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VIABILITY – A LOCAL AUTHORITY PERSPECTIVE
Jim CliffePlanning Obligations Manager
Bristol City Council
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Areas covered
Implementing CILApproach to site specific viability appraisals Why the affordable housing policy compliant percentage is not always achieved
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CIL – Implementation
Keep it simple – there are not many benefits to making CIL complicated but there are dis-benefits:
Higher risk of successful challenge It will almost certainly take longer to implement Higher chance of errors in calculating, monitoring
and enforcing CIL
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CIL - Implementation
Don’t be greedy – be generous with developers costs, cautious with sales values, and leave a significant viability buffer
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CIL - Implementation
When setting residential CIL rates we followed the following mantra “Our CIL rates will be set at a level that will not make residential development that is currently policy compliant and viable, unviable” …..….. and we didn’t worry too much about residential development that was unviable even with no CIL
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CIL - Implementation
Think very carefully about how to deal with strategic sites – they may well need a lower or even a £nil CIL rate due to the level of on-site infrastructure required. Swindon and South Gloucestershire are good examples of Councils that have taken this approach
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What the inspector wants
Development type Maximum viable CIL
rate
Proposed CIL rate
CIL as % of maximum viable rate
CIL as % of costs
CIL as % of GDV
Inner Zone Residential
£130 £70 54 2.2 1.9
Outer Zone Residential
£90 £50 56 1.6 1.5
Retail £250 £120 48 4.5 3.4
Student Accommodation
£220 £100 45 3.2 2.8
Hotel £160 £70 44 1.9 1.8
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CIL viability information – how it helps you
Your CIL viability study will provide large amounts of information on costs and values that you can use as a reference point in dealing with site-specific viability appraisals.
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Other viability information available due to CIL
Once CIL is implemented you need access to BCIS data, which provides up to date costs dataSales prices are available on the Land Registry web site, and for all consents granted after CIL was implemented, the GIA is known. Therefore you can start building up a dataset of sales values per square metre
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Site Specific Viability – Issues for Bristol
We had no structured process in place for dealing with viability appraisals
We spent lots of time and resource disputing viability appraisals, whilst making little progress towards resolving differences
We sometimes forgot the bigger picture and spent too much time and effort focussing on the cost of taps and flooring
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3 Stage approach – Stage 1 Identify issues of concern Commission consultant Consultant assesses viability appraisal and reports
back to Council – no meetings with applicant at this stage
If necessary, consultant undertakes their own appraisal based on nil affordable housing, to see what excess there is that could be applied to affordable housing
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3 Stage approach – Stage 1
If the consultant agrees with the level of affordable housing the applicant claims can be afforded the issue is concluded.
Stage 1 is completed within a month
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3 Stage approach – Stage 2
Meetings held with applicant to try to understand areas of difference and see if an agreed position can be reached Stage 2 has a cut off time of a month
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3 Stage approach – Stage 3
If agreement cannot be reached, the Council offers independent arbitration to look solely at the areas of disagreement, and agrees to accept the view of the arbiter
Council and applicant each put their case to the arbiter in writing and have the option of one meeting with the arbiter
Stage 3 is completed within a month
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Benefits of the staged approach
We don’t spend months arguing about areas of difference whilst making no progress
Applicants know where they stand Helps the Council deliver consents in a timely
manner Offer of arbitration lessens the chances of
appeals on viability grounds
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Why do we not always secure policy compliant levels of
affordable housing? Challenging sites Government Initiatives Impact of RICS Professional Guidance Rising GDV often goes hand in hand with rising
Site Values and Build Costs
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Brownfield SitesUrban brownfield sites often have high Existing Use Values, which translates to high Site ValuesThere is less of an uplift in value on such sites for residential uses.Development costs tend to be higher due to the constrained nature of the sitesTherefore there is less potential to secure affordable housing from brownfield sites
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Greenfield Sites Suburban and rural greenfield sites often have
low Existing Use Values. There is more of an uplift in value on such sites
for residential uses. Sites tend to be large and less constrained
meaning that there are economies of scale and fewer abnormal design costs, therefore costs tend to be lower
Consequently there is more potential to secure affordable housing from greenfield sites
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Government Policy / InitiativesThe following have all had an adverse impact on the ability of Local Authorities to secure affordable housing:National Planning Policy Framework (2012)Section 106 BA (2013)Vacant Building Credit (2014)
Also, and most significantly:RICS Professional Guidance (Financial Viability in Planning) (2012)
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Market Value / Site Value
Market Value = the price agreed for the land between a willing buyer and a willing sellerSite Value = Market Value but taking account of Development Plan Policies
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Impact of RICS Guidance – General Hospital example
Had the General Hospital viability been before publication of the RICS Guidance, the Site Value would have been approx £2,500,000 (Existing Use Value of £2,000,000 plus £500,000 incentive for the landowner to bring the site forward).
As it was after publication of the RICS Guidance, the Site Value was approx £6,250,000, as that was the price paid for the site, and other bidders were prepared to pay a similar price.
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Rising Residential ValuesIncreasing residential values help viability but:Profits are based on value so the actual profit also increasesBuild Costs are also increasing (up 13% nationally in the past two years)Fees and contingency are based on a percentage of costs so these also increaseLand is changing hands for higher prices (up 15% nationally in the past two years) as house-builders are competing for a scarce resource
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Hypothetical ExampleScheme value increases by 17% / Site value
increases by 15% / Build costs increase by 13%
2013 2015
Scheme Value £2,000,000 £2,340,000
Build Costs £1,000,000 £1,130,000
Profit (20% of Value) £400,000 £468,000
Professional Costs (10% of Build Cost)
£100,000 £113,000
Contingency (5% of Build Cost)
£50,000 £56,500
Residual Land Value £450,000 £572,500
Site Value £300,000 £345,000
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General Observations Flatted developments may deliver less
affordable housing than estate developments as they contain approx 20% unsellable floorspace (lift shafts, stairwells, corridors etc) and have higher build costs
Experience suggests it is possible in the current market to secure 30% affordable housing on suburban estate developments on clean sites, but in and around the City Centre viability is much more challenging
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