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Is the Vacant Building Credit an election gimmick or long-term game changer for residential changes of use and conversions?

Marketing / 16 Apr, 15

What is the Vacant Building Credit (VBC)?

The VBC is a new form of affordable housing relief for the conversion or redevelopment of vacant buildings which have not been abandoned. It was introduced on 28 November 2014.

Where such buildings are proposed to be brought back into use for residential purposes, developers should be offered a financial credit equivalent to the existing gross floorspace of relevant vacant buildings when the Local Planning Authority (LPA) calculates any affordable housing contribution which will be sought.

Notional Example for Calculating the VBC

For a scheme where 26 dwellings are proposed and the Development Plan requires 33% to be affordable. There is an existing vacant floorspace of 865sqm and a proposed residential floorspace of 1,607.1sqm (net increase of floorspace of 742.1sqm). The average floorspace of the proposed residential units is calculated at 61.8sqm. Therefore 12 dwellings can be provided on the net increase in floorspace (741.1sqm / 61.8sqm = 12).

Before VBC was introduced 9 affordable dwellings would need to be provided on-site or a financial contribution equivalent to 9 dwellings for off-site provision. However using the VBC only 4 affordable dwellings need to be provided (33% of the total dwellings (12) provided on the net floorspace increase).

What are the implications?

I think the VBC has been introduced just before the General Election to secure votes from the development industry. Whilst this is not guaranteed, if the Conservative win the election, or form part of a new Coalition Government, I suspect guidance on this matter will be issued soon after to clarify how the VBC should be applied in practice. If another party is elected I think the VBC will be scrapped.

At a time when grant funding to deliver affordable housing is hard to come by, the VBC is unlikely to be welcomed by LPAs or indeed those in need such as families and individuals who cannot afford to buy a house at open market value.

It will clearly result in less affordable housing coming forward. This has already happened in some parts of the Country including Westminster where at a recent committee meeting where the affordable housing contribution for the redevelopment of 20 Grosvenor Square office building dropped from £17.5m to £8.5m because of the VBC .

One would think that developers would support the VBC however this is not the case. For example, the Westminster Property Association, which represents British Land, Land Securities, the Crown Estate and Grosvenor Estates, recently wrote to the current Housing and Planning Minister Brandon Lewis MP urging him to scrap the plans because the policy is flawed . I anticipate a number of resubmitted applications that essentially seek to apply the credit to already approved schemes.

National PPG is not policy but merely guidance which is a material consideration. I therefore expect some LPAs will test the credit at appeal and argue that their Development Plan policies relating to affordable housing take precedence over the guidance and should be given greater weight as a material consideration. The VBC is also likely to lead to more disagreements between LPAs and developers about what constitutes abandonment.

In cases where development is profitable and there is a not a question mark over viability I suggest a positive spin of proposing more affordable housing than is required under the VBC, but less than is required by Development Plan policy, could be acceptable to developers and LPAs.

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