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Vacant Building Credit – A Window of Opportunity

The tinkering with the planning system continues. The addition to the Planning Practice Guidance in November of three slender paragraphs introducing the vacant building credit marks one of the Government’s latest attempts to encourage the redevelopment of brownfield sites.

The principle behind the vacant building credit is straightforward. Where a vacant building is brought back into any lawful use, or is demolished to be replaced by a new building, affordable housing contributions should be payable only on any net increase in floorspace.

So how is the credit worked out?

  1. Where there is an overall increase in floorspace in the proposed development, the LPA should calculate the amount of affordable housing contribution required from the development by the local plan;
  2. A credit should then be applied which is the equivalent of the gross floorspace of any relevant vacant buildings being brought back into use or demolished as part of the scheme. This is then deducted from the overall affordable housing contribution calculation. The credit does not apply where the building has been abandoned.

On the face of it this all seems very simple, but the lack of detail in the guidance (before the move to the online PPG one would have expected a fairly substantial guidance document to have introduced the credit) is already raising some interesting questions in practice.

Areas that are likely to prove contentious include the point at which a relevant building is judged to be vacant, the legitimacy of any such vacancy and the question of abandonment (which, in itself, is a highly complex area of law). The guidance gives no steer on whether the gross floorspace or number of units should be prorated in circumstances where affordable housing contributions are calculated on a unit by unit basis. It remains to be seen whether a consensus will emerge – in the couple of months since the guidance came into force we have already seen different LPAs taking different approaches to these issues.

It is clear that the credit will be applicable to much new residential development. The corollary of this will be a reduction in affordable housing contributions – which is understandably unpopular amongst LPAs – although the Government has not published any evidence relating to the levels of contributions it expects to be lost. Given that all vacant floorspace which is being brought back into use counts towards the credit (not just vacant floorspace that is to be used for residential purposes) the reduction in receipts is likely to be substantial. The City of London is already exploring ways to break free from the credit through an alteration to its Local Plan, but this will not happen overnight.

In the meantime, the credit presents an opportunity for developers to benefit from reduced affordable housing contributions where the credit applies. LPAs will be braced – albeit with gritted teeth – for an influx of applications.