Off-site affordable housing and the policy test
Most policies require affordable housing on site, with a contribution allowed only on the policy's own terms. How to build the case, calculate the sum and draft the obligation.
An off site affordable housing contribution is the exception, not the default. Most local plan affordable housing policies require provision on site, with off-site provision or a commuted payment permitted only where the policy's own exception wording is satisfied and where the authority agrees. A developer who assumes a cheque will be accepted because it suits the scheme usually discovers at committee that it will not.
The two tests that decide it are the local plan's policy wording and the statutory tests for planning obligations in the Community Infrastructure Levy Regulations 2010: the obligation must be necessary to make the development acceptable in planning terms, directly related to the development, and fairly and reasonably related in scale and kind.
When off-site provision is acceptable
Policies vary, and the exception wording tends to cluster around a small set of circumstances.
Where on-site provision is not practical because of the physical characteristics of the site. A single-stair building where a registered provider cannot take a viable block, a site too small to create a management arrangement a provider will accept, or a scheme where service charges on a high-specification building would be unaffordable for the intended tenure.
Where on-site provision would not deliver the tenure mix the authority needs, and a contribution would deliver more homes elsewhere.
Where the authority has an identified receptor site or a programme that the contribution can be directed to.
Where on-site provision is demonstrably unviable, which is the viability route rather than the off-site route and is a different argument.
And in some plans, where the development is below the threshold at which on-site provision is required but above the threshold at which a contribution is sought.
The practical point: find the policy, read the exception clause word for word, and build the case against its actual terms. A case that argues general practicality against a policy requiring that on-site provision be impossible will fail.
The statutory tests and why they bite
The three tests in regulation 122 are a legal constraint on what can be required, and they cut both ways.
An authority cannot require a commuted sum larger than the value of the on-site provision foregone, because that would not be fairly and reasonably related in scale and kind. Nor can it take the money and apply it to something unrelated.
Equally, an applicant cannot offer a smaller sum than the policy-compliant on-site provision is worth and call it compliance. The obligation has to replace what the development would otherwise have delivered.
The direct relationship test is the one that produces argument on receptor sites. A contribution spent in the same authority area, on affordable housing, within a defined period, generally satisfies it. A contribution pooled into a general fund with no identified use and no spend deadline is harder to defend, which is why spend deadlines and repayment clauses have become standard.
Calculating a commuted sum
Three methods appear in practice, and the plan or the supplementary document usually specifies which.
| Method | How it works | Where it goes wrong |
|---|---|---|
| Transfer value differential | Market value of the units foregone less the price a registered provider would have paid | Needs an evidenced provider price, which varies by tenure and specification |
| Residual value approach | The difference between the residual value with and without policy-compliant on-site provision | Sensitive to every appraisal input, so it imports the whole viability argument |
| Published formula | A rate per unit, per habitable room or per square metre set out in the plan or an SPD | Simple and transparent, but can be stale relative to current values |
The transfer value differential is the most common and the most defensible, because it measures what the authority has actually lost. It needs two valuations: the open market value of the affordable units as if sold privately, and the price a registered provider would pay for them at the policy tenure. Both should be evidenced from comparable transactions and both should be dated.
Where a published formula exists, use it and say so. Arguing for a lower figure than the adopted formula produces means arguing against the plan, which is a viability case rather than an off-site case, and it needs a Viability Assessment with the full evidence base. Our note on independent review of a viability appraisal explains how that will be tested.
Indexation matters more than people expect. A sum agreed in a deed and paid three years later, unindexed, has lost real value, and authorities now index as standard. Name the index and state the base date.
Identifying a receptor site
An identified receptor strengthens the case considerably, because it answers the direct relationship test with a specific outcome rather than a promise.
Three things make a receptor credible. A site in the authority's ownership or under its control, or a registered provider's site with a funding gap the contribution would close. A deliverable timescale. And a planning status that makes delivery realistic. A site with no permission, no owner agreement and no programme is not a receptor, it is an aspiration.
Where the applicant controls a second site, offering the affordable provision there raises its own questions. Whether the second site is in a location the authority considers suitable. Whether it would have delivered affordable housing anyway. And how the obligation is secured across two titles. The last of those is a drafting problem with a known answer, which is a single deed binding both sites with cross-default provisions.
Obligation drafting and spend deadlines
The clauses that matter in an off-site deal:
- The sum, the index, the base date and the payment trigger, tied to a verifiable event rather than to commencement in the abstract.
- The purpose, defined tightly enough to satisfy the direct relationship test but not so tightly that a sensible alternative use of the money becomes impossible.
- A spend deadline, commonly five or ten years from receipt, with repayment of the unspent balance with interest.
- A reporting obligation, so the developer can see what was spent and where. The authority's annual infrastructure funding statement should show it too.
- Where provision is in kind on another site, the delivery mechanism, the tenure, the specification and the registered provider arrangements.
- Any review mechanism, since an off-site contribution agreed on reduced provision for viability reasons will often carry a clawback as well.
Point three protects both sides. For the authority it demonstrates the contribution is directed at a real need. For the developer it provides the repayment route if nothing happens.
Objections from members and the community
Expect them, and prepare for them specifically.
Three objections come up every time. That off-site provision separates affordable housing from market housing, contrary to the mixed communities objective most plans contain. That money is less certain than homes. And that the receptor site is in a less desirable location.
The answers that work are evidential. Show how many homes the contribution delivers at the receptor compared with the on-site provision it replaces, since a contribution that funds more homes is a stronger case than one that funds fewer. Show the physical or management reason on-site provision does not work, with the registered provider's own written position where you have it. And show the spend deadline and the repayment clause, which answers the certainty objection directly.
What does not work is an argument based solely on the scheme's economics, presented as an off-site case. If the real reason is viability, run the viability case properly with a benchmark land value and a full appraisal, and say so.
The evidence to submit
An Affordable Housing Statement making an off-site case should set out, in this order. The policy requirement and the exception clause relied on, quoted in full. The reason on-site provision does not work, with supporting evidence including any registered provider correspondence. The calculation of the sum, with both valuations and their dates. The proposed receptor, or the defined purpose of the contribution. The spend deadline and repayment proposal. And a comparison of the homes delivered by each route.
Where unit mix, space standards or accessible housing requirements affect the calculation, those assumptions need stating too, as our note on space standards and accessible housing as appraisal inputs sets out. And where the scheme is a conversion with constrained economics, the particular issues are covered in our note on listed building conversion viability.
The honest observation after reading a lot of these: the off-site cases that succeed are the ones where the applicant approached the housing team before the planning application, asked what the authority needs and where, and came back with a proposal that answers it. The ones that fail are the ones where a sum was calculated in isolation and offered as a fait accompli at the end of the process.
Draft your affordable housing statement with PlanScope, then have the valuations reviewed by an RICS-registered valuer.
This is general guidance, not legal advice; check the position with your local planning authority or a qualified professional before relying on it. PlanScope provides AI-assisted draft reports for planning applications. Reports should be reviewed before submission. We do not guarantee planning approval.
Frequently asked questions
When will a council accept off-site affordable housing?
Only where the local plan's exception wording is satisfied and the authority agrees. The usual grounds are that the physical characteristics of the site make on-site provision impractical, that a registered provider will not take a viable block, that the tenure mix needed cannot be delivered on site, or that an identified receptor site exists.
What are the statutory tests for a commuted sum?
Under the Community Infrastructure Levy Regulations 2010 an obligation must be necessary to make the development acceptable in planning terms, directly related to the development, and fairly and reasonably related in scale and kind. That limits both what the authority can require and what an applicant can offer as compliance.
How is a commuted sum calculated?
Most commonly by the transfer value differential: the open market value of the units foregone less the price a registered provider would have paid at the policy tenure, both evidenced and dated. A residual value approach imports the whole viability argument, and a published formula in the plan or an SPD overrides both where one exists.
What makes a receptor site credible?
Control, timescale and planning status. A site owned or controlled by the authority, or a registered provider's site with a funding gap the contribution would close, on a deliverable programme. A site with no permission, no owner agreement and no programme is an aspiration rather than a receptor.
Why do off-site contributions carry spend deadlines?
Because an unspent pooled contribution with no identified use is hard to defend against the direct relationship test. A deadline of five or ten years from receipt, with repayment of the unspent balance with interest, shows the authority is directing the money at a real need and gives the developer a route to recover it.
Sources and further reading
This article is general guidance about the planning system in England and, where stated, the rest of the UK. It is not legal or professional advice. Check your local planning authority’s validation requirements and take professional advice for your specific site.