As I was going to St Ives—restricting second home ownership

Planning analysis: The town of St Ives has voted to restrict the future development of second homes in the area. Peter Robinson, partner at Hunters (incorporating May, May & Merrimans) looks at whether the decision can be challenged, and its implications for lawyers, property developers and local authorities.

Original news

St Ives votes to restrict second home ownership, LNB News 10/05/2016 28

Residents of St Ives have overwhelmingly backed plans to restrict second home ownership. Following a referendum, 83% of voters backed proposals to only allow full-time residents to own new-build properties in St Ives and Carbis Bay.

What was this referendum about and why is it significant?

The Localism Act 2011 (LA 2011) created a process by which local communities could produce ‘Neighbourhood Development Plans’ (NDPs). If passed by an independent examiner and by a majority of voters in the NDP area in a referendum, an NDP can then be adopted by the local planning authority (LPA) as part of the relevant statutory development plan. An adopted NDP dictates what development will be permitted in the area.

The St Ives NDP contains a number of planning and planning-related policies. Policy H2 proposed that any new dwelling in the St Ives NDP area would be prevented from being used as a second home or as self-catering holiday accommodation. The question asked in the St Ives referendum was ‘Do you want Cornwall Council to use the neighbourhood plan for St Ives to help it decide planning applications in the neighbourhood area?’ As 80% of the voters in the referendum backed the proposed St Ives NDP, Policy H2 will now apply to the development of new dwellings in the St Ives NDP area until at least 2030.

If implemented, what will it mean in practice? Have any other areas implemented similar rules? If so, what effect have they had? Have there been any unforeseen challenges/difficulties?

The St Ives NDP will have to be formally adopted at Cornwall Council before it comes into force but Policy H2 provides that ‘new open market housing, excluding replacement dwellings, will only be supported where there is a restriction to ensure its occupancy as a “Principal Residence”’.

Principal residence is then defined as ‘those occupied as the residents’ sole or main residence, where the residents spend the majority of their time when not working away from home’. In practice, the policy will mean that occupiers of homes subject to this principal residence condition will be required to keep proof that they are meeting the obligation or condition and will be obliged to provide such proof if/when Cornwall Council requests that information. This proof would be verifiable evidence, which could include evidence of registration on the local electoral register or being registered for and using local services (such as healthcare, schools etc).

In her report, the examiner said that she had compared Policy H2 to other similar policies which had been accepted by other neighbourhood plan examiners, but while that process had been helpful, those other policies had been different in context and wording. Lynton and Lynmouth in Devon have obtained approval for an NDP with similar restrictions on development of second homes, but that decision seems not to have attracted the publicity that the St Ives decision has.

Is the decision likely to be challenged? If so, on what grounds and what are the likely next steps?

It is understood that a ‘local developer’ has lodged a challenge against the adoption of the St Ives NDP. Although no details of the basis of that challenge have become public, it is most likely to be an application for judicial review of one of the component parts of the process by which the St Ives NDP was passed. The objective is to succeed in proving that a person exercising an administrative function in that process exercised that function incorrectly and that either the decision itself should be set aside or remitted to be exercised on a different basis.

Ironically, the only part of the decision that is unlikely to be capable of challenge is the result of the referendum itself. In that respect (as the Prime Minister may find out to his cost next month) vox populai vox dei applies and, as the voting population of St Ives is not an administrative body, its decision is not open to judicial review unless the underlying process of calling or administering of the referendum is found to have been administratively flawed.

The most likely area of challenge will be the examiner’s report required in order for the NDP to be put to a referendum. One of the purposes of the examiner’s report was to provide confirmation that the policies comprising the NDP met the ‘Basic Conditions’ set out by paragraph 8(2) of Schedule 4B of the Town and Country Planning Act 1990 (TCPA 1990). These are that the NDP must:

• have regard to the national policies contained in the guidance issued by the Secretary of State
• contribute to the achievement of sustainable development
• be in conformity with the strategic policies for the development plan for the area and
• be compatible with EU and European Court of Human Rights obligations

In her report, the examiner, Deborah McCann, stated that her concerns over Policy H2 related to ‘how the policy can meet the basic Conditions…delivering a wide choice of quality home… and delivering sustainable development’. After ‘much deliberation and on balance’ Ms McCann concluded that:

‘due to the adverse impact on the local community/economy of the uncontrolled growth of second homes the restriction of further second homes does in fact contribute to delivering sustainable development.’

What does this mean for lawyers and their clients (local authorities, property owners and developers)?

If Cornwall Council adopts the St Ives NDP without that decision or the preceding process being subject to a successful judicial review, landowners and developers involved in the construction of housing in the St Ives NDP area will be the most materially affected. The cost of construction of a house is fairly constant but, if the price that a developer can realise for the finished house is adversely affected by, for instance, a principal residence condition, the price that a developer will be prepared to pay to buy the land that the house is to be built on will decrease. The economics of supply and demand (and the availability of finance to persons meeting the principal residence condition) will determine the economic issue of whether developers are prepared to invest in building housing to which Policy H2 applies.

Controlling and enforcing principal residence conditions on development and onward sale will be a concern for lawyers and clients involved in those processes. LPAs granting planning consent for such construction will have a choice of whether to seek to impose the restrictive conditions through TCPA 1990, s 106 agreement obligations (which have the effect in law of a restrictive covenant for the benefit of the LPA) or through the imposition of planning conditions in the planning consent. More importantly, there is a question as to whether LPAs have the political will to enforce breaches of such conditions—particularly if LPAs are required, in effect, to threaten or take injunctive measures to force a person who does not meet a principal residence condition to move out of a property.

How does all this fit in with other developments in this area of the law? Do you have any predictions for future developments?

It remains to be seen whether the Department for Communities and Local Government (DCLG) will welcome the adoption of policies like H2 via the mechanism of NDPs. The DCLG may feel that, given the relative scarcity of land for residential development in England & Wales, allowing local control as to who may live in a new build (however laudable in principle) is economically unwise. The government may seek to amend LA 2011 to restrict what may be included in an NDP to exclude H2 type policies.

Because of the minimum levels of affordable housing required to be provided in most residential developments (a requirement sustained by the decision in West Berkshire Council and Reading Borough Council v The Department for Communities and Local government [2015] EWHC 2222 (Admin), [2015] All ER (D) 360 (Jul)), the government needs to ensure that developers remain incentivised to bring forward and conclude residential development projects in order to ensure a continuing supply of affordable housing. If that incentive is adversely affected by H2 type policies the unwelcome alternative faced by the government is to increase state-funded residential construction.

Interviewed by Duncan Wood.

This article was originally published in Lexis PSL and can be found, behind a paywall, here.

Peter Robinson

Hunters incorporating May, May & Merrimans