Affordable Housing: Policies into Practice

1. Affordable Housing: Policies into Practice Louise Dwelly Housing Strategy & Enabling Manager October 2004

2. Why Training Now? • Policy in place for a year • Need for better understanding of how officers are using and developing the policy in practice • An understanding of how we look at scheme viability and how the negotiation process works is becoming more critical

3. Training Objectives • Understand the policy context for negotiating community benefits • Review the policy provisions • Achieve a better understanding of how the negotiation procedure works in practice • Understand the importance of development economics

4. We are losing homes.... • Gabbons Nursery 50-75 affordable • Block A maritime centre 4 • Stary Dom 4 • Poltair Road Penryn 15 • Sandy Cove Porthtowan 10 Total 83-108 affordable homes not approved

5. National Policy Context • Main mechanism is section 106 of the Town & Country Planning Act 1990 (section 106 agreements) • Rules about what benefits can be negotiated (reasonable and directly related) • Circular 6/98 deals with affordable housing. Must “seek to negotiate” and must have regard to financial viability • Fundamental review of policy guidance taking place

6. Carrick Policy (recap) • Thresholds (15 urban and 2 rural) • Targets • 35% Truro (20% rent, 15% intermediate) • 40% Falmouth-Penryn (20% rent and intermediate) • 50% rural (20% rent and 30% intermediate) • Intermediate includes low cost for sale, shared equity and key worker housing

7. BUT there is more flexibility than you think...... • Provision can also be off site or a financial contribution in some circumstances • The targets can be varied if more than 50% is affordable • Provisions will most often be affected by whether there is any public subsidy

8. The Money Question • Affordable housing without grant • The local context • Grant free but not everywhere all of the time • Public subsidy is needed to deliver the Council’s 60 homes target and to deliver all the s106 opportunities • Subsidy must come from somewhere (Gvnmt, Carrick, developer)

9. Sources of Funding • Housing Corporation (£2-3 million over 2 years) 50 homes • Carrick £500,000 (CTSH) 8-10 annually • Commuted sums £1.6 million negotiated (26 homes but no money yet) • Subsidy of £60,000-75,000 each

10. Options • Seek additional developer subsidy • Seek commuted sums on some developments to increase funding • Only target grant at strategic sites • RSLs can pay something towards homes where there is no grant but it means fewer homes......

11. What is Grant Free? • The payment reflects what a housing association can pay by way of a mortgage secured against future rental income • Rents are restricted by Gvnmt so....

12. Grant Free Values

13. How we work • Pre-application contact • DC involve relevant officers for community benefits • Joint discussions, full policy requirement is starting point • Agree a final negotiating postion • Affordable housing unit gives formal response and works with legal services to draft / modify any s106 obligation

14. What can affect what we ask for? • Economic viability • Abnormal costs (infrastructure, contamination) • Not a strategic site and limited grant • Area not suitable or already a concentration of affordable homes • High density flatted scheme which does not meet need • Other costly community benefits • Limited evidence of need

15. Understanding the cost of development (development economics) We can use a range of tools: • Developers’ financial appraisals • Secondary data (house prices/land values) • External technical expertise • The Development Economics Toolkit

16. The Development Economics Toolkit • Developed by 3 Dragons and Nottingham Trent University for GLA • Carrick (supported by Cornwall partners) developing first rural version • Under development for a year and now in use • Consultation with developers and housing associations complete

17. Purpose of Toolkit • Provides information about the economics of residential development proposals • Shows impact of affordable housing requirement • Site area/number of dwellings is the only ‘MUST HAVE’ information • Aid to decision making - does not make decisions!

18. Basis of Toolkit • Residual value approach • Residual is value less costs • Takes account of availability of public subsidy • Land value is not an ‘input’

20. COSTS Build costs Infrastructure costs Professional fees Overheads/finance costs Marketing costs Contribution to developer REVENUE Market units X market value Affordable element TCI (less on costs) for social rent and shared ownership % of value for Equity Share and Low Cost Sale Capitalised rental value for sub-market rent Revenue and costs

21. What ifs……... Can test for…... • % different types and tenures affordable housing • +/- Density • +/- Market value • Alternative planning obligations

22. More what ifs……... Can test for • Exceptional development costs • Alternative %TCI and with/without grant (and different % share for SO) • Alternatives for Equity Share, Low Cost Sale and Sub-Market Rent • Range of assumptions about costs

23. Lessons Learnt • Community benefits is a process of negotiation • Robust policies help but there is always that rogue appeal decision • Flexibility is most often needed around difficult sites and grant availability • The involvement of members and the community in understanding specific sites is crucial to develop consensus and support