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The Urban Regeneration and Housing Act 2015 has been signed
AUTHOR(S): Cara O’Hagan, Brian Doran, Peter McKeever, Nicola Dunleavy, Rhona Henry
PRACTICE AREA GROUP: Commercial Real Estate, Construction and Engineering, Environmental, Planning and Safety
The Urban Regeneration and Housing Act 2015 (the “Act”), was signed into law by the President on Tuesday 28 July 2015, and seeks to incentivise urban regeneration and address housing supply-related issues by using both “carrot and stick” to encourage activity in the construction sector. It will have significant implications for both developers and landowners.
Developers will welcome the revision of Part V arrangements on social and affordable housing and the retrospective application of reduced development contribution charges, both of which will reduce the cost of construction. However, the introduction of a vacant site levy to incentivise urban regeneration and provision of housing may be viewed as a penal measure in some circumstances.
The Act was preceded by a consultation on the General Scheme of the Planning and Development (No.1) Bill (the “General Scheme”). The new name of the legislation is indicative of the change in focus and content between the scheme as originally proposed and as now enacted. For example, the “use it or lose it” provisions proposed in the General Scheme, which would have permitted planning authorities to reduce the life of planning permissions if development did not commence within the timeframe indicated when applying for permission, have not been included in the Act.
Vacant site levy
The Act introduces a vacant site levy, which will generally be an annual charge of 3% of the market value of each site registered on a vacant sites register to be maintained by each planning authority.
Both the scope and conditions attaching to the vacant site levy under the Act are very different from those originally proposed under the General Scheme. The levy will apply to land zoned solely or primarily for residential purposes (“Residential Land”) and land designated with the objective of development and renewal of areas in need of regeneration (“Regeneration Land”), regardless of who owns it. In both cases the site must exceed 0.05 hectares (excluding a home and its associated garden).
The planning authority is required to identify any such Residential Land which is vacant or idle, suitable for the provision of housing and situated in an area where there is a need for housing.
In the case of Regeneration Land, the criteria for being designated a vacant site is that the site being vacant or idle has adverse effects on existing amenities or reduces the amenity provided by existing public infrastructure and facilities in the area, or has adverse effects on the character of the area.
For the purpose of calculating the levy, a planning authority, or the Valuation Tribunal on appeal, may deem that a vacant site has a zero market valuation if appropriate in all circumstances. The Act refers in particular to circumstances where no market exists for the site, or the site is situated on contaminated lands and the estimated costs of remedial works necessary to use or develop the site exceed the market value of the site. However, absence of planning permission, lack of financial resources, or the fact that development is not commercially viable, are not listed as grounds for exemption from the levy.
A site ought not to be designated a “vacant site”, attracting the vacant site levy, unless it is properly serviced and has appropriate transport links for housing.
Where a vacant site is subject to a “site loan” the vacant site levy is reduced down to zero in certain circumstances, where the outstanding loan exceeds the market value of the site. This concession applies only to the original mortgage loan for acquisition of the site.
The vacant site levy is to be charged and levied beginning in 2018, becoming payable in arrears from 2019. However, from January 2017 landowners need to be alert to any notices they may receive from the planning authority, so that they can respond within the prescribed 28 day timeframe to any proposal to enter details of their site on the register.
Failure to pay the levy will result in a charge on the property. In any year there is a change of ownership of the vacant site, the levy shall be zero for that year and the preceding year. This does not apply where the transfer is to a connected person or associated company or for the purpose of avoiding the levy. However, the mechanics of how this will work in practice are not clear, as there is a requirement to provide a certificate of discharge on sale of the property showing payment for each year that the property was registered as a vacant site.
In recent years the property industry lobbied for a reduction in development contributions to a level that does not impede development. Initially a number of local authorities amended their development contribution schemes to reduce the level of contributions or permit payment of development contributions in phases. In January 2013 the Department of the Environment, Community and Local Government implemented new Development Contribution Guidelines for Planning Authorities to ensure a consistent nationwide approach to revising development contribution schemes in order to promote economic activity and job creation.
While such initiatives were welcome they did not affect pre-existing planning permissions. Reduced development contributions under a new development contribution scheme adopted by a planning authority will now have retrospective effect in relation to any planning permission granted prior to adoption of the revised scheme, where a commencement notice has not yet been lodged in respect of the development.
Where a development (including a completed development) comprises houses or apartments which are not yet all sold, the reduced development contributions is to be applied to the unsold units. The planning authority is authorised to amend the development contribution condition in planning permissions to reflect the change.
Any reduction in supplementary development contribution schemes is also to apply retrospectively to existing planning permissions in the same manner.
The Act is silent as to whether there will be any refund given in respect of development contributions or supplementary development contributions already paid in relation to units which are still unsold.
Social and affordable housing requirements
The Act makes a number of changes to planning and housing legislation, in particular to the requirements for provision of social and affordable housing, known as Part V. In future Part V agreements must be put in place prior to lodgement of a commencement notice in respect of the development to which the planning application relates.
At present developers are required to reserve up to 20% of land zoned for residential use or residential and other uses, for social and affordable housing, or fulfil that obligation by one of the permitted alternative means. The General Scheme proposed removing the affordable housing element and retaining a requirement for 10% social housing. While the Act provides that the overall percentage is to be reduced to a maximum of 10%, the provision for social and affordable housing is to be kept on the statute book.
The Government has indicated that, for now, the focus is on social housing. It is anticipated that a Ministerial Policy Directive will be issued to planning authorities, directing that developers fulfill their Part V obligations in the form of social housing only, until such time as the policy may be altered by another Ministerial Policy Directive.
To maximise the transfer of completed social housing units, the option of providing a cash payment in lieu of social housing is being removed, as is the option of providing sites, either on the land the subject of the planning application or elsewhere. Developers will have the option of transferring completed units on land which is not the subject of the planning application, rather than the current option to enter into an agreement to build units and transfer them on completion. This is intended to allow social housing units to be delivered in another location, in the event that the development in question does not meet the social housing or mixed tenure needs of the local authority.
It will also be open to developers to fulfil their Part V obligations either within the development the subject of the planning application or on other land through long term leasing of units or rental accommodation availability agreements. These provisions replace similar provisions which were introduced by the Planning and Development (Amendment) Act 2010, but never brought into force.
The new Part V arrangements may be applied retrospectively to existing planning permissions where works have not commenced, provided that:
- all parties to the agreement consent;
- the Part V agreements are amended prior to lodgement of the commencement notice; and
- the amended agreement complies with the new statutory requirements.
This retrospective application is intended to provide a “kick start” to house construction and remove any barrier that existing Part V agreements may have caused. However, where works have already been commenced it is unclear what, if any, impact this will have on existing Part V agreements with planning authorities.
As indicated in the General Scheme, the provisions in relation to social and affordable housing are to be disapplied for developments of nine units or fewer. With the maximum obligation reduced to 10% this means that in a housing development comprising ten units, just one unit is required for social housing.
The Act will not come into force until the Minister for the Environment, Community and Local Government signs a commencement order. The Minister may choose to commence the Act in a piecemeal fashion or on a single date.