October last year saw the High Court ruling in Stonewater (2) Ltd v Wealden District Council. It involved a registered housing provider (RHP) who proposed to deliver an extant residential planning permission with 35% affordable housing, secured by a Section 106 Agreement as a 100% affordable housing scheme.

The challenge emerged following the Council’s refusal to grant the RHP CIL Social Housing Relief for those additional affordable units that were not secured as affordable units in the Section 106 Agreement. 

The judgement is of particular interest as it goes beyond the matter of CIL relief and has wider implications on affordable housing, particularly in development scenarios where it is proposed to let residential units as affordable units when these units are not secured as affordable in the Section 106 agreement.  This is particularly common for RHPs.

The judgement raises a number of pertinent points that are worthy of reflection in relation to how it could impact on the delivery of affordable housing. 

Firstly, there is the question of whether an amendment to a planning permission or legal agreement is required to occupy unrestricted open market dwellings as affordable units.  It has typically been assumed no, on the basis that it is at a developer’s discretion the price-point at which it wishes to let units.  In the case in question, however, the judge took the view that the quantum of affordable housing was fixed and, at the very least, an amendment to the Section 106 agreement would be required to increase the quantum of affordable housing (and subsequently benefit from CIL social housing relief). 

In the knowledge that an amendment would be required, the next question is what is the prospect of the local planning authority approving it?  Again, it is fair to say, particularly in areas where housing affordability and lack of affordable housing supply is a major concern, that it is typically assumed that any development that provides affordable housing above the policy expectation is a positive thing.  Indeed, within Greater London, it is positively encouraged by the London Plan.  That said, local planning authorities will also have regard to creating “mixed and balanced communities” and it is arguable that a single tenure scheme may not best promote this.  Furthermore, as highlighted by the case in question, the CIL financial contribution towards infrastructure was a material planning consideration and the fact that affordable housing benefits from CIL mandatory social housing relief is another reason why local planning authorities may not necessarily welcome a wholly affordable scheme over a mixed tenure scheme - notwithstanding how discriminatory this reasoning may appear to be.

A huge issue that falls out of this judgement and which has the potential to threaten development viability, particularly for RHPs, is that if a local planning authority requires that all additional affordable housing is secured by a Section 106 agreement, it effectively makes these units ineligible from obtaining Government grant funding.  The Affordable Homes Programme (2021-2026) awards grant funding for “net additionality” only i.e., affordable dwellings delivered over and above that required legally by the Section 106 agreement.  This will naturally make affordable housing providers less competitive in acquiring sites and flies in the face of what the Affordable Homes Programme is fundamentally trying to achieve i.e., to encourage the delivery of more affordable housing.  

The Stonewater judgement therefore goes well beyond CIL relief and has the potential to have far-reaching consequences on the delivery of affordable housing. Whilst building flexibility into planning permissions and legal agreements is one way to prevent another Stonewater case, this equally relies on the willingness of the local planning authority to be flexible in the first instance.  

Undoubtedly, the implications of the judgement will be emotive for all stakeholders involved in delivering affordable housing.  One thing that we can learn from it though is that to avoid the potential for any unwelcome surprises downstream, early engagement and transparency with the local planning authority is prudent.  In theory, there should be nothing to fear from this.  After all, there is a significant housing shortage across the country and the intentions of boosting the supply of affordable housing should only be applauded.  The reality, however, may differ and therefore it is important that our clients are aware of this and undertake their appropriate due diligence.