Scotland's fourth National Planning Framework (NPF4) was formally adopted in February 2023, replacing NPF3 and Scottish Planning Policy. It sets out the spatial strategy and planning policy at a national level and will form part of the Development Plan, replacing the previous four Strategic Development Plans for City Regions.
In this article, we will examine the implications of the new NPF4 policy on affordable housing provision and viability assessments in Scotland.
VIABILITY AND AFFORDABLE HOUSING
National Planning Policy 16 e) states that:
“Development proposals for new homes will be supported where they make provision for affordable homes to meet an identified need. Proposals for market homes will only be supported where the contribution to the provision of affordable homes on a site will be at least 25% of the total number of homes, unless the LDP [local development plan] sets out locations or circumstances where:
i. a higher contribution is justified by evidence of need, or
ii. a lower contribution is justified, for example, by evidence of impact on viability, where proposals are small in scale, or to incentivise particular types of homes that are needed to diversify the supply, such as self-build or wheelchair accessible homes.
The contribution is to be provided in accordance with local policy or guidance.”
The requirement for a minimum 25% provision of affordable housing could have serious implications in local authority areas where there are currently no affordable housing requirements, such as Glasgow and Dundee, or where the current requirement is less than 25%, including parts of Fife.
At the other end of the spectrum, the City of Edinburgh Council is proposing to increase their current 25% requirement to 35%.
This policy change is set against a backdrop of development headwinds. Significant construction cost inflation over the last two years, coupled with increased borrowing costs over recent months, have impacted the viability of high-density urban flatted developments in particular. The 'for sale' market has also been impacted by recent house price falls and difficulties in phasing construction to align with reduced buyer demand, and the build-to-rent market has been impacted by outward yield shifts mitigated by rental growth.
The Scottish Government's temporary rent cap on 'in tenancy' private sector rent uplifts was increased from 0% to 3% from 1 April until 30 September 2023, and the effective moratorium on evictions was continued, with the legislation allowing a further six-month extension if necessary and proportionate. These updates have knocked confidence in the BTR market north of the border, and this could be compounded in the autumn when the Scottish Government is due to publish its proposals for longer-term rent control under the forthcoming Housing Bill.
The new NPF4 policy sets out circumstances under which less than 25% of affordable housing might be acceptable, one of which is viability. To date, viability assessments have yet to be used extensively in Scotland. However, we expect them to be more widely adopted going forward as developers seek to navigate the challenges highlighted above and provide much-needed new homes for sale and rent.
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