Pretty vacant?

A common concern of university lecturers who work in close-to-market or vocational subjects is that, due to lack of day-to-day contact with clients etc., their knowledge becomes out-of-date or they miss major changes in the market.

Something that I missed has been the Vacant Building Credit (VBC). I suspect that a whole cohort may have left UCL without having heard about it (sorry). A planner that I know well was surprised that I had missed something so important for developers. If you know all about it, then no need to read on.

The VBC is meant to provide an incentive for brownfield development on sites which have vacant buildings. It came into force last November and applies to any vacant building brought back into use, or demolished to be replaced by a new building. Basically the developer can get a financial ‘credit’ equivalent to the existing gross floor space of vacant buildings when the local planning authority calculates affordable housing contributions. So an affordable housing contributions seems only to be required for any increase in floorspace.

It seems to work something like this.  Let’s assume a developer is building a 100,000 square metre residential development and demolishing a 20,000 square metre building that has been classified as vacant. There is an affordable housing policy in place that requires 40% of housing to be affordable. To be policy compliant, in the absence of the Vacant Building Credit, they would have to provide 40,000 squares metres of affordable housing. However, it seems that the Vacant Building Credit may allow them to provide 20,000 square metres if the 20,000 square metres is deducted from a policy compliant 40,000.

As ever, it’s largely been left to local authorities to sort out the detail and it will be up to the authority to operationalise this policy initiative for their area. In addition, there is no definition of what a vacant or abandoned building is or how long it must have been vacant for. Inevitably, there are concerns that developers will try to ‘game’ this allowance. In particular, there are worries that premises may be made ‘artificially’ vacant in order to obtain the credit.

How might it affect housing supply and land markets? Given that developers could justify a reduced affordable housing contribution on the grounds of viability, it’s hard to see how it should bring forward additional marginal sites. Similar to the Growth and Infrastructure Act which focussed on affordable housing as the only planning obligation to be amended in renegotiations of s106 agreements, affordable housing has been singled out again. Clearly, the supply of affordable housing would be expected to fall. Sites with vacant buildings that are viable when policy compliant get a substantial financial benefit. The main beneficiaries are likely to be owners of viable sites with vacant buildings which should have higher values. Developers will have been looking for sites with vacant buildings as soon as the VBC looked likely to be introduced.

One of my friends who is a developer tells me that there can be a trade-off between the Vacant Building Credit and the CIL payments. CIL is only payable on additional space developed. However, I understand that to get the CIL exemption the building must be in use.

As ever, the devil is in the detail – not my strongest point. The Law of Unintended Consequences could well be out in force. If you want to find out more, there is some good discussion here, here and here.

So, feeling pleased with myself that I’d worked out the above, I must admit that I was a bit gutted when I learn that the VBC has been successfully challenged by a couple of local (to me anyway) authorities. Oliver Wainwright in the Guardian sounds quite pleased with it all claiming a victory for affordable housing.  Another part of the judgement was the exemption of schemes of under 10 units from affordable housing requirements. Who says that our planning system isn’t dynamic?

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