Cannock Chase Council, Lichfield District Council

Cannock Chase Council, Lichfield District Council, Tamworth Borough Council Local Plan and Community Infrastructure Levy Viability Testing Study to Support The Introduction of The Community Infrastructure Levy 5 December 2012

Prepared by: Jeffrey Solomon BSc (Hons) MRICS Principal Surveyor RICS Registered Valuer Valuation Office Agency Block A. Government Buildings Whittington Road Worcester WR5 2LB Tel: 03000 507695 email: [email protected] Tony Williams MRICS Development Team Leader RICS Registered Valuer Valuation Office Agency 4400 Nash Court Oxford Business Park South Garsington Road Oxford OX4 2RU Tel: 03000 506355 email: [email protected]

CONTENTS

1.0 EXECUTIVE SUMMARY .......................................................................... 2 2.0 INTRODUCTION ...................................................................................... 4 3.0 LOCAL AUTHORITY NOTIONAL SCHEME LOCATIONS AND LAND /

PROPERTY TYPES / USES TESTED ..................................................... 5 4.0 METHODOLOGY ..................................................................................... 7 5.0 NATIONAL PLANNING GUIDANCE......................................................... 9 6.0 CANNOCK CHASE COUNCIL, LICHFIELD DISTRICT COUNCIL, AND

TAMWORTH BOROUGH COUNCIL’S LOCAL PLAN.............................11 7.0 NOTIONAL RESIDENTIAL AND COMMERCIAL DEVELOPMENT

SCHEME TYPES AND UNIT MIXES.......................................................12 8.0 RESIDENTIAL AND COMMERCIAL DEVELOPMENT SCHEME

ASSUMPTIONS.......................................................................................17 9.0 POLICY COMPLIANT RESIDUAL LAND VALUES .................................27 10.0 BENCHMARK LAND VALUES (Residential and Commercial) ................35 11.0 S106 AND COMMUNITY INFRASTRUCTURE LEVY ASSUMPTIONS..38 12.0 COMMUNITY INFRASTRUCTURE LEVY CONSULTATION TESTING

STUDY RESULTS...................................................................................39 13.0 SUMMARY CONCLUSIONS REGARDING NOTIONAL SCHEME

VIABILITY................................................................................................42 14.0 SENSITIVITY ANALYSIS AND TESTING ...............................................55 15.0 CONCLUSIONS ......................................................................................58

APPENDIX 1 – SENSITIVITY ANALYSIS AND TESTING CONCLUSIONS APPENDIX 2 – PLANS Cannock Chase Council District Showing Cil Viability Testing Study Area Lichfield District Council District Showing Cil Viability Testing Study Area Tamworth Borough Council District Showing Cil Viability Testing Study Area

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1.0 EXECUTIVE SUMMARY Background to the Community Infrastructure Levy and National Planning Policy

Framework and purpose of this Study and Report The Community Infrastructure Levy has been introduced by the Government as a

means of Local Authorities pooling development contributions to help fund the provision of the local infrastructure needed to support the planned growth in their area. The Community Infrastructure Levy is discretionary for the Local planning Authority, although the scaling back of S106 obligations is not discretionary and can have serious implications for Local Planning Authorities electing not to adopt it.

Post 2014 in some local authorities it will largely, though not entirely, replace S106 as a

means of securing such contributions, particularly for cumulative and strategic infrastructure. The Community Infrastructure Levy is the preferred method for collecting pooled contributions to fund infrastructure and the use of S106 based tariffs will become problematic. Additionally, in March 2012 the National Planning Policy Framework (NPPF) came into force. This emphasises that plans should be viable and deliverable, and ‘the sites and scale of development identified in the plan should not be subject to such a scale of obligations and policy burdens that their ability to be developed viably is threatened’.

In considering the viability of their plans, and the potential implementation of the

Community Infrastructure Levy, Cannock Chase, Lichfield District, and Tamworth Borough Councils appointed the Valuation Office Agency (DVS) to review a range of different residential and commercial notional development schemes, development types and land uses in different localities to support Community Infrastructure Levy funding throughout the three Local Authority Districts

The purpose of the Study is to provide information on viability and the impacts of each

plan’s policies, and to provide initial evidence which will inform the Council’s consideration of proposed Community Infrastructure Levy charging rates throughout their respective areas, by property and land use type, and location, subject to viability assessment testing, and accordingly varying charging rates may be set. In setting rates that strike a balance between contributing to local infrastructure funding needs, and development viability, Local Authorities also need to consider a wider range of information, such as the availability and supply of development sites, the relevant Local Plan/Local Development Framework policies, as well as the proposed residential and commercial development scheme.

The viability testing study involved various stages, relating to agreeing notional

residential and commercial development schemes (property and land use types and sizes of units) with each Local Authority in specific localities within each district, undertaking research, and carrying out range of development appraisals, and sensitivity analysis and testing.

It should be noted that this information relates to a particular point in time and in difficult

economic circumstances at both the national and local level, and that circumstances will change so this evidence will need refreshing at regular intervals. It should also be noted that this report provides a starting point for the setting of CIL charging schedules, but that each Local Authority will be individually progressing CIL work further.

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In order to comply with the National Planning Policy Framework, ensuring that plans are

deliverable, we are of the conclusion that Cannock Chase, Lichfield District, and Tamworth Borough Council’s Local Plan policies need to be flexible, taking account of viability issues when considering policy application (such as the level of affordable housing to be provided, or the application of the Code for Sustainable Homes for example), being proactive in exploring opportunities for intervention, and being flexible in terms of their development trajectories, enabling the sites which are currently more viable to be brought forward earlier in the plan period where possible.

Whilst it can clearly be seen that some of the notional policy complaint schemes are not

currently viable, other development schemes are, resulting in a surplus being achieved, and it can be concluded that the Local Authorities can charge the Community Infrastructure Levy, which provides the starting point for further detailed work for each Local Authority to develop its own CIL charging schedules.

We would strongly recommend that Cannock Chase, Lichfield District, and Tamworth

Borough Councils regularly review the viability testing study and notional development schemes that we have appraised on a regular basis, as values and costs will change over time, and the majority of the notional development schemes tested, can be anticipated to be viable over the life of the local plan period as the economic situation improves.

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2.0 INTRODUCTION The Community Infrastructure Levy (‘CIL’) came into force in April 2010 and allows

Local Authorities in England and Wales to raise funds from house builders and developers undertaking new development schemes in their area. In this study Cannock Chase Council, Lichfield District Council, and Tamworth Borough Council’s are to be the charging authorities should they choose to proceed with CIL.

The Community Infrastructure Levy (Amendment) Regulations 2011 came into force on

6 April 2011. The regulations have been amended to ensure Local Authorities have more control over the processes for operating the levy by removing the centrally prescribed arrangements for payment, removing the threshold for in kind payments of land, making minor amendments to close potential loopholes and improve how the levy system works.

Charging authorities wishing to introduce to charge the CIL Levy must produce a

charging schedule setting out the levy’s rates in their area. The proposed Levy rate should not put at risk the overall development of their area.

The Community Infrastructure Levy must be charged per square metre of the net

additional increase in floor space of any new development. Any new development (including a new building or extension) is only liable to pay the levy if it has 100 square metres or more of gross internal area or involves the creation of one new dwelling even when that is below 100 square metres. Although any new development over the area stated above will be subject to the Levy, the gross internal floor area of any existing buildings on a site that have previously been used, or are to be demolished are to be taken into account, and deducted from any levy payable.

Under the Government’s regulations, affordable housing and development by Charities

will not be liable for CIL charging. This means that within policy compliant residential development schemes, it is only open market units that will be liable for the payments at the rate(s) set by the charging authority. Cannock Chase Council, Lichfield District Council, and Tamworth Borough Council’s have all undertaken Infrastructure planning as part of the preparation of their Local Plans and all three have compiled an Infrastructure Delivery Plan.

This sets out what infrastructure is required to bring forward the planned development,

the cost of that infrastructure, who is responsible for that infrastructure and when it is needed.

All three Local Authorities have indicated that developer contributions from either S106

agreements, s278 agreements or from a Community Infrastructure Levy would be required to assist delivering this infrastructure.

In determining the viability of any proposed residential or commercial development

scheme, and the amount of any surplus available for funding infrastructure, through whatever means (e.g. CIL or S106) it is important that, where possible the policy impacts of each Local Plan are assessed, to ensure that plans are viable and deliverable throughout the economic cycle. This is a key requirement of the NPPF which came into force in March 2012, and which is covered in more detail in Chapter 5.

As stated below the recently published National Planning Policy Framework (NPPF)

sets out the Government’s context for developing local Planning Policy in England. It emphasises deliverability and the provision of competitive returns to willing land owners and developers/house builders to enable sustainable development to come forward

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3.0 LOCAL AUTHORITY NOTIONAL SCHEME LOCATIONS AND LAND / PROPERTY TYPES / USES TESTED

Taking into account our knowledge, and experience in the surrounding West Midlands

and surrounding Staffordshire areas of the commercial and residential development property market, and following discussions with Cannock Chase Council, Lichfield District, and Tamworth Borough Council’s the following land uses, property types and Local Authority localities were taken into account in our CIL viability testing study.

However it should be noted that all the residential and commercial development schemes assessed are based on notional schemes, as opposed to any site specific schemes in the localities tested and are based on a range of special development assumptions we have taken into account, which we believe would be applicable to each of the geographical location tested. The notional development schemes are not site specific; therefore we cannot take into account site specific information/costs in this CIL viability testing study, which would be available on a site specific development scheme.

Cannock Chase Council

Residential development sites are Cannock, Hednesford, Heath Hayes, Rugeley, and Norton Canes.

Commercial development sites are Cannock Town Centre, Kingswood Lakeside

Business Park, and Rugeley Town Centre (see map in Appendix 2). Lichfield District Council

Residential development locations relate to the housing market areas of: Lichfield City, Burntwood, Rural North and South/East (see map in Appendix 2).

Commercial development sites are Lichfield and Burntwood Town Centres, Rural

South/East and Rural North (inc Fradley), which all take into account established commercial locations.

Tamworth Borough Council

Residential development sites are Wilnecote (representing Tamworth South), Belgrave (representing Tamworth East), and Spital (representing Tamworth North) (see map in Appendix 2).

Commercial development sites are Tamworth Town Centre, Relay Business Park, and

Ventura Retail Park. In relation to the commercial locations, notional commercial development schemes in the same locality as Relay Park were taken into account reflecting the established commercial location, and links to the A5 road, and M6, M1 and M42 motorways all in close proximity. The NEC, Birmingham Business Park, and Birmingham International Airport and Train Station are also in close proximity. Having regard to Ventura Retail Park, this is located close to Tamworth Town Centre, and forms part of Tamworth’s largest retail development scheme, with easy access to the A5.

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The property and land uses tested for all Local Authorities include the following;

• Class C3 (Dwellings) • Class B1 (Business) • Class B2 (General Industrial) • B8 (Storage & Distribution) • Class A1 and A2 • Class A3, A4 and A5 • Class C1 Hotels • Class C2 Residential Institutions • Class D1 Non-Residential Institutions • Class D2 Assembly and Leisure (cinemas)

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4.0 METHODOLOGY

This viability testing study has investigated the potential for a range of commercial and residential development types and notional schemes to contribute to infrastructure provision funding across Cannock Chase Council, Lichfield District Council, and Tamworth Borough Council’s areas through the collection of financial contributions charged via a Community Infrastructure Levy.

The Local Planning Authorities have to balance maximising its CIL and affordable

housing contributions and the impacts of other policies, to ensure the infrastructure costs and affordable housing targets are met, with the importance of having policies that ensure sufficient land is brought forward to meet its overall requirements. Set the thresholds too high and the adverse impact on development viability will choke off the land supply; set the target too low and the need for affordable housing and CIL will not be met while landowners and developers get a return greater than essential to maintain an adequate land supply.

Our approach to this study follows the recognised methodology for residual land

valuations. This involves the calculation of a Gross Development Value (GDV) and the deduction of the appropriate Gross Development Costs (GDC) to provide a Residual Value (RV).

This is the approach widely accepted by the development industry and it is the approach

used in most appraisal software. GDV’s include the combined revenue from market and affordable housing and the capitalised income from commercial elements. GDC’s assume a return to the developer and the ‘build costs’ and other development costs such as professional fees, finance costs, marketing fees and any overheads borne by the development company.

Where costs exceed revenue the development is not viable. Where revenue exceeds

costs, a development is theoretically viable but this does not mean that it will be brought forward for development. For a scheme to be developed, both developer and landowner need to secure an acceptable return from the development.

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The existing use value (EUV) of the site, or a realistic alternative use value (AUV) for a

site will play a role in the mind of the land owner in bringing the site forward and thus is a factor in deciding whether a site is likely to be brought forward for development.

Many sites will have only an EUV to be considered e.g. as agricultural land. However,

some sites will have both an EUV and an AUV. This would occur, for example where a site already has permissions for another use e.g. for commercial use on currently agricultural land.

Where scheme residual is lower than the EUV and/or AUV, then the

development is unviable as the landowner will not release the land. It is therefore necessary to allow an amount over and above EUV to incentivise the landowner to release the site. Some practitioners suggest an uplift of 10-30% over EUV, while others look at the particular circumstances of each site and the relative strength of each party’s bargaining position. This is more straightforward to do when modelling actual as opposed to notional sites.

Relationship Between RLV and Potential Maximum CIL Rate (surplus or margin

potentially available for CIL)

Residual Land Value

Less

Benchmark Land Value

AUV/EUV

Equals

Potential Margin for CIL

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5.0 NATIONAL PLANNING GUIDANCE National Planning Policy Framework (March 2012)

The recently published National Planning Policy Framework (NPPF) sets out the Government’s context for developing local Planning Policy in England. It emphasises deliverability and the provision of competitive returns to willing land owners and developers/house builders to enable sustainable development to come forward.

The NPPF also confirms:

“Pursuing sustainable development requires careful attention to viability and costs in plan-making and decision-taking. Plans should be deliverable. Therefore, the sites and the scale of development identified in the plan should not be subject to such a scale of obligations and policy burdens that their ability to be developed viably is threatened. To ensure viability, the costs of any requirements likely to be applied to development, such as requirements for affordable housing, standards, infrastructure contributions or other requirements should, when taking account of the normal cost of development and mitigation, provide competitive returns to a willing land owner and willing developer to enable the development to be deliverable”.

“Local planning authorities should set out their policy on local standards in the Local

Plan, including requirements for affordable housing. They should assess the likely cumulative impacts on development in their area of all existing and proposed local standards, supplementary planning documents and policies that support the development plan, when added to nationally required standards. In order to be appropriate, the cumulative impact of these standards and policies should not put implementation of the plan at serious risk, and should facilitate development throughout the economic cycle.

Evidence supporting the assessment should be proportionate using only appropriate

available evidence”. “Where practical, Community Infrastructure Levy charges should be worked up and

tested alongside the Local Plan. The Community Infrastructure Levy should support and incentivise new development, particularly by placing control over a meaningful proportion of the funds raised with the neighbourhoods where development takes place”..

RICS Financial Viability in Planning Guidance Note (August 2012)

The recently published RICS Guidance Note Financial Viability in Planning provides guidance and advice to practitioners in undertaking and assessing viability appraisals for planning purposes.

The guidance note sets out “a methodology framework and set of principles for financial

viability in planning. These have been formulated mainly for development management purposes at a scheme specific level but the principles equally apply to plan making and to the viability testing that underpins Community Infrastructure Levy charging schedules (area wide viability studies)”.

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Financial viability for planning proposes is defined by the Guidance Note as follows: “An objective financial viability test of the ability of a development project to meet its

costs including the cost of planning obligations, while ensuring an appropriate Site Value for the landowner and a market risk adjusted return to the developer in delivering that project”.

Site Value, either as an input into a scheme specific appraisal or as a benchmark, is

defined in the guidance note as: “Site Value should equate to the market value subject to the following assumption: that

the value has regard to development plan policies and all other material planning considerations and disregards that which is contrary to the development plan”.

The Guidance Notes also confirm that when undertaking Local Plan or CIL (area-wide)

viability testing, a second assumption needs to be applied to the Site Value definition, as follows;

“The Site Value (as defined above) may need to be further adjusted to reflect the

emerging policy/CIL charging level. The level of the adjustment assumes that site delivery would not be prejudiced. Where an adjustment is made, the practitioner should set out their professional opinion underlying the assumptions adopted. These include, as a minimum, comments on the state of the market and delivery targets as at the date of assessment”.

Viability Testing Local Plans / Local Housing Delivery Group (June 2012)

The recently issued guidance by the Local Housing Delivery Group confirms that the “Threshold Land value is used to determine the viability of a type of site”.

The guidance also confirms “we recommend that the Threshold Land Value is based on

a premium over current use values and credible alternative use values”, and defines viability as follows:

“An individual development can be said to be viable if, after taking into account of all

costs, including central and local government policy and regulatory costs and the cost and availability of development finance, the scheme provides a competitive return to the developer to ensure that development takes place and generates a land value sufficient to persuade the land owner to sell the land for the development proposed. If these conditions are not met, a scheme will not be delivered”.

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6.0 CANNOCK CHASE COUNCIL, LICHFIELD DISTRICT COUNCIL, AND TAMWORTH BOROUGH COUNCIL’S LOCAL PLAN

All three Local Authorities are well advanced in the production of their Local Plans. Tamworth Borough Council and Lichfield District Council have both published their

Plans under Regulation 19 of the Town and Country Planning (Local Planning) (England) Regulations 2012 and expect to submit to the Secretary of State for examination shortly under Regulation 22.

Cannock Chase Council is to publish in February 2013 and submit for examination in

May 2013.

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7.0 NOTIONAL RESIDENTIAL AND COMMERCIAL DEVELOPMENT SCHEME TYPES AND UNIT MIXES

Development appraisals using the principles and methodology outlined above have

been carried out to review the viability of different types of residential and commercial developments schemes for the property and land uses stated above.

The notional development schemes were all developed and discussed with each

Council following a review of all the information provided, taking into account Local Plan Policies, the Council’s Core Strategies, Developer Contributions and Planning Obligations Supplementary Planning Document, Monitoring Reports, Affordable Housing Viability Assessments, Strategic Housing Land Availability Assessments (SHLAA), other data and evidence.

It was necessary to determine residential and commercial development schemes most

relevant and likely to come forward across each of the Local Authority Districts. The scheme types were then proposed and agreed with Cannock Chase, Lichfield District, and Tamworth Borough Council’s as reasonably representative for the purposes of this viability testing study.

Each residential development policy compliant scheme also took into account each of

the relevant Local Authorities policies for affordable housing. Residential Development Schemes

For the residential schemes for each of the Local Authorities, different scenario types were tested on brownfield and greenfield notional development sites with the following mix of dwellings and affordable housing provision (where required by and in accordance with the Council’s policy):

The floor areas of the residential units have been calculated in accordance with the

RICS Code of Measuring Practice, Sixth Edition. Cannock Chase Council Scheme Types and Mixes for each Location

10 Unit Scheme (Affordable Housing based on 15% and 25%)

Unit Type

No of units

Sq M per unit

Total Sq M

2 bed house 4 70 280 3 bed house 5 85 425 4 bed house inclusive of a single garage

1 115 115

Total 10 820

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Unit Type

No of units

Sq M per unit

Total Sq M

1 bed flat 2 50 100 2 bed flat 3 60 180 2 bed house 18 70 1,260 3 bed house 20 85 1,700 4 bed house inclusive of a single garage

7 115 805

Total 50 4,045


Unit Type

No of units

Sq M per unit

Total Sq M


15 115 1,725

Total 100 8,125

Lichfield District Council Scheme Types and Mixes for each Location

25 Unit Scheme (Affordable Housing based on 20%)

Unit Type

No of units

Sq M per unit

Total Sq M

1 bed flat 1 50 50 2 bed flat 3 60 180 2 bed house 7 70 490 3 bed house 11 85 935 4 bed house inclusive of a single garage

3 115 345

Total 25 2,000


Unit Type

No of units

Sq M per unit

Total Sq M

1 bed flat 2 50 100 2 bed flat 7 60 420 2 bed house 14 70 980 3 bed house 21 85 1,785 4 bed house inclusive of a single garage

6 115 690

Total 10 3,975

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Unit Type

No of units

Sq M per unit

Total Sq M


12 115 1,380

Total 100 7,915


Unit Type

No of units

Sq M per unit

Total Sq M

1 bed flat 25 50 1,250 2 bed flat 70 60 4,200 2 bed house 140 70 9,800 3 bed house 205 85 17,425 4 bed house inclusive of a single garage

60 115 6,900

Total 500 39,575

Tamworth Borough Council Scheme Types and Mixes for each Location


Unit Type

No of units

Sq M per unit

Total Sq M

2 bed house 8 70 560 3 bed house 6 85 510 4 bed house inclusive of a single garage

1 115 115

Total 15 1,185


Unit Type

No of units

Sq M per unit

Total Sq M

1 bed flat 2 50 100 2 bed flat 10 60 600 2 bed house 11 70 770 3 bed house 19 85 1,615 4 bed house inclusive of a single garage

8 115 920

Total 50 4,005

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Commercial Development Schemes

The floor areas of the commercial units have been calculated in accordance with the RICS Code of Measuring Practice, Sixth Edition.

Cannock Chase Council Commercial Scheme Details

Use Class Cannock TC Rugeley TC Kingswood

A1/A2 46 sq m

139 sq m 465 sq m 929 sq m

46 sq m 139 sq m 465 sq m 929 sq m

139 sq m 465 sq m 929 sq m

A3/A4/A5 139 sq m 465 sq m

139 sq m 465 sq m

139 sq m 465 sq m

B1/B2/B8 140 sq m 465 sq m 929 sq m

140 sq m 465 sq m 929 sq m

140 sq m 465 sq m 929 sq m

C1 60 bed Hotel 60 Bed Hotel 60 Bed Hotel C2 60 Bed Nursing Home 60 Bed Nursing

Home 60 Bed Nursing Home

D1 1,000 sq m Health Clinic

1,000 sq m Health Clinic


D1 2,500 sq m Primary School

2,500 sq m Primary School


D2 1,800 sq m Cinema 1,800 sq m Cinema

18,00 sq m Cinema

Lichfield District Council Commercial Scheme Details

Use Class Lichfield TC Burntwood TC Rural North and Rural South/East

A1/A2 46 sq m 139 sq m 465 sq m 929 sq m

46 sq m 139 sq m 465 sq m 929 sq m

139 sq m 465 sq m 929 sq m

A3/A4/A5 139 sq m 465 sq m

139 sq m 465 sq m

139 sq m 465 sq m

B1/B2/B8 140 sq m 465 sq m 929 sq m

140 sq m 465 sq m 929 sq m

140 sq m 465 sq m 929 sq m

C1 60 bed Hotel 60 Bed Hotel 60 Bed Hotel C2 60 Bed Nursing

Home 60 Bed Nursing Home

60 Bed Nursing Home

D1 1,000 sq m Health Clinic







18,00 sq m Cinema

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Tamworth Borough Council Commercial Scheme Details

Use Class Tamworth TC Relay BP and

Ventura Retail Park

A1/A2 46 sq m 139 sq m 465 sq m 929 sq m

139 sq m 465 sq m 929 sq m

A3/A4/A5 139 sq m 465 sq m

139 sq m 465 sq m

B1/B2/B8 140 sq m 465 sq m 929 sq m

140 sq m 465 sq m 929 sq m

C1 60 bed Hotel 60 Bed Hotel C2 60 Bed Nursing Home 60 Bed Nursing

Home D1 1,000 sq m Health

Clinic 1,000 sq m Health Clinic




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8.0 RESIDENTIAL AND COMMERCIAL DEVELOPMENT SCHEME ASSUMPTIONS

Residential

For the residential scheme types modelled as stated above in this study a range of sales value levels have been applied to each notional scheme tested, based on market research and analysis of comparables in the surrounding area of each of the previously agreed locations, for each Local Authority. This is in order to test the scope for and the sensitivity of scheme viability to the requirement for a range of potential CIL rates.

Affordable housing values were also researched having regarding to the affordable

housing tenure types and agreed percentage provisions agreed with each Local Authority for the notional schemes, having regard to each scheme location.

Following this research, varying sales values were observed in each Local Authority

area tested. This is as would be expected with some areas tested resulting in higher values, and some showing lower values, reflecting the scheme locations tested.

As stated above each residential development policy compliant scheme also took into

account each of the relevant Local Authorities policies for affordable housing. A summary of the sales value ranges for the unit types applied for each residential

notional scheme tested in each of the Local Authority areas is shown below. These are shown as a capital values per unit, although these were then further analysed and a capital value per sq m was then adopted for each of the unit types in each appraisal.

It should be noted that no allowances have been made for the ground rents of the

residential flats forming part of the notional schemes tested, reflecting the nature of the CIL Viability Testing Study.


Cannock

Unit Type

Average Capital Value per unit

Price per Sq M

1 bed flat £70,000 £1,400 2 bed flat £85,000 £1,417 2 bed house £115,000 £1,643 3 bed house £150,000 £1,765 4 bed house inclusive of a single garage

£200,000 £1,739

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Hednesford

Unit Type

Average Capital

Value per unit Price per

Sq M 1 bed flat £75,000 £1,500 2 bed flat £85,000 £1,417 2 bed house £105,000 £1,500 3 bed house £150,000 £1,765 4 bed house inclusive of a single garage

£200,000 £1,739

Heath Hayes

Unit Type

Average Capital



£200,000 £1,739

Rugeley

Unit Type

Average Capital



£225,000 £1,957

Norton Canes

Unit Type


Price per Sq M


£200,000 £1,739

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Lichfield District Council

Lichfield City

Unit Type


Price per Sq M


£250,000 £2,174

Burntwood

Unit Type


Price per Sq M


£225,000 £1,957

Rural North

Unit Type


Price per Sq M


£250,000 £2,174

Rural South/East

Unit Type


Price per Sq M


£275,000 £2,391

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Wilnecote

Unit Type


Price per Sq M


£195,000 £1,696

Belgrave

Unit Type


Price per Sq M


£195,000 £1,696

Spital

Unit Type


Price per Sq M


£225,000 £1,957

The value of the affordable housing units and amount of revenue received by a

developer/house builder will be variable depending on the affordable housing tenure types required on a scheme by scheme basis.

The sales values generated will be dependent on scheme specific information such as

location, unit types/size and other matters including the Registered Social Landlord / Registered Providers’ development program and will vary on a scheme by scheme basis.

The Registered Social Landlord/Registered Providers could also have access to other

sources of funding, relating to its own business plan/development program, funding resources, cross-subsidy from sales of other residential dwellings and flats, and recycled capital grant from other properties.

Accordingly this potential additional funding cannot be taken into account in our CIL

viability testing study assumptions, for the reasons stated above and has been excluded from our development appraisals.

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In accordance with our instructions from Cannock Chase, Lichfield District, and

Tamworth Borough Council’s we have taken into account Social Rented, Affordable Rent, and Intermediate (Shared Ownership) tenure types in our development appraisals.

Affordable housing revenue assumptions have been made and reviewed in the context

of our experience in dealing with site specific development viability assessments for Local Authorities in the surrounding Staffordshire and West Midlands areas.

Accordingly we have based our assessment on affordable housing revenue

assumptions on a discount from the open market unit sales values reflecting each scheme notional mix of affordable housing and tenures required

The Homes and Community Agency currently expects the majority of affordable housing provision of any affordable housing tenure on s.106 sites to be delivered with nil grant input.

Accordingly we have also made no allowance for any grant funding in any of the

notional schemes tested. Different developments schemes were tested having regard to notional brownfield and

greenfield locations, and site areas in each Local Authority area. The notional development schemes for all three Local Authorities take into account

construction costs ranging from £91 per Sq Ft/£984 per Sq M inclusive of externals to £112 per Sq Ft/£1,208 per Sq M inclusive of externals depending on size of scheme, location, and as to whether each site was assumed to be either greenfield or brownfield, having regard to the RICS BCIS Quarter 4 2012 Costs.

The area of the flats is taken to include a small proportion of the communal areas, as

the flats are deemed to be constructed in small blocks to coincide with the size of the dwelling houses within a notional development scheme.

The construction costs above assume average ground conditions without the benefit of

any additional foundations above normal strip/deep trench foundations, traditional masonry construction with timber truss roof and tiled coverings.

External works have been assessed, based upon the number of dwellings to be

constructed, on the smaller developments, it is envisaged that there is reasonable existing infrastructure so there is no requirement for road construction, with the 50 unit development, a small access road is allowed for, whereas with the 100 unit development there is an allowance for a small urban road and infrastructure.

It is noted that if timber frame, construction costs are envisaged to be higher but with

preliminaries lower as construction period is less and hence there is little overall difference in costs

On the four bedroom dwellings, an allowance has also been included for a single

garage. The adopted build costs are inclusive of allowances for Level 3 of the Code for

Sustainable Homes for Cannock Chase and Lichfield but excluded from Tamworth as this was not required by policy.

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Various assumptions were made having regard to the notional development schemes

relating to fixtures and fittings, level of specification and design of the proposed residential flats and dwellings, which were reflected in the adopted construction cost build rates.

On the notional brownfield sites, an allowance has been made for dealing with land

remediation/contamination costs, however the cost will vary considerably upon the extent and type of remediation, but the assessment is taken on an average allowance assuming that a portion of the strata will have to be removed and replaced with clean inert material.

In relation to other development appraisal inputs the following allowances have been

also been adopted; i) Contingency provision @ 5% of construction costs ii) Professional fees @ 8% of construction costs iii) Open Market Sales/Legal/Marketing Cost Allowances @ 4% of Gross

Development Value iv) Finance costs (inclusive of bank arrangement fees/monitoring costs @ 6.5% v) Site Acquisition Fees

Agent’s fees @ 1.0% Legal fees @ 0.75% Stamp Duty Land Tax (0 to 5%)

v) Open Market units developers profit allowance @ 20% of Gross Development

Value vi) Affordable Housing units developers profit allowance @ 6% of Gross

Development Value. Different development / construction / sales programs have been adopted ranging from

24 months 2 years for the smaller schemes of 10 units, of up to 125 months / 10.42 years for the larger schemes of 500 units.

The notional unit schemes and mixes were again based on information provided by

each of the Local Authorities and reflect a range of different types of development schemes that could come forward regularly across each of their districts so as to ensure that viability has been tested with reference to the ongoing housing supply themes and policies.

Sensitivity analysis of each of the above main scheme types was also tested over a

range of value levels representing varying residential values seen currently in Local Authority area and also allowing us to consider the impact on development viability of changing market conditions over time (i.e. falling and rising values).

22

Commercial

For the commercial schemes modelled as stated above a range of rental and sales values have been applied to each notional scheme tested based on market research and analysis of comparables in the surrounding areas.

A summary of the rental values/sales values applied for commercial scheme is shown

below. Cannock Chase Council

Cannock Town Centre

Use Class Rental per Sq Ft Yield A1/A2 £269 7%

A3/A4/A5 £242 7% B1 £86 7% B2 £54 8% B8 £43 8% C1 £3,500 per bed 7% C2 Capital Value of

£75,000 per bed

D1 – School Build Cost Only D2 £107 8%

Rugeley Town Centre

Use Class Rental per Sq Ft Yield

A1/A2 £215 7% A3/A4/A5 £215 7%

B1 £86 7% B2 £54 8% B8 £43 8% C1 £3,500 per bed 7% C2 Capital Value of

£75,000 per bed

D1 – School Build Cost only

D2 £107 8% Kingswood Lakeside Business Park


A1/A2 £161 7% A3/A4/A5 £188 7%

B1 £86 7% B2 £54 8% B8 £43 8% C1 £3,500 per bed 7% C2 Capital Value of

£75,000 per bed

D1 – School Build Cost only D2 £107 8%

23


Lichfield Town Centre


A3/A4/A5 £269 7% B1 £129 7% B2 £65 8% B8 £54 8% C1 £3,500 per Bed 7% C2 Capital Value of

£75,000 per bed


Burntwood Town Centre


A1/A2 £215 7% A3/A4/A5 £215 7%

B1 £108 7% B2 £65 8% B8 £54 8% C1 £3,500 per Bed 7% C2 Capital Value of

£75,000 per bed


Rural South/East and North including Fradley


A1/A2 £161 7% A3/A4/A5 £161 7%


£75,000 per bed


24


Tamworth Town Centre


A3/A4/A5 £269 7% B1 £129 7% B2 £65 8% B8 £48 8% C1 £3,500 per Bed 7% C2 Capital Value of

£75,000 per bed


Relay Business Park and Ventura Retail Park


A1/A2 £269 7% A3/A4/A5 £269 7%


£75,000 per bed


Construction Costs

The notional development schemes for all three Local Authorities take into account construction costs having regard to the RICS BCIS Quarter 4 2012 Costs as follows:

Use Class Build Cost £ per Sq m

A1 £952 A2 £1,425

A3/A4/A5 Average £1,603 B1 £993 B2 £682 B8 £458

C1 - Hotel £1,247 C2 – Nursing Home £1,155

D1 - School £1,497 D2 - Cinema £1,005

Adjustments factors are made with regards to the location of the various regions, these

factors are based upon regional movement and tender prices received and analysed by the Royal Institution of Chartered Surveyors.

25

The areas/regions are allocated by the Department of Environment Standard Statistical

Regions and the adjustment factors are therefore: Cannock Chase Council – 0.98

Lichfield District Council – 1.00 Tamworth Borough Council – 0.92

The construction costs above assume average ground conditions and either strip/trench

fill foundations or pad foundations and ring beams are deemed to be the norm. External works have been added ranging from 5% to 20% plus an allowance for ground

remediation on brownfield sites. The allowance for brownfield sites has been made for dealing with land

remediation/contamination on site, and the cost will vary considerably upon the extent and type of remediation. The assessment for the larger sites is assumed to be that much of the contamination is dealt with on site and with only a smaller portion of the remediation/contamination work involving removal and replacement.

In relation to other development appraisal inputs the following allowances have been

also been adopted; i) Contingency provision @ 5% of construction costs ii) Professional fees @ An average of 10% of construction costs iii) Open Market Sales/Legal/Marketing Cost Allowances @ 3% of Gross

Development Value vi) Letting Costs @ 15% of rental value including agents and legal fees vii) Finance costs (inclusive of bank arrangement fees/monitoring costs @ 6.5% viii) Site Acquisition Fees:

Agent’s fees @ 1.0% Legal fees @ 0.75% Stamp Duty Land Tax (0 to 5%)

ix) Developers profit allowance @ 15% of Gross Development Value Different development programs have been adopted with a site hold of up to 6 months

prior to construction and then a construction programme of 6 to 18 months.

26

9.0 POLICY COMPLIANT RESIDUAL LAND VALUES Residential

The residual land values for the above stated notional residential development schemes for the Local Authorities in the agreed locations are as follows; Cannock Chase Council Cannock (Greenfield Sites)

Notional Scheme

Notional Gross Development Area (acres)

Residual Land Value (based on 15% affordable housing provision)

Residual Land Value (based on 25 % affordable housing provision)

Land Value per Acre (based on 15% affordable housing provision)


10 unit scheme

0.75 £43,171 - £7,894 £57,561 -£10,525

50 unit scheme

3.50 -£88,144 -£270,253 -£25,184 -£77,215

100 unit scheme

7.00 £28,594 -£291,734 £4,085 -£41,676

Hednesford (Greenfield Sites)

Notional Scheme






10 unit scheme

0.75 £17,903 - £31,745 £23,871 - £42,327

50 unit scheme

3.50 - £193,954 - £371,009 - £55,415 - £106,003

100 unit scheme

7.00 - £166,173 - £477,609 - £23739 £68,230

27

Heath Hayes (Greenfield Sites)

Notional Scheme






10 unit scheme

0.75 £17,903 - £31,745 £23,871 - £42,327

50 unit scheme

3.50 - £193,954 - £371,009 - £55,415 - £106,003

100 unit scheme

7.00 - £166,173 - £477,609 - £23,739 - £68,230

Rugeley (Greenfield Sites)

Notional Scheme






10 unit scheme

0.75 £190,125 £130,817 £253,500 £174,423

50 unit scheme

3.50 £584,313 £382,421 £166,947 £109,263

100 unit scheme

7.00 £1,254,646 £905,026 £179,235 £129,289

Norton Canes (Greenfield Sites)

Notional Scheme






10 unit scheme

0.75 £63,980 £11,747 £85,307 £15,663

50 unit scheme

3.50 £40,424 - £145,848 £11,550 - £41,671

100 unit scheme

7.00 £268,432 - £59,219 £38,347 - £8,460

28


Lichfield City (Brownfield/Greenfield Sites)

Notional Scheme




50 unit (brownfield)

scheme

3.50 £1,109,388 £316,968

500 unit (greenfield)

scheme

34.00 £6,349,031 £186,736

Burntwood (Brownfield Sites)

Notional Scheme




50 unit scheme

3.50 - £201,455 - £57,559

500 unit scheme

34.00 - £4,592,757 - £135,081

Rural North (Greenfield Sites)

Notional Scheme




25 unit scheme

1.75 £717,758 £410,147

100 unit scheme

7.00 £2,379,732 £339,962

29

Rural South and East (Brownfield/Greenfield Sites)

Notional

Scheme





scheme

1.75 £750,071 £428,612


scheme

7.00 £2,158,017 £308,288


Wilnecote (Brownfield/Greenfield Sites)

Notional Scheme







scheme

1.00 - £25,574 £22,528 - £25,574 £22,528


scheme

1.00 £13,797 £61,900 £13,797 £61,900


scheme

3.50 - £303,370 -£123,028 - £86,680 - £35,151


scheme

3.50 - £176,208 £4,143 - £50,345 £1,184

30

Belgrave (Brownfield/Greenfield Sites)

Notional Scheme







scheme

1.00 - £25,574 £22,528 - £25,574 £22,528


scheme

1.00 £13,797 £61,900 £13,797 £61,900


scheme

3.50 - £303,370 -£123,028 - £86,680 - £35,151


scheme

3.50 - £176,208 £4,143 - £50,345 £1,184

Spital (Brownfield/Greenfield Sites)

Notional Scheme







scheme

1.00 £104,438 £157,832 £104,438 £157,832


scheme

1.00 £143,809 £197,204 £143,809 £197,204


scheme

3.50 £197,091 £393,462 £56,312 £112,418


scheme

3.50 £321,834 £513,304 £91,953 £146,658

31

COMMERCIAL Cannock Chase Council

Residual Land Values Notional Scheme Use NotionalSite Area Acres

Cannock Brownfield

£

Rugeley Brownfield

£

Kingswood Greenfield

£ A1 - 46 sq m 0.023 58,007 33,986 N/AA1 - 139 sq m 0.068 155,580 82,996 10,411 A1 - 465 sq m 0.230 615,963 376,795 137,626 A1 - 929 sq m 0.459 1,278,786 800,963 323,139 A2 - 46 sq m 0.023 39,230 15,210 N/AA2 - 139 sq m 0.068 125,756 53,171 - 19,413 A2 - 465 sq m 0.230 432,077 192,908 - 46,261 A3/A5 - 139 sq m 0.068 67,073 30,781 - 5,511 A3/A5 - 465 sq m 0.230 238,125 118,540 - 1,044 B1 - 140 sq m 0.068 53,431 - 53,431 - 53,431 B1 - 465 sq m 0.230 - 179,442 - 179,442 - 179,442 B1 - 929 sq m 0.459 - 306,872 - 306,872 - 306,872 B2 - 140 sq m 0.068 - 66,225 - 66,225 - 66,225 B2 - 465 sq m 0.230 - 220,243 - 220,243 - 220,243 B2 - 929 sq m 0.459 N/A N/A - 388,252 B8 - 140 sq m 0.068 - 43,391 - 43,391 - 43,391 B8 - 465 sq m 0.230 - 106,033 - 106,033 - 106,033 B8 - 929 sq m 0.459 N/A N/A - 160,078 C1 - Hotel 1.500 - 55,627 - 55,627 - 55,627 C2 - Nursing Home 1.500 - 782,429 - 782,429 - 782,429 D1 - School 2.000 Nil Nil NilD2 - Cinema 1.500 - 517,931 - 517,931 - 517,931

32


Residual Land Values Notional Scheme Use NotionalSite Area Acres

Lichfield Brownfield

£

Burntwood Brownfield

£

Rural South/East/North

Greenfield £

A1 - 46 sq m 0.023 80,955 32,914 N/AA1 - 139 sq m 0.068 224,374 79,206 6,621 A1 - 465 sq m 0.230 848,932 365,946 131,426 A1 - 929 sq m 0.459 1,265,132 779,288 310,373 A2 - 46 sq m 0.023 61,795 13,754 N/AA2 - 139 sq m 0.068 193,941 48,773 - 23,812 A2 - 465 sq m 0.230 656,636 177,935 - 60,870 A3/A5 - 139 sq m 0.068 98,510 25,925 98,510 A3/A5 - 465 sq m 0.230 341,582 102,413 341,582 B1 - 140 sq m 0.068 1,896 - 27,771 1,896 B1 - 465 sq m 0.230 1,477 - 94,190 1,477 B1 - 929 sq m 0.459 54,577 - 136,552 54,577 B2 - 140 sq m 0.068 - 55,791 - 55,791 - 55,791 B2 - 465 sq m 0.230 - 186,169 - 186,169 - 186,169 B2 - 929 sq m 0.459 N/A N/A - 320,178 B8 - 140 sq m 0.068 - 32,230 - 32,230 - 32,230 B8 - 465 sq m 0.230 - 68,776 - 68,776 - 68,776 B8 - 929 sq m 0.459 N/A N/A - 85,644 C1 - Hotel 1.500 - 97,113 - 97,113 - 97,113 C2 - Nursing Home 1.500 - 861,416 - 861,416 - 861,416 D1 - School 2.000 Nil Nil NilD2 - Cinema 1.500 - 557,867 - 557,867 - 557,867

33


Residual Land Values Notional Scheme Use Notional

Site Area Acres

Tamworth Brownfield

£

Relay Business Park and Ventura

Retail Park Greenfield

£ A1 - 46 sq m 0.023 612,254 N/A A1 - 139 sq m 0.068 166,950 188,586 A1 - 465 sq m 0.230 652,817 700,725 A1 - 929 sq m 0.459 1,352,035 1,399,942 A2 - 46 sq m 0.023 43,597 N/A A2 - 139 sq m 0.068 138,951 160,587 A2 - 465 sq m 0.230 475,905 523,812 A3/A5 - 139 sq m 0.068 114,230 139,568 A3/A5 - 465 sq m 0.230 406,090 453,998 B1 - 140 sq m 0.068 14,533 30,166 B1 - 465 sq m 0.230 43,149 94,887 B1 - 929 sq m 0.459 137,832 189,569 B2 - 140 sq m 0.068 - 46,457 - 30,784 B2 - 465 sq m 0.230 - 155,390 - 103,518 B2 - 929 sq m 0.459 N/A - 206,814 B8 - 140 sq m 0.068 - 32,180 - 8,169 B8 - 465 sq m 0.230 - 71,593 7,555 B8 - 929 sq m 0.459 N/A 15,095 C1 - Hotel 1.500 68,831 68,831 C2 - Nursing Home 1.500 - 545,468 - 545,468 D1 - School 2.000 Nil NilD2 - Cinema 1.500 - 386,120 - 386,120

34

10.0 BENCHMARK LAND VALUES (Residential and Commercial) 10.0 Residential and Commercial Benchmark Land Values, and Market Commentary

In order to consider any potential CIL rates in relation to any development scheme, a comparison/benchmark needs to be made between the residual land value for each of the notional development schemes assessed and a benchmark value (Site Value).

As stated above, The RICS Guidance Note Financial Viability in Planning confirms that:

“Site Value should equate to the market value subject to the following assumption that the value has regard to development plan policies and all other material planning considerations and disregards that which is contrary to the development plan”.

The Guidance Notes also confirm that when undertaking Local Plan or CIL (area-wide)

viability testing, a second assumption needs to be applied to the Site Value definition, as follows;

“The Site Value (as defined above) may need to be further adjusted to reflect the

emerging policy/CIL charging level. The level of the adjustment assumes that site delivery would not be prejudiced. Where an adjustment is made, the practitioner should set out their professional opinion underlying the assumptions adopted. These include, as a minimum, comments on the state of the market and delivery targets as at the date of assessment”

After reviewing the difference between the Residual Land Value and the Site Value of

the notional development scheme/ land this enables us to assess the potential Community Infrastructure Levy funding level.

Accordingly if it is established that there is little or no surplus, or a negative Residual

Land Value (i.e. a deficit), it can be established that there is little or no scope for any Community Infrastructure Levy Contribution in conjunction with all the other development costs, and S106 contributions assumed, for each notional development scheme .

In undertaking research to establish comparable evidence for benchmarking purposes,

we sought to find example of local recent transactions, although in the current market as at the date of this report, there is very little comparable evidence available in the three local authorities or the surrounding Staffordshire and West Midlands areas.

Data was reviewed from a number of sources, such as EGI, Focus, and other property

and auction websites. Local Agents in the surrounding Staffordshire, and West Midlands area were also approached to discuss the availability of land for sale, and to try and establish what land transactions have recently taken place.

However very little comparable evidence was obtained. The slowdown in the residential and commercial property market in 2008 and 2009

impacted significantly on the residential and commercial development market. The majority of house builders, and commercial developers placed their existing schemes on hold and postponed the commencement of any new development.

35

Many “volume house builders” and commercial developers have seen the value of their

existing land holdings reduce significantly over the last 36 months and combined with the cash flow issues presented by lower than expected residential and commercial unit sales have found themselves in an extremely perilous position.

In 2010 there was a marked improvement in conditions and sentiment in the residential

and commercial property market which was evidenced by plc house builders, and commercial developers who restructured their bank debt, recapitalised through rights issues and recruited new land managers and surveyors.

House builders and commercial development companies were tasked to actively

acquire residential and commercial development land opportunities, subject to securing planning on appropriately designed housing and commercial schemes.

In 2011/2012 however, house-builders and commercial developers have been

considerably more cautious due to the Coalition Government’s austerity programme, the EU crisis, the impact of further tax rises and the impact of public sector cuts.

This change in focus from the main house builders and commercial developers means

they are selectively acquiring land in established residential and commercial locations to build traditional low density, two storey houses, and standard commercial unit types and but will immediately disregard sites with planning permissions with inappropriate designed schemes for the current market.

The sharp fall in overall UK construction activity in 2012 highlights the weakness of the

residential and commercial development market, and the level of new construction orders for commercial property in particular remains historically low. Although very little commercial development is coming on stream outside of central London, subdued occupier demand means that vacancy rates are still rising across many UK markets.

The low level of development activity means that the supply of high quality commercial

accommodation is already diminishing. As the UK economic recovery gets a firmer footing in the next few years, the demand for quality commercial accommodation should increase.

In order to arrive at our conclusions of the Site Value of the subject parcels of

residential development land, we have discussed the planning position of each parcel of greenfield and brownfield land, with Cannock Chase, Lichfield District, and Tamworth Borough Council’s, and in accordance with our instructions we have made the Special Assumption that each of the notional greenfield sites are located outside the settlement boundary of each Local Authorities district although are either allocated in each Council’s Local Plan for either commercial or residential development, or would potentially obtain planning permission for development, although at the date of our assessment each parcel of land has been assumed to have no planning permission.

Regarding the notional brownfield sites for residential development we have also made

the Special Assumption that for each parcel of previously developed land planning permission would be granted for either B1 (Business), B2 (General Industrial), or B8 (Storage & Distribution), and or alternative car parking uses.

Accordingly each of the Residual Land Value results for the notional residential and

commercial development schemes is compared to each Site Value (having regard to the definition as previously stated) for each site taking into account the greenfield and brownfield nature of the land, and the planning comments as stated above.

36

Having regard to the above comments we have taken the view that the minimum Site

Value likely to incentivise landowners to release agricultural land located outside the settlement boundary for each of the Local Authorities Local Plan districts for residential development in the surrounding Staffordshire area would be in the region of £100,000 per gross acre / £250,000 per gross hectare. However it should be noted that these land values would also be adjusted reflecting location, and the size of each notional parcel of agricultural land.

In relation to the brownfield residential development sites, and the comments above,

and reflecting the low demand for commercial development land, current UK economy, and depressed commercial property market as at the date of this report we would expect Site Values for benchmarking purposes to be in the region of £200,000 per gross acre/ £495,000 per hectare. These land values would also be adjusted reflecting location, and the size of each notional parcel of brownfield land.

Whilst notional development scheme appraisals and inputs vary having regard to the

current commercial and residential development market, and Local Authority Local Plan policies on affordable housing and S106 contributions, landowners’ expectations will also need to be realistic.

At this stage we have adopted the same basis for commercial sites. In respect of

greenfield sites we have adopted £100,000 per gross acre and £200,000 per gross acre for brownfield sites.

RESIDENTIAL / COMMERCIAL DEVELOPMENT MARKET AND GROWTH

COMMENTS

The current development market is currently at a ‘low point’ due to lack of demand and lack of supply.

The lack of demand is generated from the current economic climate with considerable

uncertainty and lack of both personal and development finance. Although this report takes account of the current market conditions it is not

unreasonable to consider growth over the plan period and sensitivities have been provided to task growth into account.

Growth – We have made certain assumptions on growth which are expressed as net

growth taking into account both growth in values and costs. Experience from the past has shown that costs have grown by approx half the rate of

value growth. The net growth rates utilised for the purpose of this report are 5% net, 10% net and 15%

net.

37

11.0 S106 AND COMMUNITY INFRASTRUCTURE LEVY ASSUMPTIONS In accordance with our instructions from Cannock Chase, Lichfield District, and

Tamworth Borough Council’s, no S106 contributions and or Community Infrastructure Levy rates have been taken into account in any of the notional residential and commercial development schemes assessed. Rather, it is the amount of surplus in each scheme which is being used as the basis for further work in relation to CIL charging schedules, as each authority is likely to take a different approach in relation to how it funds infrastructure in term of the split between CIL and S106, and the availability of other sources of funding such as grant aid.

38

12.0 COMMUNITY INFRASTRUCTURE LEVY CONSULTATION TESTING STUDY RESULTS

As part of the Viability Testing Study we have undertaken, each local authority

provided us with the contact details of house builders, developers, agents, and planning and property professionals, as well as Registered Social Landlords / Registered Providers who operate in each of Cannock Chase, Lichfield District, and Tamworth Borough Council’s districts who were contacted as part of the consultation exercise, and asked to respond to a number of questions regarding development viability.

Whilst the vast proportion of consultees chose not to respond to the consultation

study, the following questions were asked and responses were received; i) Many development sites within Tamworth Borough, Lichfield District and

Cannock Chase Council’s areas range in different sizes and will be required to provide affordable housing (residential schemes) Section 106 contributions and potential Community Infrastructure Levy rates to deliver identified infrastructure needs arising as a result of new development.

Please consider any particular local development issues (i.e.

construction, abnormal and infrastructure costs, planning requirements, etc) that you will have encountered within your work, land/property holdings, or land acquired that could affect the financial viability and deliverability of commercial and residential development schemes.

The majority of the responses received were in relation to infrastructure and

abnormal costs, relating to former mine workings, flooding, land contamination/remediation, and S106 planning contributions.

Reference was also made to current property market conditions, the United

Kingdom economy, and fall in values and rents of residential and commercial properties, and development land values.

Larger development sites were also discussed as they will also normally

require major infrastructure and normally attract higher S106 contributions. Where major infrastructure works and costs are required to facilitate

development, this is a large upfront cost which will affect development viability including Internal Rates of Return, and Return on Capital Employed.

ii) Are there any other issues concerning the practical and financial

deliverability of residential and commercial development schemes that you would like to draw to our attention and consider in our study?

Examples may include current land values, sales/rental values of

residential and commercial units, current economic climate/state of the property market, developer’s profit, construction/abnormal costs etc.

Most of the responses received related to current low land values, and poor

market conditions. In addition many areas within Cannock and Tamworth Council districts and to a lesser extent Lichfield comprise of brownfield land, which will also have high abnormal costs.

39

Comments from Registered Social Landlords/Registered Providers also

referred to the reduction of Homes and Community Agency (HCA) grant funding, and that Registered Providers will always be looking at schemes in relation to Code Level 3, and HCA Design and Quality Standards. In particular if the new build dwellings are not constructed to the HCA Design and Quality Standards, then most Registered Providers would not be interested in purchasing the proposed residential units.

Reference was also made to developers’ profit, and the majority of lending

institutions would not advance funds towards any scheme which generate less then 20% gross profit.

iii) Tamworth Borough, Lichfield District and Cannock Chase local authority

areas where affordable housing will be required, may have an impact on development viability. Are there any issues that you would like to comment on and wish to draw to our attention?

The majority of responses relate to the impact that affordable housing has on

development viability, in particular having regard to affordable housing tenure mixes, and the perception of the development scheme with the public. Reference was made to the comparison between a notional scheme requiring 80% rent and 20% shared ownership being more onerous then a 50:50 split.

Examples were also made relating to recent public participation events where

members of the public welcomed a small proportion of affordable housing, but that ranges of between 25% to 40% meant as a community, they were providing a level of affordable housing beyond their own need, and may be occupied by persons having little connection with their area.

Comments were also received relating to the requirements of Registered

Providers, and that they insist on all properties are compliant with Code Level 3 of the Code for Sustainable Homes regardless of whether grant funding is not provided’.

iv) In establishing the viability of development schemes the residual land

value is benchmarked to either the Current/Existing Use Value or Alternative Use Value of the subject land. Do you wish to bring to our attention any information relating to minimum land values at which land owners are likely to release land for development?

Once again reference was made to developers profit and as to whether or not

there was likely to be any profit margin over Existing Use Value specifically relating to brownfield sites, to make it worthwhile for a landowner to bring a development site forward.

Examples were also provided to companies operating out of outdate/old

premises, who may wish to relocate to more modern buildings, but are unable to relocate as the revenue received from their existing premises and land is not sufficient for relocating, or building new modern buildings.

40

Responses were also made in relation to greenfield sites and that many

landowners have entered into historic option agreements with house builders and developers, where no allowances were made for current development issues such as the Code for Sustainable Homes. Accordingly potentially many option agreements are unworkable as the minimum land values are unachievable having regard to current construction requirements and deductions that are required to comply with current construction legislation. This has also been further exacerbated by the current property market, and low levels of value.

v) Are you aware of any recent comparable sale evidence of either

residential or commercial development land in the above local authority areas that you wish to bring to our attention, and take into account in our study?

All responses received could not refer to or alternatively provide any

references to the sale of residential or commercial development land, in Tamworth Borough, Lichfield District and Cannock Chase Council’s surrounding districts.

vi) In undertaking our Community Infrastructure Levy Viability Testing

study we have made a variety of Special Assumptions about notional residential and commercial development schemes. Do you have any specific information or wish to raise any points about commercial and residential development?

Once again all consultation responses received made no specific reference to

commercial or residential development, other then in the current market there is restricted development activity, and there appears to be no prospect of this improving in the foreseeable future having regard to the current economic and funding circumstances.

41

13.0 SUMMARY CONCLUSIONS REGARDING NOTIONAL SCHEME VIABILITY BASED ON THE CURRENT MARKET AS AT THE DATE OF OUR ASSESSMENT

NB: As stated above previously, no Section 106 or CIL rates have been included at

this stage as these will be the subject of further work by each local authority. In arriving at our conclusions as to whether the residential/commercial development schemes are viable, the Residual Land Value for each notional development scheme has been benchmarked against the range of Site Values/ Benchmark Land Values, as stated above and adjusted to reflect the location, land uses, and size of each notional parcel of land, and the following conclusions can be seen;

RESIDENTIAL SCHEMES

Cannock Chase Council Cannock (Greenfield Sites)

Notional Scheme





Viability

10 unit scheme

0.75 £43,171 - £7,894 £95,000 Not viable

50 unit scheme

3.50 -£88,144 -£270,253 £435,000 Not viable

100 unit scheme

7.00 £28,594 -£291,734 £700,000 Not Viable

Hednesford (Greenfield Sites)

Notional Scheme





Viability

10 unit scheme

0.75 £17,903 - £31,745 £95,000 Not viable

50 unit scheme

3.50 - £193,954 - £371,009 £435,000 Not viable

100 unit scheme

7.00 - £166,173 - £477,609 £700,000 Not Viable

42

Heath Hayes (Greenfield Sites)

Notional Scheme





Viability

10 unit scheme

0.75 £17,903 - £31,745 £95,000 Not viable

50 unit scheme

3.50 - £193,954 - £371,009 £435,000 Not viable

100 unit scheme

7.00 - £166,173 - £477,609 £700,000 Not Viable

Rugeley (Greenfield Sites)

Notional Scheme





Viability

10 unit scheme

0.75 £190,125 £130,817 £100,000 Viable

50 unit scheme

3.50 £584,313 £382,421 £455,000 Not viable @ 25%

affordable housing.

Viable at

15% affordable housing

100 unit scheme

7.00 £1,254,646 £905,026 £735,000 Viable

Norton Canes (Greenfield Sites)

Notional Scheme





Viability

10 unit scheme

0.75 £63,980 £11,747 £100,000 Not viable

50 unit scheme

3.50 £40,424 - £145,848 £455,000 Not viable

100 unit scheme

7.00 £268,432 - £59,219 £735,000 Not viable

43


Lichfield City (Brownfield/Greenfield Sites)

Notional Scheme




Viability


scheme

3.50 £1,109,388 £700,000 Viable

500 unit (�reenfield)

scheme

34.00 £6,349,031 £3,400,000 Viable

Burntwood (Brownfield Sites)

Notional Scheme




Viability

50 unit scheme

3.50 - £201,455 £700,000 Not viable

500 unit scheme

34.00 - £4,592,757 £5,950,000 Not viable

Rural North (Greenfield Sites)

Notional Scheme




Viability

25 unit scheme

1.75 £717,758 £215,000 Viable

100 unit scheme

7.00 £2,379,732 £700,000 Viable

44

Rural South and East (Brownfield/Greenfield Sites)

Notional Scheme




Viability


scheme

1.75 £750,071 £215,000 Viable


scheme

7.00 £2,158,017 £1,400,000 Viable


Wilnecote (Brownfield/Greenfield Sites)

Notional Scheme





Viability


scheme

1.00 - £25,574 £22,528 £225,000 Not viable


scheme

1.00 £13,797 £61,900 £125,000 Not viable


scheme

3.50 - £303,370 -£123,028 £700,000 Not viable


scheme

3.50 - £176,208 £4,143 £435,000 Not viable

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Belgrave (Brownfield/Greenfield Sites)

Notional Scheme





Viability


scheme

1.00 - £25,574 £22,528 £225,000 Not viable


scheme

1.00 £13,797 £61,900 £125,000 Not viable


scheme

3.50 - £303,370 -£123,028 £700,000 Not viable


scheme

3.50 - £176,208 £4,143 £435,000 Not viable

Spital (Brownfield/Greenfield Sites)

Notional Scheme





Viability


scheme

1.00 £104,438 £157,832 £225,000 Not viable


scheme

1.00 £143,809 £197,204 £125,000 Viable


scheme

3.50 £197,091 £393,462 £700,000 Not viable


scheme

3.50 £321,834 £513,304 £435,000 Not viable @ 30%

affordable housing

Viable @

20% affordable housing

46

COMMERCIAL SCHEMES The residual land values generated by all commercial schemes have been compared to the benchmarked land values and rated at this stage as Surplus or Deficit on the basis that no account has yet been taken of section 106 contributions or CIL tariffs. Tamworth Borough Council Tamworth

Notional Scheme Notional Site Area

Acres

Benchmarked Brown Field

£200,000 Per Acre

£

Residual Land Value Tamworth Brownfield

£

Viability

A1 – 46 sq m 0.023 4,600 612,254 Surplus A1 – 139 sq m 0.068 13,600 166,950 Surplus A1 – 465 sq m 0.230 46,000 652,817 Surplus A1 – 929 sq m 0.459 91,800 1,352,035 Surplus A2 – 46 sq m 0.023 4,600 43,597 Surplus A2 – 139 sq m 0.068 13,600 138,951 Surplus A2 – 465 sq m 0.230 46,000 475,905 Surplus A3/A5 – 139 sq m 0.068 13,600 114,230 Surplus A3/A5 – 465 sq m 0.230 46,000 406,090 Surplus B1 – 140 sq m 0.068 13,600 14,533 Surplus B1 – 465 sq m 0.230 46,000 43,149 Deficit B1 – 929 sq m 0.459 91,800 137,832 Surplus B2 – 140 sq m 0.068 13,600 - 46,457 Deficit B2 – 465 sq m 0.230 46,000 - 155,390 Deficit B2 – 929 sq m 0.459 91,800 N/A B8 – 140 sq m 0.068 13,600 - 32,180 Deficit B8 – 465 sq m 0.230 46,000 - 71,593 Deficit B8 – 929 sq m 0.459 91,800 N/A C1 – Hotel 1.500 300,000 68,831 Deficit C2 – Nursing Home 1.500 300,000 - 545,468 Deficit D1 – School 2.000 400,000 Nil D2 – Cinema 1.500 300,000 - 386,120 Deficit

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Relay Business Park / Ventura Retail Park Notional Scheme Notional

Site Area Acres

Benchmark Green Field

£100,000 Per Acre

£

Residual Land Value

Relay Business

Park and Ventura Retail Park Greenfield

£

Viability

A1 – 46 sq m 0.023 2,300 N/A A1 – 139 sq m 0.068 9,800 188,586 Surplus A1 – 465 sq m 0.230 23,000 700,725 Surplus A1 – 929 sq m 0.459 45,900 1,399,942 Surplus A2 – 46 sq m 0.023 2,300 N/A A2 – 139 sq m 0.068 9,800 160,587 Surplus A2 – 465 sq m 0.230 23,000 523,812 Surplus A3/A5 – 139 sq m 0.068 9,800 139,568 Surplus A3/A5 – 465 sq m 0.230 23,000 453,998 Surplus B1 – 140 sq m 0.068 9,800 30,166 Surplus B1 – 465 sq m 0.230 23,000 94,887 Surplus B1 – 929 sq m 0.459 45,900 189,569 Surplus B2 – 140 sq m 0.068 9,800 - 30,784 Deficit B2 – 465 sq m 0.230 23,000 - 03,518 Deficit B2 – 929 sq m 0.459 45,900 - 206,814 Deficit B8 – 140 sq m 0.068 9,800 - 8,169 Deficit B8 – 465 sq m 0.230 23,000 7,555 Deficit B8 – 929 sq m 0.459 45,900 15,095 Deficit C1 – Hotel 1.500 150,000 68,831 Deficit C2 – Nursing Home 1.500 150,000 - 545,468 Deficit D1 – School 2.000 200,000 Nil D2 – Cinema 1.500 150,000 - 386,120 Deficit

48

Lichfield District Council Lichfield


Acres

Benchmark Brown Field

£200,000 Per Acre

£

Residual Land Value

Lichfield Brownfield

£

Viability

A1 – 46 sq m 0.023 4,600 80,955 Surplus A1 – 139 sq m 0.068 13,600 224,374 Surplus A1 – 465 sq m 0.230 46,000 848,932 Surplus A1 – 929 sq m 0.459 91,800 1,265,132 Surplus A2 – 46 sq m 0.023 4,600 61,795 Surplus A2 – 139 sq m 0.068 13,600 193,941 Surplus A2 – 465 sq m 0.230 46,000 656,636 Surplus A3/A5 – 139 sq m 0.068 13,600 98,510 Surplus A3/A5 – 465 sq m 0.230 46,000 341,582 Surplus B1 – 140 sq m 0.068 13,600 1,896 Deficit B1 – 465 sq m 0.230 46,000 1,477 Deficit B1 – 929 sq m 0.459 91,800 54,577 Deficit B2 – 140 sq m 0.068 13,600 - 55,791 Deficit B2 – 465 sq m 0.230 46,000 - 186,169 Deficit B2 – 929 sq m 0.459 91,800 N/A B8 – 140 sq m 0.068 13,600 - 32,230 Deficit B8 – 465 sq m 0.230 46,000 - 68,776 Deficit B8 – 929 sq m 0.459 91,800 N/A C1 – Hotel 1.500 300,000 - 97,113 Deficit C2 – Nursing Home 1.500 300,000 - 861,416 Deficit D1 – School 2.000 400,000 Nil D2 – Cinema 1.500 300,000 - 557,867 Deficit

49

Burntwood Centre


Acres


£200,000 Per Acre

£

Burntwood Brownfield

£

Viability

A1 – 46 sq m 0.023 4,600 32,914 Surplus A1 – 139 sq m 0.068 13,600 79,206 Surplus A1 – 465 sq m 0.230 46,000 365,946 Surplus A1 – 929 sq m 0.459 91,800 779,288 Surplus A2 – 46 sq m 0.023 4,600 13,754 Surplus A2 – 139 sq m 0.068 13,600 48,773 Surplus A2 – 465 sq m 0.230 46,000 177,935 Surplus A3/A5 – 139 sq m 0.068 13,600 25,925 Surplus A3/A5 – 465 sq m 0.230 46,000 102,413 Surplus B1 – 140 sq m 0.068 13,600 - 27,771 Deficit B1 – 465 sq m 0.230 46,000 - 94,190 Deficit B1 – 929 sq m 0.459 91,800 - 136,552 Deficit B2 – 140 sq m 0.068 13,600 - 55,791 Deficit B2 – 465 sq m 0.230 46,000 - 186,169 Deficit B2 – 929 sq m 0.459 91,800 N/A B8 – 140 sq m 0.068 13,600 - 32,230 Deficit B8 – 465 sq m 0.230 46,000 - 68,776 Deficit B8 – 929 sq m 0.459 91,800 N/A C1 – Hotel 1.500 300,000 - 97,113 Deficit C2 – Nursing Home 1.500 300,000 - 861,416 Deficit D1 – School 2.000 400,000 Nil D2 – Cinema 1.500 300,000 - 557,867 Deficit

50

Rural South / East / North


Acres

Benchmarked Green Field

£100,000 Per Acre

£

Residual Land Value Rural

South/East/NorthGreenfield

£

Viability

A1 – 46 sq m 0.023 2,300 N/A A1 – 139 sq m 0.068 9,800 6,621 Deficit A1 – 465 sq m 0.230 23,000 131,426 Surplus A1 – 929 sq m 0.459 45,900 310,373 Surplus A2 – 46 sq m 0.023 2,300 N/A A2 – 139 sq m 0.068 9,800 - 23,812 Deficit A2 – 465 sq m 0.230 23,000 - 60,870 Deficit A3/A5 – 139 sq m 0.068 9,800 98,510 Surplus A3/A5 – 465 sq m 0.230 23,000 341,582 Surplus B1 – 140 sq m 0.068 9,800 1,896 Deficit B1 – 465 sq m 0.230 23,000 1,477 Deficit B1 – 929 sq m 0.459 45,900 54,577 Surplus B2 – 140 sq m 0.068 9,800 - 55,791 Deficit B2 – 465 sq m 0.230 23,000 - 186,169 Deficit B2 – 929 sq m 0.459 45,900 - 320,178 B8 – 140 sq m 0.068 9,800 - 32,230 Deficit B8 – 465 sq m 0.230 23,000 - 68,776 Deficit B8 – 929 sq m 0.459 45,900 - 85,644 C1 – Hotel 1.500 150,000 - 97,113 Deficit C2 – Nursing Home 1.500 150,000 - 861,416 Deficit D1 – School 2.000 200,000 Nil D2 – Cinema 1.500 150,000 - 557,867 Deficit

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Cannock Chase Council Cannock Notional Scheme Notional

Site Area Acres


£200,000 Per Acre

£

Residual Land Value

Cannock Brownfield

£

Viability

A1 – 46 sq m 0.023 4,600 58,007 Surplus A1 – 139 sq m 0.068 13,600 155,580 Surplus A1 – 465 sq m 0.203 46,000 615,963 Surplus A1 – 929 sq m 0.459 91,800 1,278,786 Surplus A2 – 46 sq m 0.023 4,600 39,230 Surplus A2 – 139 sq m 0.068 13,600 125,756 Surplus A2 – 465 sq m 0.230 46,000 432,077 Surplus A3/A5 – 139 sq m 0.068 13,600 67,073 Surplus A3/A5 – 465 sq m 0.230 46,000 238,125 Surplus B1 – 140 sq m 0.068 13,600 - 53,431 Deficit B1 – 465 sq m 0.230 46,000 - 179,442 Deficit B1 – 929 sq m 0.459 91,800 - 306,872 Deficit B2 – 140 sq m 0.068 13,600 - 66,225 Deficit B2 – 465 sq m 0.230 46,000 - 220,243 Deficit B2 – 929 sq m 0.459 91,800 N/A B8 – 140 sq m 0.068 13,600 - 43,391 Deficit B8 – 465 sq m 0.230 46,000 - 106,033 Deficit B8 – 929 sq m 0.459 91,800 N/A C1 – Hotel 1.500 300,000 - 55,627 Deficit C2 – Nursing Home 1.500 300,000 - 782,429 Deficit D1 – School 2.000 400,000 Nil D2 – Cinema 1.500 300,000 - 517,931 Deficit

52

Rugeley


Acres


£200,000 Per Acre

£

Residual Land Value

Rugeley Brownfield

£

Viability

A1 - 46 sq m 0.023 4,600 33,986 Surplus A1 - 139 sq m 0.068 13,600 82,996 Surplus A1 - 465 sq m 0.230 46,000 376,795 Surplus A1 - 929 sq m 0.459 91,800 800,963 Surplus A2 - 46 sq m 0.023 4,600 15,210 Surplus A2 - 139 sq m 0.068 13,600 53,171 Surplus A2 - 465 sq m 0.230 46,000 192,908 Surplus A3/A5 - 139 sq m 0.068 13,600 30,781 Surplus A3/A5 - 465 sq m 0.230 46,000 118,540 Surplus B1 - 140 sq m 0.068 13,600 - 53,431 Deficit B1 - 465 sq m 0.230 46,000 - 179,442 Deficit B1 - 929 sq m 0.459 91,800 - 306,872 Deficit B2 - 140 sq m 0.068 13,600 - 66,225 Deficit B2 - 465 sq m 0.230 46,000 - 220,243 Deficit B2 - 929 sq m 0.459 91,800 N/A B8 - 140 sq m 0.068 13,600 - 43,391 Deficit B8 - 465 sq m 0.230 46,000 - 106,033 Deficit B8 - 929 sq m 0.459 91,800 N/A C1 - Hotel 1.500 300,000 - 55,627 Deficit C2 - Nursing Home 1.500 300,000 - 782,429 Deficit D1 - School 2.000 400,000 Nil D2 - Cinema 1.500 300,000 - 517,931 Deficit

53

Kingswood


Acres


£200,000 Per Acre

£

Residual Land Value

Kingswood Greenfield

£

Viability

A1 - 46 sq m 0.023 4,600 N/A A1 - 139 sq m 0.068 13,600 10,411 Deficit A1 - 465 sq m 0.230 46,000 137,626 Surplus A1 - 929 sq m 0.459 91,800 323,139 Surplus A2 - 46 sq m 0.023 4,600 N/A A2 - 139 sq m 0.068 13,600 - 19,413 Deficit A2 - 465 sq m 0.230 46,000 - 46,261 Deficit A3/A5 - 139 sq m 0.068 13,600 - 5,511 Deficit A3/A5 - 465 sq m 0.230 46,000 - 1,044 Deficit B1 - 140 sq m 0.068 13,600 - 53,431 Deficit B1 - 465 sq m 0.230 46,000 - 179,442 Deficit B1 - 929 sq m 0.459 91,800 - 306,872 Deficit B2 - 140 sq m 0.068 13,600 - 66,225 Deficit B2 - 465 sq m 0.230 46,000 - 220,243 Deficit B2 - 929 sq m 0.459 91,800 - 388,252 Deficit B8 - 140 sq m 0.068 13,600 - 43,391 Deficit B8 - 465 sq m 0.230 46,000 - 106,033 Deficit B8 - 929 sq m 0.459 91,800 - 160,078 C1 - Hotel 1.500 300,000 - 55,627 Deficit C2 - Nursing Home 1.500 300,000 - 782,429 Deficit D1 - School 2.000 400,000 Nil D2 - Cinema 1.500 300,000 - 517,931 Deficit

54

14.0 SENSITIVITY ANALYSIS AND TESTING It can be seen in looking at the residential and commercial development scheme viability summary conclusions above, that the majority of the notional development schemes tested for Cannock Chase, Lichfield District and Tamworth Borough Council are not viable for a number of reasons taking into account reduced residential/commercial sales values, commercial rents and yields, and taking into account the low demand for commercial development land, current UK economy, and depressed commercial and residential property market as at the date of our assessment. Following further discussions with Cannock Chase, Lichfield District, and Tamworth Borough Council’s to establish if viable notional residential and commercial development schemes can be achieved we have undertaken sensitivity analysis on the following bases; Residential Development Schemes Cannock Chase Council Basis 1 Base Development Appraisal with affordable housing @ 0%, with all units

Open Market. Basis 2 Base Development Appraisal with developers profit at 17.5% open market

units. Basis 3 Base Development Appraisals assuming 5% increase in growth of sales

values. Basis 4 Base Development Appraisals assuming 10% increase in growth of sales


values. Basis 6 Benchmark Land Values (Greenfield) retested at £75,000 per gross acre. Basis 7 Benchmark Land Values (Brownfield) retested at £180,000 per gross acre. Basis 8 Benchmark Land Values (Brownfield) retested at £220,000 per gross acre. Please see Appendices.

55

Lichfield District Council Basis1 Base Development Appraisal with affordable housing @ 0%, with all units





values. Basis 6 Benchmark Land Values (Greenfield) retested at £75,000 per gross acre Basis 7 Benchmark Land Values (Brownfield) retested at £180,000 per gross acre Basis 8 Benchmark Land Values (Brownfield) retested at £220,000 per gross acre Please see Appendices. Tamworth District Council Basis 1 Base Development Appraisal with affordable housing @ 0%, with all units






56

Commercial Development Schemes Basis 1 Base Development Appraisal with 12.5% Developers Profit. Basis 2 Base Development Appraisals assuming 5% increase in growth of sales

values. Basis 3. Base Development Appraisals assuming 10% increase in growth of sales



57

15.0 CONCLUSIONS We have undertaken detailed residual development appraisals to calculate the residual

land values for each notional residential and commercial development notional scheme tested, and compared this to a benchmark land value/site value for each development site as confirmed in this report, taking into account current guidance. To date no S106 Contributions or CIL Levy rates have been taken into account in any of the notional residential or commercial development schemes tested as these will be the subject of further work by each local authority. In our summary conclusions, we have confirmed the viability of each notional Local Plan policy compliant residential and commercial scheme expressed as either a surplus or a deficit, as at the date of our community infrastructure levy viability assessment testing study. If a scheme shows a surplus there is the capacity to provide some section 106 contributions / CIL Levy rates whilst if the scheme shows a deficit it is not viable and no contributions are possible taking account of the viability of each notional scheme tested at the present time, although the study has demonstrated that this situation could change allowing for growth in the economy and flexibility in the application of Local Plan policies. RESIDENTIAL DEVELOPMENT SCHEMES Cannock Chase Council, Lichfield District Council and Tamworth Borough Council Our conclusions show varied results across Southern Staffordshire in terms of residential viability in the current economic climate, particularly when Local Plan policies are applied in full. There are particular issues with urban sites in a number of locations across the three areas, especially brownfield sites although rural areas overall are seen to be performing better, as are more affluent locations. It can also be seen, however, that some development schemes in specific locations are more viable then others taking into account lower levels of affordable housing. Moreover, the sensitivity analysis and testing of the notional residential development schemes which take into account Bases 1 to 8 (i.e. testing a range of scenarios relating to affordable housing provision, levels of economic growth and varying benchmark land values), also clearly show that a proportion of schemes become viable and a surplus can be achieved taking into consideration the flexible application of each local authorities local plan policies. This surplus can be used towards Community Infrastructure Levy Rates, after making a variety of assumptions. The sensitivity testing and analysis undertaken takes into account 0% affordable housing, reduced developers profit, and making modest assumptions about growth in sales values over the next few years, which forms part of the local plan period. In undertaking research to establish comparable evidence for benchmarking purposes, we sought to find example of local recent transactions as previously confirmed, although in the current market as at the date of this report, there is very little comparable evidence available in the three local authorities or the surrounding Staffordshire and West Midlands areas.

58

Reduced land values and landowners expectations have also been considered, which

taking into account the current residential and commercial development market as at the date of this report is not considered unrealistic. We have not taken into account any grant funding in our CIL viability testing study assumptions, for the reasons stated and this potential additional funding has been excluded from our development appraisals. In order to bring some sites forward in the current economic climate local authorities will need to explore options for intervention in terms of funding or other opportunities.

This viability testing study provides an overview of notional residential development schemes tested in line with the requirements of the National Planning Policy Framework rather than a detailed site by site viability assessment approach for which detailed information would be available. As stated previously the National Planning Policy Framework confirms that: “Pursuing sustainable development requires careful attention to viability and costs in plan-making and decision-taking. Plans should be deliverable. Therefore, the sites and the scale of development identified in the plan should not be subject to such a scale of obligations and policy burdens that their ability to be developed viably is threatened. To ensure viability, the costs of any requirements likely to be applied to development, such as requirements for affordable housing, standards, infrastructure contributions or other requirements should, when taking account of the normal cost of development and mitigation, provide competitive returns to a willing land owner and willing developer to enable the development to be deliverable”. “Local planning authorities should set out their policy on local standards in the Local Plan, including requirements for affordable housing. They should assess the likely cumulative impacts on development in their area of all existing and proposed local standards, supplementary planning documents and policies that support the development plan, when added to nationally required standards. In order to be appropriate, the cumulative impact of these standards and policies should not put implementation of the plan at serious risk, and should facilitate development throughout the economic cycle”. Accordingly we are of the conclusion that Cannock Chase, Lichfield District, and Tamworth Borough Council’s Local Plan policies need to be flexible, taking account of viability issues when considering policy application (such as the level of affordable housing to be provided, or the application of the Code for Sustainable Homes for example), being proactive in exploring opportunities for intervention, and being flexible in terms of their development trajectories, enabling the sites which are currently more viable to be brought forward earlier in the plan period where possible. Whilst it can clearly be seen that some of the notional policy complaint schemes are not currently viable, other development schemes are, resulting in a surplus being achieved, and it can be concluded that the Local Authorities can charge the Community Infrastructure Levy, which provides the starting point for further detailed work for each Local Authority to develop its own CIL charging schedules We are also aware that residential development schemes are still taking place as at the date of this report in each Local Authorities district, albeit in many cases, with slow development sales periods, reflecting the current economic situation with S106 agreements funding infrastructure locally, on a site by site basis

59

It should be noted that our CIL viability testing study has been undertaken at a particular

point in time taking into account difficult economic circumstances, and is also looking at development issues on a generic (i.e. notional site) basis.

The sensitivity analysis and testing undertaken clearly shows that the surplus amount for each scheme tested to be used for CIL increases when assumptions are factored in for economic growth which is not unreasonable to be anticipated over the Local Plan period for each Local Authority. Accordingly we would strongly recommend that Cannock Chase, Lichfield District, and Tamworth Borough Council’s regularly review the viability testing study and notional development schemes that we have appraised on a regular basis, as values and costs will change over time, and the majority of the notional development schemes tested, will be viable in the near future over the life of the local plan period as the current economic situation improves.

COMMERCIAL DEVELOPMENT SCHEMES

The Conclusions for each Local Authority, property type/land use tested and location is detailed below.


At the present time the following conclusions are reached, assuming no external intervention: Tamworth – All A1 to A5 uses are viable and all B1 uses are either viable or are marginal. No other uses are viable. Relay Business Park/Ventura Retail Park – All A1 to A5 uses and B1 uses are viable. No other uses are viable. If 15% growth is taken into account for all Tamworth’s locations all A1 to A5 schemes and all B1 schemes are viable whilst all other uses are still unviable. If a reduced profit of 12.5% is used all most of A1 to A5 and B1 uses across all locations are viable whilst all other uses are unviable.


At the present time the following conclusions are reached, assuming no external intervention: Lichfield – All A1 to A5 schemes are viable whilst no other use is viable. Burntwood – All A1 to A5 schemes are viable whilst no other use is viable Rural South/East/North – All A1, A3 to A5 and B1 at 929 sq m are viable. All other uses are unviable. If 15% growth is taken into account for all Lichfield’s locations all A1 to A5 schemes and all B1 schemes are viable whilst all other uses are still unviable. If a reduced profit of 12.5% is used all of A1, A2 in town centres, all A3 to A5 and B1 uses in Lichfield and Rural are viable whilst all other uses/locations are unviable.

60

61


At the present time the following conclusions are reached, assuming no external intervention: Cannock – All A1 to A5 schemes are viable. All other uses are unviable. Rugeley – All A1 to A5 schemes are viable. All other schemes are unviable. Kingswood – Only A1 schemes are either viable or marginally viable. No other use is viable. If 15% growth is taken into account for all Cannock’s locations all A1 to A5 schemes are either viable or marginally viable whilst all other uses are still unviable.

If a reduced profit of 12.5% is used all most of A1 to A5 across all locations are either

viable or marginally viable whilst all other uses are unviable. Across the three southern Staffordshire authorities as a whole however, as with residential viability, it is important that it is recognised that this study relates to a particular point in time in especially difficult economic conditions and has used specific notional site sizes with specific assumptions. Plans will need to be flexible in their application of policy, in applying their development trajectories and where possible in seeking external intervention where opportunities arise. As previously confirmed, and having regard to the notional commercial development schemes tested we would strongly recommend that Cannock Chase, Lichfield District, and Tamworth Borough Councils also regularly review the viability testing study and notional commercial development schemes that we have appraised on a regular basis, as values and costs will change over time, and the majority of the notional development schemes tested, will be viable in the near future over the life of the local plan period as the economic situation improves We trust the above is to your satisfaction but if you have any queries, please do not hesitate to contact us. Jeffrey Solomon BSc (Hones) MRICS Tony Williams MRICS Principal Surveyor Principal Surveyor RICS Registered Valuer, DVS RICS Registered Valuer, DVS

Documents

Cannock Chase Council, Lichfield District Council