Carl Dyer Discusses C2 Developments And How To Ensure They Are Not Subject To C3 Affordable Housing Policies

Our population is ageing. By 2020, the number of over 65s will have increased from 11.7m in 2015 to 12.8m. By 2025, according to JLL, the figure is projected to be 14.3m.

As we live longer, so the incidence of dementia increases. The current figure of 850,000 people afflicted today is expected to be 1m by 2025; and to surpass 2m by 2050.

There is a clear and agreed need for more house building; within that, more housing is required for the elderly in general (boosted by the increasing number of elderly single people), and the frail elderly in particular. The government has targeted 1m new homes, but at current construction rates will see only 70% of that target.

Housing the elderly

The most land-efficient way to house elderly people in need of care is in class C2 care homes, yet local plan allocations for such homes are scarcely more common than unicorns.

And many local authorities still mistakenly try to impose C3 affordable housing policies onto C2 care homes.

In one, a developer builds units and sells them, then moves onto the next project. In the other, the operator must provide an ongoing, high standard of care to the residents and maintain the building to a high standard indefinitely. There simply is not the margin to pay what is effectively a tax towards unrelated housing provision.

So let us look at the planning difference:

• C2 is used for the provision of residential accommodation and care to people in need of care (other than use within class C3)
• C3 is used as a dwellinghouse (whether or not as a sole or main residence) by:
• 1. a single person or by people to be regarded as forming a single household;
  2. not more than six residents living together as a single household where care is provided for residents; or
  3. not more than six residents living together as a single household when no care is provided to residents (other than a use within class C4)

While there is an apparent blurring of the lines in Class C3(b), in practice this is simply a sensible measure to avoid potentially many unnecessary applications for a C3 to C2 change of use where care is provided within a C3 dwelling house.

Caring is key

The key test is whether care is provided and this must be for the occupier not the building. Choosing to hire a gardener or a handyman does not mean you are in need of care. Equally, a service charge for maintenance does not mean that care is being provided.

In a planning appeal involving Aspen Retirement, the King Edward VI School and Stratford-upon-Avon District Council, an inspector found as a matter of fact that the proposed development was a C2 use, and that consequently the council’s C3 affordable housing policies did not apply to it.

The level of care needed does not have to be extensive. A planning inspector has held that between two and four hours of care a week was sufficient for a development to constitute a C2 use. In a separate decision at Southborne in West Sussex, an inspector held that one and a half hours per week in units which could be occupied by two people, only one of whom had to be in need of care, was insufficient as a matter of fact and degree in that case to constitute a C2 use.

Where the care provider insists on access to all the rooms, to ensure that emergency care can be provided, that is also evidence of a C2 use, rather than the exclusivity implied by the C3 use class.

By contrast, not having locks in a C3 house, where only supervision but not care was provided, did not make that a C2 house.

Planning permission was also granted on appeal for numerous Sunrise Senior Living care homes, none of which were required to provide any affordable housing. At local authority level Audley Retirement has to date convinced 12 separate local planning authorities that its C2 care homes and care villages are all in C2 use, and no affordable housing contributions have been required.

Making the class use clear

So how best to ensure a proposed C2 development should not be subject to a requirement to provide or contribute to affordable housing? A good illustrative track record helps. Sunrise was able to report that its typical resident was in their mid-80s. The average age of admission to an Audley care home is 79.

Having council members visit an existing facility and see first-hand the age of the residents and the care being provided is also a great way to turn scepticism into an appreciation of reality.

And, of course, being registered as a care provider is pretty conclusive.

Formally, the commitment can be made through either planning conditions or section 106 obligations. For example: “The accommodation provided shall only be occupied by people in need of care and who are to be provided with care.”

Age restrictions should be avoided. They add little, and can cause problems. Being 65 (or 85) does not automatically mean that someone is in need of care and cases exist where people under 55 need care.

Any restrictions should be in the form of planning conditions. There is no reason for them to be in section 106 obligations, and paragraph 203 of the NPPF is clear: “planning obligations should only be used where it is not possible to address unacceptable impacts through a planning condition”.

So, to summarise: provide a real level of genuine care, be registered as a care provider, insist upon access to provide that care, formalise who can occupy the accommodation by way of a planning condition, demonstrate your track record elsewhere if you have one – and don’t pay for affordable housing.

A new lease of life

It is estimated that only 0.5% of people over 65 in the UK live in purpose-built retirement villages, compared to approximately 5% in the US and Australia.

Given the acute demand and significant under-supply of retirement accommodation, this figure can only rise, as evidenced by recent expansion plans announced by two of the leading retirement village players, Audley and Pegasus.

While the preferred model is to sell units within the village, there is perhaps space for a private rental proposition, as would-be residents seek to distribute capital from the disposal of the family home in a tax efficient way or look to assist generation rent get onto the housing ladder.

Renting provides residents much-needed flexibility, especially as their care needs change, but both landlords and tenants need to think through the issues.

From a tenant’s perspective, security of occupation and certainty of costs are likely to be the major considerations. They will doubtless require longer tenancies with fixed rents and estate/management charges, with a requirement that any increases are index linked to enable residents to fund lease payments, possibly through annuity style arrangements over their lifetime.

While this is likely to be acceptable to both landlord and investor, great care needs to be taken as to how voids are managed, particularly where tenants need to transition to alternative accommodation within the village as their care needs become more acute.

Landlords need to remember that consumer protection legislation applies to tenancies, meaning terms have to be objectively fair and clear to tenants before they can be enforced.

Any fee payable on assignment or termination of the tenancy (similar to the exit fees payable on a sale) will need to be transparent and clearly explained to tenants if the terms are going to be enforceable.

Disability discrimination legislation means that landlords may have to provide non-structural physical improvements to units even if the cost of these cannot be recovered as rent. Alarms, handrails, large text guides to services etc can all be treated as “auxiliary aids”, which must, by law, be provided. Landlords therefore need to ensure that units are as compliant as possible at the outset, to ensure they minimise any expenditure that may be difficult to recoup in the future.

Brand loyalty and association are vitally important, especially at the higher end of the scale, and operators need to ensure the highest possible quality of ongoing management.

Retirement living villages are not exempt from dealing with the challenges of anti-social behaviour (hoarding, excess noise, nuisance calls etc) and landlords must be aware that if this cannot be managed informally, any steps to take possession of the property will probably have to rely on discretionary grounds for possession.

While there is clearly potential for private rental models to flourish in the context of retirement villages, there are challenges to be overcome and it will be interesting to see how these are met.

This article appeared first on EGi on 26 November 2016