Planning

Planning decisions on development sites are made in accordance with a Planning Policy Framework that comprises:

• National Planning Policy Framework (NPPF)
• Spatial development strategies (for example, the London Plan)
• Local plans
• Supplementary Planning Guidance and Documents including those expanding on the local plan's expectations around affordable housing levels, tenures, nominations and affordability criteria.

It is important to recognise that there is a statutory process that must be followed in the development of spatial development strategies and local plans, which includes stages of consultation, review and an independent examination. In reality this means that the various tiers of planning policy documents are not always fully synchronised. Estate owners should take note of both published and emerging policy when considering their estates strategies in order to be aware of the associated planning considerations that will need to be managed when delivering these plans. The cycle of consultation and review of planning policy does however, afford estate owners the opportunity to engage with the development of future policy that may affect the future development of their sites.

The NPPF defines affordable housing as “housing for sale or rent, for those whose needs are not met by the market” (including housing that provides a subsidised route to home ownership and/or is for essential local workers)”.

The NPPF defines essential local workers as ‘public sector employees who provide frontline services in areas including health, education and community safety – such as NHS staff’.

Many staff employed within the NHS are likely to fall within the definition of ‘essential workers’ subject to certain regional and local income and affordability tests. The NPPF does not however prescribe any specific proportion of affordable housing or breakdown of tenures and these are set locally in accordance with the local housing needs assessments undertaken by regional and/or local authorities. 

This means that many LPAs will have no particular policy directed at essential workers and it is down to NHS estate owners as employers to make the specific case for the housing needs of their workers to the local authority. Local authorities have a number of affordable housing priorities to balance (some statutory) and there is often greater demand for affordable housing than there is supply.

Drawing on sources that evidence the extent and type of housing need within the staff population and outlining wider local benefits of providing affordable housing for NHS staff may be useful ways to influence LPAs.

A range of affordable housing tenures have evolved over time to address specific housing needs. The most frequently used terms are explained below.

Social Housing

Social Rent

Social rented housing is owned by local authorities and private registered providers (as defined in section 80 of the Housing and Regeneration Act 2008), for which guideline target rents are determined through the national rent regime.

Affordable Rent

Affordable rented housing is let by local authorities or private registered providers of social housing to households who are eligible for social rented housing. Affordable Rent is subject to rent controls that require a rent of no more than 80 per cent of the local market rent (including service charges, where applicable).

Intermediate housing

Shared Ownership

A form of home ownership whereby the purchaser buys a proportion of the leasehold of a dwelling, usually from a local authority or housing association. The resident is then charged rent by the freeholder (LA or HA) on the proportion of the equity they do not own. The resident has the opportunity to purchase further proportions of the property until they own 100% outright (known as ‘staircasing’).

Shared Equity

The same as Shared Ownership in that the purchaser buys a percentage of a property from a local authority or housing association and has the opportunity to staircase towards 100% ownership. However, in the case of Shared Equity, the LA/HA does not charge rent on the unsold equity.

Discounted Market Rent (DMR)

DMR housing is similar to affordable rented housing in that it encompasses homes that must be let at no more than 80 per cent of local market rents. However, DMR homes do not have to be owned by a local authority or housing association (Registered provider), is usually considered a form of intermediate rather than affordable housing and as such is not subject to the same regime of control for rents such as LHA caps and future rent increase restrictions.

Discounted Market Sale

DMS housing is that sold at a discount of at least 20 per cent below local market value. Eligibility is determined with reference to local incomes and local house prices. Provisions should be in place to ensure housing remains at a discount for future eligible households.

Housing for essential workers

Essential workers are those delivering front line health, education and community safety services. Employee retention in these careers can be challenging due to restraint in public sector pay and rising costs of market housing.  Essential worker accommodation aims to alleviate this. This type of accommodation is often referred to as key worker housing which is a definition that existed in a previous version of the NPPF.  To qualify for this type of housing applicants must not currently own a home and be unable to access equivalent market housing.

Planning decisions in London must be made in accordance with the area local plan and the Mayor of London’s London Plan. The latter was last adopted in 2016 but a new emerging London Plan is currently undergoing an independent examination and expected to be adopted in 2020. 

There are key emerging London Plan policies that estate owners should be aware of when bringing sites forward for development or disposal for residential development. These include:

• A strategic target of 50 per cent of all new homes delivered to be genuinely affordable. (H5)
• Major applications (above 150 homes) achieving the 50 per cent threshold (for public land) will be fast-tracked through planning. (H6) 
• At least 30 per cent of all affordable homes to be provided must be for low cost rented products such as Social Rent or London Affordable Rent. NHS employees are unlikely to meet eligibility criteria for these homes. At least 30 per cent of homes should be provided for intermediate tenures with the balance to be determined by the LPA. (H7)
• Applications that fail to meet these thresholds will be subject to rigorous viability testing and may be subject to planning obligations that require early, mid and late reviews during construction to ensure that any additional value generated is captured to the point of making the development policy compliant.

Estate owners need to be aware of these and the impact of the added time that will be needed for rigorous viability testing to be undertaken and the impact on desired timescales for disposal. Further information on how viability in decision taking on planning applications will be considered is included in NPPG and the Mayor of London’s Affordable housing and viability supplementary planning guidance (2017). The NPPG also sets out how viability should be considered at the plan making stage in the first instance. This will be important for estate owners to take into consideration when submitting evidence on bringing forward new sites for inclusion in a local plan.

These are set by LPAs which could be the District, Unitary (including Borough) or County Council (for mineral and waste local plans). For London Boroughs, local plans are required to be in general conformity with the London Plan. LPAs within a Combined Authority may be required to be in general conformity with a Spatial Development Strategy where one has been brought forward. LPAs would also be required to be in conformity with strategic policies set at the County level.

Local plans will set out requirements for strategic housing targets, site-based targets and may include minimum thresholds for affordable housing and tenure splits.

The planning system is vital to helping provide the new homes that are required whilst also ensuring that development is sustainable and balanced with the social, economic and environmental needs of an area. By proactively engaging and collaborating with LPAs, estate-owners can help to determine and evidence the need for NHS workers homes in the area, where they should be located and what type of new homes should be built. This will likely require appropriate professional advice on how estate owners can best input to local plans.

The planning system is based on law, policy and guidance and can be considered by some as a complicated and lengthy process. To help navigate planning requirements in a particular area, estate owners are encouraged to procure specialist advice from a suitably experienced and qualified planning consultant at an early stage. This will ensure planning considerations and potential risks associated with bringing a site forward are understood before a business case is approved and significant resources are invested.

Public sector and registered provider landowners that have signed up to a portfolio agreement with the GLA are able to benefit from the “planning fast-track” for all sites delivering 35 per cent affordable homes. They may also be able to attract affordable housing grant where provision exceeds 50 per cent across the programme.



NHS estate owners are encouraged to explore the potential for working in partnership with the GLA (Homes England nationally), local authorities and registered providers in order to maximise the number of homes provided for NHS staff whilst achieving best value for a site. The strategic estates planning (SEP) team can broker these conversations with partners, with One Public Estate supporting such partnerships.

How is a site valued?

You have reviewed the Trust’s estate and identified a site as surplus. How do you calculate what that site is worth? In simple terms:

Site value = Value of completed scheme – (Cost of building it + developer profit and finance)

 A Royal Institution of Chartered Surveyors (RICS) registered valuer  would have to make a  set of assumptions which may range from cautious to robust depending on market conditions, risks and broader economic and policy factors. When considering a value range there are three key variables that each carry inherent risk for a potential Developer and can lead to quite different views on value. These are:

• Number and size of homes that are deliverable on the site overall and the tenure split (Planning Risk)
• Development cost (Construction Risk)
• Value of the homes (Sales Risk)

Where planning consent has not yet been granted for a site, a registered valuer would expect you to have commissioned a density and massing study to calculate what can reasonably fit on the site. This would normally form part of the options appraisal described in the project feasibility section.

The proposed number of homes would need to take account any site constraints and have regard to relevant planning considerations/policies, including, for example,   density, height, amenity, accessibility, parking provision and affordable housing requirements. Where risks have not yet crystallised through the planning process, a registered valuer will naturally build in prudent assumptions to his/her assessment of value.

Any potential purchaser of the site would also make their own assessment of planning risk on the site, often after instructing their own advisors. Purchasers may take a more or less cautious view based on their own experience of working on similar sites or on their experience of recent decisions by the LPA.

Applying for an outline or full planning consent can de-risk the site from a planning perspective, provide a clearer basis for valuation and a level playing field for offers. It also provides you as an estate-owner with a greater degree of control over what is ultimately provided. For example, it affords the opportunity to negotiate with planners on the number, tenure and affordability criteria of Homes for NHS Staff. However, it may deliver a less successful development solution than an experienced residential developer may come up with or it may not assist purchasers who wish to pursue a different development strategy. It is therefore important to consider the benefit of seeking a planning consent, or not, with advice provided by relevant professional.

When calculating the cost of constructing a scheme, a registered valuer would initially make some broad assumptions based on recent market evidence such as knowledge of tender prices, and usually with reference to the BCIS (building cost indices). As the design of the scheme evolves through planning, the registered valuer would expect to be provided with a report from a cost consultant to the relevant Royal Institute of British Architects (RIBA) stage. Costs can vary as a result of a wide range of factors including:

• Site constraints e.g. ground contamination, accessibility issues, party wall and neighbourly matters, services and utilities
• Planning requirements and conditions e.g. heritage considerations, design guides, conservation area requirements, sustainability measures and tree preservation orders
• Supply chain inflation and type of construction

These are risks that are often difficult for a registered valuer or a potential purchaser to quantify. For this reason, where risks are unknown or unmitigated, prudence will be built into the valuation assessment and caution may be built into offer prices or offers may be made conditionally on the outcome of further investigations.

Potential public sector partners and registered providers are more likely to take a prudent approach to construction risks if they are unknown. They are less likely to have the level of experience and control over their construction supply-chain as that of a house-builder to take a commercial view of the impact.  They may therefore price construction risk into offers made.

NHS estate-owners should consider the potential upside of commissioning their own suite of surveys, reports and site investigations in order to provide more certainty to purchasers about the deliverability of the site. This potentially provides for a more level playing field between different types of purchasers and may facilitate disposals to other public sector partners including local authorities and registered providers who are more likely to take a positive view of delivering Homes for NHS Staff.

It is important to understand the attitude of potential purchasers/developers to sales risk.

A registered valuer will look at market evidence based on out-turn sales from comparable schemes and their knowledge of other schemes being marketed. They will also, as far as possible, reflect market outlook in their assessments. Developers will use similar evidence to make their own assessment but variations will occur depending on the profit margins a particular developer can tolerate in relation to their wider development programme and the overall risk of delivering the site. Prudent developers will also consider their exit routes in the event of a potential downturn.

Sales profit margins are an allowable cost in both valuation and viability assessments. Assumed profit margins for affordable and intermediate homes are generally lower than for private sale as the risks are lower. At times, particularly those of market uncertainty, a registered provider or local authority may be able to offer best value for a site. This would be due to lower margin requirements and a clear exit route that involves holding the assets for growth, with the support of grant and internal subsidy. Estate owners should also ensure that they have considered, with the benefit of specialist advice as required, the appropriateness of using overage and clawback arrangements to capture any increased site value at a later date.  

Under most circumstances affordable housing will have a lower gross development value than housing for private sale. When calculating the value of affordable housing within a larger development, registered valuers and developers will generally consider what a registered provider would pay for the homes in a competitive sale once agency fees have been deducted. A registered provider will usually consider the NPV of the homes to be acquired. This means they take account of the rental income, deduct management and maintenance costs and apply a discount rate.

Registered providers and local authorities often have access to grant funding to deliver affordable homes where these are being provided above the planning requirement threshold, through investment programmes administered by the GLA and Homes England. Other subsidies may also be applicable, either from a registered provider’s existing asset portfolio or a Local authority’s Right to Buy receipts. Registered providers can often claim stamp duty land tax (SDLT) relief on land purchased for the purpose of affordable housing development. In addition, affordable homes consented through planning are not normally subject to Community Infrastructure Levies (CIL). The impact of these subsidies and reliefs can go some way to mitigate the difference between the price a registered provider or local authority might pay for a site compared to the price payable by a housebuilder or developer, especially in mid to lower value areas.

A viability assessment is used where a landowner wishes to make the case that a site is not economically viable for residential development unless the proportion of affordable housing is dropped to below the threshold required in local and/or regional planning policy.

The approach to valuing the land in the first instance follows the same rules as a land valuation described above. A planning authority will require that the land valuation should take account of local planning policy including affordable housing thresholds. The LPA will take account of a site’s Existing Use Value plus a premium for the landowner when benchmarking the value of the land and where this is lower than the Gross Development Value of the land a scheme is deemed to be viable.

Therefore, an NHS estate owner’s requirement for a certain quantum of receipt is not sufficient justification for a lowering of the affordable housing threshold, unless a convincing argument can be presented to the LPA that it is not economically viable to bring the site forward for development at the current threshold. The LPA may be willing to accept an argument that the cross subsidy required from the receipt for disposal of the land to provide new health facilities should be given more weight than the requirement for affordable housing. Such an argument is far more likely to be accepted if the NHS estate owner has engaged early with the local authority and worked to deliver their plans in partnership with STPs, and other local partnerships, such as those supported by One Public Estate.

Engaging with the LPA early is often key to success. NHS estate owners are encouraged to work in partnership with their local authority and other public sector providers to deliver both optimal value for the disposing landowner and good planning outcomes on surplus sites.