Making the case: 2. Addressing ​‘best consideration’

This chapter is part of our guide to making the case for community-led housing on public land.

Making the case
1. The context: legislation and regulations
2. Addressing the ​‘best consideration’ requirement – and winning
3. Case studies
4. Building an evidence base
5. Backing up your arguments

The ​‘best consideration’ requirement can seem like a huge barrier to community-led housing. But this section introduces existing options within the current legislation for community groups to access land for affordable housing. It also outlines some key campaign goals which would make this process much easier for community-led housing groups.

Although the incentives underpinning the public land sale policy mean that advocates of community-led housing are always likely to be on the back foot, there are nevertheless opportunities to make a strong case by highlighting its social and long-term benefits.

Working within the system: how community-led groups can challenge ​‘best consideration’

The following four options are some approaches available within the current system which can be used by community-led housing groups to challenge the ​‘best consideration’ requirements:

1. Forming a partnership outside of a competitive tender

Community-led housing groups can form a partnership with the public sector body that owns the land before the site is listed as surplus and made available for bids from private developers. This means that they are able to work with the public body before the land becomes subject to competitive tender, and avoid the ​‘best consideration’ requirement altogether.

The StART development in Haringey is following this strategy.

Another example is the Brixton Green project in Lambeth: a £110 million scheme to build 303 new homes, a theatre, and community spaces on a site 75% owned by Lambeth Council, leased to a new community body, Somerleyton Trust, for 250 years. The project is funded by a loan secured by Lambeth Council from the Public Works Loan Board, the government body that lends to local authorities. Somerleyton Trust will repay the council using money from the rents it charges on the properties.

For this strategy it can be helpful to investigate how the department or authority acquired the land in the first place, as this could be used to persuade them to partner. For example, if the land was formerly tenement housing or another kind of public asset, there is a strong case to maintain the land’s use for affordable housing.

In making a case for a partnership, it is important to pay attention to housing allocation in local policies, as well as looking into Neighbourhood Plans to see whether there are local priorities that support your case (for example, in support of community-led projects or increasing affordable housing).

Another option could be to form a partnership with a public agency that is willing to purchase the land for your project. This can delay competition from private sector competitors because other public agencies are given a 40 day window to apply for a land purchase or transfer before it is placed on the open register.

2. Using a community asset lock

A community asset lock places a legal restriction on assets like public land, and ensures that the value of this asset cannot be used for private benefit. Asset locks prevent land being sold on for private profit, so broader forms of social and economic value will become more significant. For example, an asset lock could prevent homes from being sold at any more than 50% of market value. This could incentivise the landowning public agency to make land available at cheaper rates because it represents a long-term investment in the local area, with no potential for short-term financial gain.

3. Use the ​‘right to contest’

The ​“right to contest” was developed as part of the land sale programme, to allow citizens and groups to challenge the usage of land by the public sector with a view to making the case for an alternative use and/​or its placement on the land sale register. However, this could also be used by groups seeking to challenge private sector developments if they can make the case that it could be put to better economic use.

4. Leverage s106 for community-led housing

Much affordable housing is delivered through a mechanism in the planning system commonly known as ​‘Section 106’. Section 106 of the Town and Country Planning Act (1990) requires developers to provide a certain proportion of affordable housing in developments of more than 10 homes. The precise amount depends on the local authority’s housing needs, and what the developers write into their plans, but ranges around 20 – 50%.

They provide an opportunity for the building of community-led housing in a few ways. Firstly, as part of a Section 106 agreement, developers might be motivated to identify a section of a construction site that is less profitable (for example, next to a railway line or close to a main road), and gift or lease this site to a community-led housing group.

Second, local authorities might develop planning policies whereby a certain percentage of Section 106 contributions would go towards the provision of community-led housing. A case could be made for this through including community-led housing into a housing needs assessment and providing evidence that this type of housing is needed.

Third, a community-led housing organisation may offer to meet a developer’s Section 106 obligation to provide affordable units and use this to acquire properties which are part of a larger development.

Finally, a local authority might, as in the case of Northumberland County Council, commit funds raised through Section 106 to support local Community Land Trust projects.

5. Agreeing a deal for ​‘less than best’ consideration

This means convincing the public body to sell the land to your group for less than they could get from private housing developers. Invoking ​‘best consideration’ does not need to be the final word. Best consideration is often the ​‘knee jerk’ reaction of local authorities, who do not fully understand the other options.

As seen in the previous section, the ​‘less than best’ policy seeks to give local authorities some freedom of manoeuvre when disposing of land, and allows local government to sell land for homes at ​‘less than best’ consideration, provided that the ​‘undervalue’ is no more than £2 million. Currently, local authorities are required to seek permission from Central Government before selling at ​‘undervalue’ in excess of £2 million. However, it seems that in the case of the Greater London Authority, greater freedom of manoeuvre is available: it can dispose of land at 30% undervalue, capped at £10 million, without seeking Central Government approval.

Interestingly, the recent Housing White Paper proposes to do away with this requirement and allow local authorities to sell at undervalue at their own discretion – something that we support and would substantially advantage those seeking to develop public and community-led housing. It would also be extremely useful if the ​‘less than best consideration’ legislation was extended to cover all public land, and social value put at the centre of public land disposal policies in the future. This is a key campaign target, in addition to those below.

Fixing the system: key changes to campaign for

In addition to what can be done within current legislation, there are some key changes that we can campaign for which would help community groups access affordable land:

1. Require developers to publish their viability assessments

A clause in the National Planning Policy Framework (NPPF), introduced in 2012, states that developers’ schemes ​“should not be subject to such a scale of obligations and policy burdens that their ability to be developed viably is threatened”. This crucial wording means that developers can appeal planning obligations (like affordable housing requirements) if they can prove they hinder the commercial viability of their schemes, using something called a ​‘financial viability assessment’.

Developers must show that building the required amount of affordable homes would mean that the project could not return a decent profit to the landowner. What is a decent profit margin? For the redevelopment of the Heygate Estate in Elephant & Castle, the level of ​‘acceptable’ profit was fixed at 25% – equating to around £300 million.

In practice, it often operates like this: developers can be granted planning permission on the understanding that they will deliver the council’s agreed level of affordable housing. After work begins, the developer submits a viability assessment showing that if they continue as planned, they won’t make a profit unless they lower the number of affordable homes. Councils then face a difficult choice: accept a proposed development that only partially meets local needs, or reject the development and go through the whole planning process again. Our research has shown that on just two public sites, viability assessments led to the loss of 171 affordable homes.

Viability assessments are usually confidential documents, not accessible to the public. Making publication standard practice would empower local residents to scrutinise developer plans early on in the planning process and provide a mandate to local authorities to ensure policy compliance over affordable housing is met. Transparency could also have an effect of making land cheaper across the board by ensuring that the price of land takes into account the obligation to build affordable housing through Section 106. If developers are less able to evade affordable housing requirements then they are likely to offer less money for a piece of land, and so make land more affordable. There are draft reforms to the NPPF which are currently under review, and these look likely to bring us closer to making viability assessments publicly available.

2. An open and accessible land registry

Currently, the information held by the Land Registry for England & Wales is not free to access. The information is available on a site-by-site basis but has a relatively poor searchable data system, making it quite an opaque database. Despite a plethora of generalised indices of house prices, the only official index of land prices was discontinued in 2011, and datasets on the value of commercial property held by the Valuation Office Agency are not publicly available.

This creates significant barriers to entry for community-led housing providers and restricts the ability of public bodies and citizens to scrutinise the activities of landowners and developers. However, things are set to change as HM Land Registry aims to develop a more open and digital register alongside comprehensive registration by 2030. According to the Land Registry, publicising land data in this way will ​“make it easier for communities and authorities to engage in and make informed decisions about planning, development and investment”.

3. Focusing on the existing use value of land

When authorities use compulsory purchase orders to acquire land, the land is priced according to the future value of the completed development – rather than the land’s existing use value. There is a concerted push for policy change around compulsory purchase orders so that authorities can buy land at a value closer to its existing use value, rather than its future value.

This means developers would be able to buy a field at closer to its cost as an agricultural field, than its (much higher cost) as land for housing, which would make affordable land for affordable community-led housing much more accessible.

There is also a debate around the need for land-value capture mechanisms that can prevent landowners from reaping all increase in the land value from public infrastructure investments.

3. Case studies

This guide was created with the generous support of the Nationwide Foundation.