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VIABILITY – A LOCAL AUTHORITY PERSPECTIVE Jim Cliffe Planning Obligations Manager

This article discusses the implementation of CIL and the challenges faced by local authorities in achieving policy-compliant levels of affordable housing. It provides insights into site-specific viability appraisals and offers a three-stage approach for resolving differences.

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VIABILITY – A LOCAL AUTHORITY PERSPECTIVE Jim Cliffe Planning Obligations Manager

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  1. VIABILITY – A LOCAL AUTHORITY PERSPECTIVE Jim Cliffe Planning Obligations Manager Bristol City Council

  2. Areas covered • Implementing CIL • Approach to site specific viability appraisals • Why the affordable housing policy compliant percentage is not always achieved

  3. 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

  4. CIL - Implementation Don’t be greedy – be generous with developers costs, cautious with sales values, and leave a significant viability buffer

  5. 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

  6. 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

  7. What the inspector wants

  8. 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.

  9. Other viability information available due to CIL • Once CIL is implemented you need access to BCIS data, which provides up to date costs data • Sales 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

  10. 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

  11. 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

  12. 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

  13. 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

  14. 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

  15. 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

  16. 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

  17. Brownfield Sites • Urban brownfield sites often have high Existing Use Values, which translates to high Site Values • There 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 sites • Therefore there is less potential to secure affordable housing from brownfield sites

  18. 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

  19. Government Policy / Initiatives The 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)

  20. Market Value / Site Value • Market Value = the price agreed for the land between a willing buyer and a willing seller • Site Value = Market Value but taking account of Development Plan Policies

  21. 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.

  22. Rising Residential Values Increasing residential values help viability but: • Profits are based on value so the actual profit also increases • Build 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 increase • Land is changing hands for higher prices (up 15% nationally in the past two years) as house-builders are competing for a scarce resource

  23. Hypothetical ExampleScheme value increases by 17% / Site value increases by 15% / Build costs increase by 13%

  24. 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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