Build to Rent and the NPPF: Breaking new ground?

The much heralded revisions to the NPPF were published at the beginning of the month, with a strong emphasis on housing delivery. Within this there is a clear recognition that a multi-tenure approach is required in order to meet challenging housing targets, with Build to Rent (BtR) placed firmly in the spotlight.

Whilst the BtR sector has been quietly getting on with delivering over the last 12 months since the Housing White Paper consultation (Planning and affordable housing for Build to Rent, February 2017), the recognition of the important role of the sector within the draft NPPF is a landmark moment. It is all the more notable in the context of the Government’s continued focus on facilitating home ownership.

However, the proposed amendments won’t come as a surprise for many in the industry following the Housing White Paper consultation when an overwhelming majority of respondents supported the specific recognition of “Build to Rent” and “Affordable Private Rent" as having a critical role to play in solving our housing crisis. That consultation prompted debate on the approach to Affordable Private Rent, covenants and claw-backs to ensure units remain for private rent, and longer tenancies.

So how much has actually made it into the draft revisions to the NPPF?

NPPF Revisions…

The draft NPPF now includes BtR as a defined term within the glossary, describing the use as:

“Purpose built housing that is typically 100% rented out. It can form part of a wider multi-tenure development scheme 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 management control.”

Further, the differences between the BtR investment, delivery and operating model and more traditional forms of housing have been recognised through its exemption from draft paragraph 65 (which outlines a requirement for at least 10% affordable provision for major housing developments) and the inclusion of Affordable Housing for Rent within the Glossary (also referred to as Affordable Private Rent).

This bespoke solution will be welcomed by the industry in resolving what can be a time-consuming battle with Local Planning Authorities. It cuts away the ‘red tape’ requirement for BtR applications to repeatedly secure deviation from existing Local Plan affordable housing policies by exhaustively demonstrating that traditional forms of affordable provision simply do not work, for various reasons, within BtR schemes.

Revisions to the Planning Practice Guidance…

Hot on the heels of the NPPF consultation, draft updates to the Planning Practice Guidance (PPG) were released for consultation on 9 March and contain much detail relating to BtR.  

The proposed new text encourages Local Planning Authorities to consider the need for homes in the private rented sector as part of their evidence base, providing a platform for Local Plans to proactively support BtR development as distinct from other tenures. This will be important to facilitating delivery. 

However, it is unclear how these requirements will be interpreted by LPAs; will they now start to allocate sites for BtR or specify areas within city centres/ regeneration sites where such uses will be supported?

Such policy support would undoubtedly help BtR developers and investors when competing for sites with other uses including ‘build for sale’ or purpose built student accommodation, but may be a step too far for most authorities authorities still grappling with the concept and potential of BtR. It does however reflect a more sophisticated approach to the assessment of housing need, moving away from crude and purely numerical measures and towards a greater appreciation of the qualitative dimensions of need.

As set out above, the draft NPPF has introduced Affordable Housing for Rent as a defined tenure, with the draft PPG elaborating to confirm that 20% is generally a suitable benchmark for the level of Affordable Private Rent (APR) homes to be provided (and maintained in perpetuity) at an average maximum of 80% of open market rents in any Build to Rent scheme. These changes represent a shift to move more closely in line with the Greater London Authority’s (GLA) approach in London, albeit not directly mirroring the draft London Plan and GLA’s Affordable Housing SPG.

Importantly, the draft PPG wording constitutes guidance, not policy. It also includes flexibility for viability to be considered on a case-by-case basis and for the requirement to be met by other routes (including commuted payments). This flexibility is crucial to the success and growth of the sector, especially if BtR is to deliver in the regions. In our experience, the blanket 20% APR approach proposed in draft PPG would render many sites unviable for BtR, or unable to compete for land with alternative uses, so maintaining inherent flexibility at the application stage is vital.

A forthcoming comment piece by Matt Spilsbury (Head of Turley’s Development Advisory service) will provide further detail on implications for BtR viability assessment arising from the proposed revisions.

Finally, the PPG also acknowledges that it is for Local Planning Authorities to decide whether national space standards should apply to BtR developments. Whilst this doesn’t go as far as some would have hoped, our view is that the need to consider BtR developments differently in this respect is implied.

We do however have continued concerns that prescriptive space standards can stifle innovation in design and lead to the creation of standard products which do not respond to what end users want and how BtR dwellers may live their lives. There is a strong case for letting the market decide how best to meet the needs of consumers in a sector where the competition for ‘customers’ will continue to grow as the market matures. Brands and operators will need to stand out from the crowd and this will create innovation in design. Product standardisation, in any form, is to be avoided in our view.

Summary

The changes may not work for all, or go as far as some would have liked in providing the certainty to facilitate investment.

However, the elevation of BtR to secure specific policy references in the draft NPPF, and heightened visibility within the draft PPG, represents valuable recognition from Government of the important role played by BtR in delivering ongoing and future housing growth.

The clear message to the industry is that the Government welcomes the sector with open arms. Build to Rent is no longer ‘emergent’. It has arrived, it is here to stay, and has firmly entered the planning sphere.

LPAs now have a specific diktat to ensure BtR features in plan-making, with supportive policies tailored to facilitate, rather than deter, investment. The industry must actively ensure LPAs are held to this.

Get in touch

For further information about any issues raised in this article please contact Taylor Cherret, Damien Holdstock or Matt Spilsbury MRICS.

Further Turley commentary on the draft revised NPPF is available here