Uncertainties over law providing for social housing will reduce supply of new homes

There has been enormous controversy about the Government's proposal that up to 20 per cent of building land must be reserved for social/affordable housing. However, this measure is now part of the law of the land since the bringing into effect of the relevant provisions of the Planning and Development Act, 2000, last November. It has major implications for developers and will also affect the purchasers of houses in new housing estates.

The irony is that the effect of these provisions runs directly counter to Government policy of increasing housing supply, and thereby controlling prices. Developers are moving from residential to commercial development due to the uncertainty created by them. In addition, the delays resulting from the implementation of these provisions will reduce the number of residential units which will become available over the next three years.

To understand how the social/affordable housing provision will operate, it must be placed in the context of the "Housing Strategy" provisions of the same Act. These require local authorities to prepare a housing strategy as soon as possible and, in any event, within nine months from November 1st, 2000. They are also required, within that time scale, to commence the procedure to vary their Development Plan to incorporate the housing strategy.

It is only open to a planning authority to impose a social/affordable housing condition in a planning permission once its housing strategy has been incorporated as an objective of its Development Plan. The plan will specify the percentage of land to be made available for social or affordable housing, not to exceed 20 per cent, and this figure can vary in different locations within the local authority's administrative area. It is anticipated that housing strategies will be adopted by local authorities, and incorporated into development plans, quite rapidly.

A further key provision of the new legislation is aimed at causing existing planning permissions to wither in order to subject various proposed housing developments to the social housing provision. This could cause considerable difficulty not only for developers, but also the prospective purchasers of new dwellings in particular developments.

It is proposed that existing planning permissions for housing developments will lapse on 31st December 2002, or the expiry of a period of two years from the date of the grant of the permission (whichever is the later). This provision applies to any permission, the subject of a planning application made after August 25th, 1999, and before the local authority housing strategy is included in its Development Plan. Generally, planning permissions have a life of five years.

Under the new Planning and Development Act, any such housing permission will lapse in respect of any portion of the authorised development consisting of buildings where the external walls have not then been completed. This provision is likely to give rise to substantial difficulties, both practical and legal.

From the legal perspective, what will be the status of buildings which have been commenced, but whose external walls have not been completed on the date the planning permission expires? It is clearly envisaged that the developer will apply for a new planning permission to complete the development, and it will then be open to the local authority to impose social housing conditions as part of the subsequent planning permission.

However, if the developer fails to make a new application for permission, or in any event in the interval before any new permission is granted, it would appear that any half-completed works would now comprise unauthorised development.

The Act provides that the planning permission will cease to have effect "without prejudice to the obligation on the person carrying out the development to fulfil the other requirements of the permission in relation to so much of the development as is not affected by this paragraph" (Section 96(15)(b). It will be very difficult in any particular case to distinguish between those parts of the planning permission which remain to be completed by the developer under this provision, and those which will lapse with the permission.

A further difficulty arises for prospective purchasers of dwellings. They will not know with any certainty whether the external walls will be completed within the life of the permission, and if they are not, and a new planning permission is required, they will need to be satisfied that the developer will apply for such new permission in similar terms.

However, what will happen if, say upon the expiry of the original planning permission, there are 20 residential units in the development whose external walls have not been completed, but in respect of which purchasers have already signed contracts and entered into building agreements? If the local authority then imposes a social/affordable housing condition as part of the new permission, requiring four of those houses to be provided for social housing, the developer will not be in a position to comply with that condition as the sites have already been sold. It is not immediately obvious how this situation will be dealt with.

There are also other practical problems that can arise. It can be expected, for instance, that a developer will need to apply for a new planning permission in good time in order to ensure continuity of the development and that he will not have to lay off his workforce pending the issue of a new permission. While it is hoped that local authorities will process such applications without delay, and will not seek additional information, this cannot be ruled out as circumstances may have changed from the date of the original planning application.

In any event, the new application is still open to appeal by third parties to An Bord Pleanala. This means that a developer can expect a delay of at least nine months before he can be sure of his new permission. He must therefore take a view, more than nine months in advance, as to how many buildings in the development will not have completed external walls. However the earlier the developer makes application for the new permission, and the more residential units he includes in the application, the more units are likely to be affected by social/affordable housing conditions.

The practical result is likely to be that, in many cases, substantial delays will be incurred in completing developments and that, in the interim, purchasers will be waiting for their new house (and with no certainty as to the date of its completion). And those who have completed the purchase of their new houses will be left for extended periods living in half-completed housing estates.

In addition, the huge increase in the number of planning applications resulting from this provision will mean that the resources of planning authorities, and presumably An Bord Pleanala, will be stretched even further.

A developer who applied for planning permission between August 25th, 1999 and November of that year might feel particularly aggrieved. While August 25th was the date the Planning Bill was first published, the social/affordable housing provision did not appear until November. However, as the Supreme Court has now ruled on the constitutionality of this element of the 2000 Act, it would appear that such persons have no further recourse to the courts.

Patrick Sweetman is a partner with the Property Department of Matheson Ormsby Prentice