PPG advises that a claw back mechanism ought to be agreed
to recoup the value of the affordable housing provision that
is withdrawn if the homes are converted to another tenure
and compensation mechanisms if the units are sold before
the expiration of an agreed period.
A sample claw back formula is contained in the PPG.
How to use this new policy and
The above is only a summary and the PPG ought to be readin full by anyone operating in the sector.
The PPG approach is significantly different from that being
taken by some local planning authorities and the Mayor of
London. The PPG is not a silver bullet as it is only guidance
and local planning authorities can always seek to argue
for a different approach if they are able to justify it in
planning terms. However as a statement of Government
policy, it is of significant weight and strengthens the hand
of the promoters of BtR schemes as, ultimately, a planning
inspector making a decision in the Secretary of State’s
name on appeal is likely to require a significant amount
of convincing to department from the approach that
the Secretary of State has set out. Likewise, inspectors
examining emerging local plan policies will want to be
satisfied that those policies accord with the NPPF and
the PPG unless the inspector can be satisfied that there
are good reasons for adopting a different approach in the
particular local circumstances.
For more information please contact the author.