New PPG on Build to Rent

24th September 2018

On 13 September the Government published a new section in its Planning Practice Guidance (Guidance) on Build to Rent in order to simplify its treatment within the planning system and aid in the interpretation of The National Planning Policy Framework (NPPF).

The Government have recognised that Build to Rent is a distinct asset class within the private rented sector and that if a need is identified, authorities should have a policy setting out their approach to promoting and accommodating Build to Rent schemes.

The NPPF (published in July 2018) affirms that affordable housing within Build to Rent schemes is expected to be in the form of affordable private rent. Guidance expressly states that 20% is a suitable benchmark for the level of affordable private rent homes to be provided in any Build to Rent scheme. If local authorities wish to set a different proportion then this must be justified using evidence from their local housing need assessment and they must also set out the policy in their local plan. Alternatively, if a developer wishes to argue for a different level this must be justified in the viability report.

National affordable housing policy requires a minimum discount of 20% for affordable private rent (inclusive of service charge) relative to local market rents. Build to Rent developers should assess the market rent using the definition of the International Valuations Standard Committee as adopted by RICS.

Guidance also states that the affordable private rent homes should be “physically indistinguishable from the market rent homes in terms of quality and size“, as well as distributed throughout the development. Management of both should be combined under common control and will not need the separate involvement of a registered landlord.

The process for managing affordable private rent units should be set out in a section 106 agreement. This needs to cover the parameters of the lettings agreement, the rent levels, apportionment of the homes across the development, a management and service agreement, and a marketing agreement setting out how their availability is to be publicised.

The section 106 should also require Build to Rent scheme operators to produce an annual statement to authorities, confirming the approach to letting the affordable units, their ongoing status, and clearly identifying how the scheme is meeting the overall affordable housing level required in the planning permission.

Affordable private rent homes included as part of a scheme through the S106 Agreement are provided specifically as a community benefit. However, circumstances may arise where developers need to sell all or part of a Build to Rent scheme. If so, the S106 Agreement should include a clawback arrangement. It will be for each local authority to determine how to structure this but Guidance provides a sample formula.

Click here to read the full guidance note.

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