The C2/C3 extra care housing debate. Does a recent Court judgment provide a way through the quagmire?

02 Nov 2020

The rigid distinction between Use Class C2 and C3 has long been the source of consternation for those involved in the development of specialist housing for older people.

Why is the C2/C3 distinction a problem? As has been widely commented on, many kinds of specialist housing for older people do not fall neatly into either use class. Whilst a traditional care home would be C2 and a retirement living development with no care and minimal communal facilities might fall squarely in C3, there are a multitude of schemes between those two poles which are not as easily classified. Many “extra care” schemes (i.e. where residents have their own independent unit of accommodation but are provided with care on site and a range of communal facilities) are not obviously C3 or C2.

Why does it matter? Well, principally because developments in Class C3 (dwellinghouses) are usually required by development plan policies to provide affordable housing (or a financial contribution in lieu) whereas development in Class C2 (residential institutions) is usually exempt from such requirements by virtue of development plan policies or other policy documents.

Everyone agrees that extra care developments have significant social benefits over and above the provision of housing need. Those in the development industry make the case that their developments would be unviable if they were required to provide an affordable housing contribution. Local planning authorities are concerned to ensure that their affordable housing targets are met.

All of this has led to drawn out disputes between developers and LPAs as to whether a particular development would or would not be C2 or C3. There is a list of appeal decisions as long as your arm where planning inspectors assessing broadly similar schemes have fallen down on one side of the line or the other. The calls for reform to the system have been loud and various, including from the MHCLG Select Committee who, in their report on housing for older people, endorsed the (not very new) idea of a new use class for this type of development.

Despite those calls, there is no sign of any such reform on the horizon.

But does the recent Judgment in Rectory Homes Ltd v SSHCLG [2020] EWHC 2098 (Admin) provide the answer? There the planning inspector found that a development for “housing with care” would fall within C2 but that an affordable housing contribution was nonetheless required. The relevant development plan policy (Policy CSH3 of the South Oxfordshire Core Strategy) required 40% affordable housing on sites where there was a “net gain of three or more dwellings.” The Inspector concluded that although the development would be in C2 use, the units of accommodation within the development would nonetheless be “dwellings” for the purpose of Policy CSH3 so as to require an affordable housing contribution.

The Court upheld that approach. There was nothing in Policy CSH3 that required a “dwelling” to be restricted to a dwelling in Use Class C3. There was, furthermore, no reason as to why C2 accommodation could not be provided by way of “dwellings.”

For any development plan policy which defines its affordable housing requirement by reference to “dwellings”, the Rectory Homes approach provides a straightforward way to assess whether a proposed development is required to make a contribution. Or does it?

Probably not. In another appeal decision concerning the same affordable housing policy and a very similar proposal for extra care housing (Appeal Ref: APP/Q3115/W/19/3220425) at Lower Shiplake, a planning inspector found that the proposal would not give rise to “dwellings” within the meaning of the policy.

The Inspector’s reasoning was as follows:

43. […] As individual elements it is not unreasonable to consider each of the separate units of accommodation as dwellings. They have the form, function and facilities one would associate with a dwelling. However the development proposed is more than the provision of individual units it is the collection of a number of units the occupation of which is restricted and which the occupants have access to communal facilities and which require occupants to have a level of care need; hence the C2 classification. It would be inappropriate to dissect the development into its constituent parts and conclude that one element triggered the affordable housing threshold. The policy refers to the site. The site in this case incorporates the whole development. The development consists of an extra care development of up to 65 units comprising of apartments and cottages (Use Class C2) and associated communal facilities. Parts of the development could not be implemented independently, the communal facilities and extra care is an integral component of the development. In this regard I am of the view that the development does not result in a net gain of three or more dwellings but results in the provision of an extra care development of up to 65 units comprising of apartments and cottages (Use Class C2) and associated communal facilities, as the description of development confirms.

While I must admit to being somewhat surprised by this approach, it illustrates if nothing else that what amounts to a “dwelling” is a matter of fact (Gravesham BC v Secretary of State for the Environment (1984) 47 P & CR 142 and that different decision makers may reach different conclusions (although it is very difficult indeed to reconcile the Lower Shiplake decision with that o the Inspector in Rectory Homes).

There is a risk, therefore, that protracted disputes about whether a development is C2 or C3 morph into protracted disputes about whether a proposed development would give rise to an increase in “dwellings” or not.

Of course, it goes without saying that this approach will not be relevant to those policies which frame their affordable housing requirements by reference to use class.

What is more, paragraph 64 of the NPPF 2019 suggests for the first time that development which provides specialist accommodation for a group of people with specific needs (such as purpose-built accommodation for the elderly) should be exempt from affordable housing requirements. We are yet to see sufficient development plans work their way through the system to understand whether this exemption will put a stop to any debate at all as to whether extra care housing should be required to deliver affordable housing. There are signs, however, that the weight to be accorded to development policies which conflict with this exemption are being accorded less weight (see, for example, APP/H2265/W/18/3202040).

What is the upshot? The Judgment in Rectory Homes no doubt promises a neat way through the C2/C3 quagmire for those LPAs whose plans frame their affordable housing policies by reference to dwellings. It is no golden bullet, however. Whether or not any particular development would comprise “dwellings” will remain a matter ripe for dispute.

More importantly, disputes between developers and LPAs in individual cases will not address the more important question of whether specialist accommodation for older people ought to provide affordable housing unless unviable to do so. Paragraph 64 of the NPPF provides an answer to that question in the longer term which should avoid such disputes. However, we are some way away from a settled position on the issue across the board. Furthermore, with an ever-increasing focus on specialist forms of housing for older people, it would seem that further developments in the policy position are unlikely to be far away.

Written by Jack Parker