Introduction to planning: best practice in BTR

BTR schemes require planning permission from Local Planning Authorities (LPAs). Given the nature of the product, BTR schemes often require a specific and bespoke approach to planning matters. This section identifies the key steps in the planning process from initial planning policy review through to determination. Matters relating to viability, affordable housing and clawback are dealt with in Section X. 

Planning Policy  

Planning policy support for BTR continues to grow at a national, regional and local level. 

The National Planning Policy Framework (NPPF) and Planning Practice Guidance (PPG) provide clear support for BTR. 

BTR schemes do not have a specific Use Class within the Use Classes Order and are identified within Class C3 Dwellinghouses. To distinguish BTR from other residential products within Class C3 and simplify its treatment within the planning system the NPPF defines BTR as follows: 

“Purpose built housing that is typically 100% rented out. It can form part of a wider multi-tenure development comprising either flats or houses, but should be on the same site and/or contiguous with the main development. Schemes will usually offer longer tenancy agreements of three years or more, and will typically be professionally managed stock in single ownership and management control.” 

Development Plans seek to guide development of an area through policies and objectives. Development Plans are based on up-to-date evidence relating to the economic, social and environmental characteristics and prospects of an area.

The PPG identifies that as part of the plan making process, LPAs should use a local housing need assessment. If a need is identified, LPAs should include a policies in the Development Plan setting out their approach to promoting and accommodating BTR schemes.

The London Plan 2021 (which forms part of the Development Plan for London Boroughs) contains a specific BTR policy (H11) and identifies 10 criteria that must be met for a scheme to quality as BTR. 

Depending on the scheme’s location the following key points should be considered: 

• Are there BTR specific policies?
• If not, what stage is the Development Plan review in? 
• Look to influence the emerging policy position by submitting representations as the draft Plan progresses to adoption

Planning Applications  

The planning legislations requires planning applications to be determined in accordance with the Development Plan unless material considerations indicate otherwise. 

The Development Plan may have a specific BTR policy. If not, the planning application will be considered in a market housing orientated policy context.

Pre-application discussions are an invaluable way of conveying the benefits of BTR (i.e. high quality design, assist in meeting housing need, enliven town centres and free up family housing) to the LPA and teasing out design matters and how they are to be assessed.  

Once the planning application has been submitted the LPA have either a 13 (major development) or 16 week (EIA development) determination period. The LPA will consult the local community and key stakeholders and then assess the proposals. 

Should an LPA determine to approve a BTR scheme they will seek a rental covenant of a certain length (i.e. 15 years) within a Section 106 (S106) Agreement.  

Amendments can also be made to existing planning consents for market rent development through S96A (28 days) or S73 applications (the same period as the original consent) depending on the extent of the changes and their significance.

Community Infrastructure Levy 

The Community Infrastructure Levy (CIL) is a mandatory charge on new charge on new development in areas where a Charging Authority (typically the LPA) has adopted a Charging Schedule. 

CIL is charged based on pounds per square metre, which can vary by use and by LPA but almost always includes residential development. CIL is payable on commencement of development, or for larger developments a phase of development, in line with an instalment policy. 

Relief can be claimed for dwellings and associated communal areas that fulfil certain criteria.  These are set out in Regulations 49 and for rental property includes properties let by a Local Housing Authority (Condition 2), a Registered Provider (Condition 3) or another body provided that a property meets local housing need and the rent (including service charge) is no more than 80% of market rent.

BTR operators should consider several factors during the planning, development and management process.  These include: 

• That the relief is granted to specific dwellings and associated communal areas shown on a plan which accompanies the relief claim.  If they cease to meet the criteria within 7 years some or all of the relief must be repaid.  This makes it difficult to claim relief on ‘pepper potted’ developments; 
• If dwellings are not managed by a Local Housing Authority or Registered Provider they must be covered by a S106 agreement which ensures compliance with the relief criteria.  Even if managed by another body it is important to ensure that any S106 or other legal agreements allow relief to be claimed; 
• The process of claiming and securing relief involves the submission of multiple forms and information to the Collecting Authority and it is essential that they are all submitted and in the correct sequence; 
• The disposal of dwellings, either as part of a whole portfolio or individual units, can affect relief and trigger repayment; 
• For large and complex developments, it is beneficial to ensure that the development can be phased so that CIL can be phased with the development of each building or plot.