Legal win: Islington Town Hall. Photograph: Islington Council

Islington Council last week won a long-standing legal battle with developer Parkhurst Road Limited (PRL) over its refusal to meet the Town Hall’s target for affordable homes.

PRL bought a former Territorial Army site on Parkhurst Road in 2013 and attempted to secure planning permission for a residential development with little or no affordable housing.

The developer was twice refused permission by the council on the grounds that its application did not include the required number of affordable homes.

Two lengthy public inquiries followed, with Islington Council winning both.

In each case, PRL justified the low levels of affordable housing by citing the price it paid for the site, and land transactions of other schemes.

Following the second public inquiry, held in early 2017, an Independent Planning Inspector upheld Islington’s refusal of planning permission.

PRL then mounted a legal challenge at the High Court.

The Planning Inspector’s decision was jointly defended by Islington’s legal team and lawyers representing the Ministry of Housing Communities and Local Government (MHCLG).

The case centred around the viability assessment – a planning tool that Islington says is often used by developers to avoid complying with councils’ requirements.

The Town Hall argued that developers are increasingly overpaying for land, and then using the purchase price as a justification for providing little or no affordable housing.

Unusually for a case such as this, the judge, Mr Justice Holgate, allowed a detailed examination of planning issues and the development’s viability evidence.

On Friday, he dismissed PRL’s legal challenge and upheld the council’s decision to refuse the planning application.

An Islington Council spokesperson said: “We are delighted by the High Court judgement. This decision reinforces Islington Council’s long-standing position that developers should abide by councils’ planning guidelines – rather than overpaying for land and then trying to bypass our affordable housing requirements.

“There is a shortage of good quality, genuinely affordable housing in Islington and a significant unmet housing need.

“The council is doing everything it can to address this, because we believe that everyone should have somewhere to live that is affordable, decent and secure – and developers must respect these important priorities when they purchase sites in Islington.”

In a highly unusual move, in a postscript to the judgment, Mr Justice Holgate recommended that the Royal Institute of Chartered Surveyors’ (RICS) current guidance on viability assessments be revised “in order to address any misunderstandings about market valuation concepts and techniques”.

The council says it has raised serious concerns about how the RICS Financial Viability in Planning (2012) guidance note was being applied for years.

The council spokesperson added: “Islington’s planning guidance on Development Viability is very clear and specifically cautions developers against overpaying for land and using the purchase price as a justification for providing little or no affordable housing.

“This landmark judgment reinforces what Islington and many other councils have been arguing for years, that affordable housing requirements cannot be bypassed by using the ‘dark art’ of viability assessments to ignore planning policy requirements.”

Update: this article was amended at 15:03 on Tuesday 1 May 2018. The original article stated that First Base Ltd is the developer. In fact, Parkhurst Road Limited is the developer, and First Base Ltd is the development manager.