3.1

Object

Representation ID: 1795

Received: 12/12/2014

Respondent: Cogent Land LLP (Cogent)

Of the 36 scenarios tested, only 36% suggested that a CIL rate could be supported. Given the high proportion of brownfield windfall sites coming forward in the Borough, we would expect the greatest weight to be given to the results assuming BLVs 1-3. Looking at the results, this suggests that only 7 scenarios would be able to support a CIL rate. However, the maximum CIL rates indicated by BNP in the summary table (reproduced above at Table 1) suggest a rate of £50 per sq m for Market Area 6.
We would therefore ask that further explanation of the interpretation of the viability testing is provided, as we do not believe that the proposed CIL rates reflect the supporting viability evidence.

Object

Representation ID: 1796

Received: 12/12/2014

Respondent: Cogent Land LLP (Cogent)

Zero Rates
In our previous representations we highlighted our concern that an unviable 'nominal' rate was being proposed by the Council. A point further strengthened by the fact that the supporting viability evidence clearly shows that a number of these development scenarios are unviable prior to the introduction of a CIL charge.
3.9 We note the Councils response to this point in the Overview Document
Some consider that if a use is deemed to be unviable then additional charges should not be imposed. However, the viability evidence demonstrates that the proposed nominal rates are unlikely to be the determining factor in relation to viability and to have an impact on a developer's decision making as to whether to bring forward a development or not. Beneficially though, the proposed nominal rates will help provide funding towards the supporting infrastructure for growth should such developments come forward. This approach is not uncommon and is the Councils proposed approach.

Object

Representation ID: 1797

Received: 12/12/2014

Respondent: Cogent Land LLP (Cogent)

The CIL Guidance identifies that Charging Authorities do not have to set a nil rate; they can set a low rate in instances where developments appear to be unviable. It is the Charging Authoritys prerogative establish the appropriate balance between raising money from CIL to deliver much needed infrastructure to support development in their area and not putting development across the Charging Authority area at risk. In this regard it is noted that the CIL Guidance identifies that there is no requirement for a proposed rate to exactly mirror the evidence .... There is room for some pragmatism.
We fundamentally disagree with this assumption and believe that the inclusion of an unviable CIL rate will have a significant influence over where development takes place and whether site come forward for development. Over 70 Local Authorities across England and Wales, with similar viability concerns, have taken a pragmatic approach to setting their CIL rates and are proposing £0 per sq m CIL rates for both strategic sites and low value areas (list included at Appendix 5).

Object

Representation ID: 1798

Received: 12/12/2014

Respondent: Cogent Land LLP (Cogent)

We would also highlight that if the CIL rate is set incorrectly, and development is prevented from coming forward, that other objectives (such as meeting housing needs and promoting the local economy) will not be met. We are therefore highly concerned that suggests that applying an additional cost to already unviable sites will not have an adverse impact on development in the Borough.
We would therefore ask that the Council reviews their proposed rates and includes a £0 per sq m CIL rate for those Market Areas that are shown to be unviable.

Object

Representation ID: 1799

Received: 12/12/2014

Respondent: Cogent Land LLP (Cogent)

Overview
As discussed in our previous representation, we do not believe that the Council has demonstrated that the proposed CIL rates will not threaten the delivery of the Core Strategy as a whole. We note in the Overview Document that BNP makes the following comment -
Savils have not provided any evidence that would demonstrate that a cost that amounts to less than 2% of the development costs would threaten the economic viability of development across the Council's area and therefore the delivery of the Local Plan.

Comment

Representation ID: 1800

Received: 12/12/2014

Respondent: Cogent Land LLP (Cogent)

Firstly, we would draw the provisions of the CIL Regulations and PPG to the Council attention. Both of which place a positive duty on Local Authorities to demonstrate that their CIL rates are appropriate, as indicated by the key tests at Examination discussed in the introduction. The Council will therefore have to demonstrate at Examination that they have struck an appropriate balance and to justify that balance with evidence at Examination, showing and explaining how the rates will contribute towards the implementation
of their relevant Plan.

Object

Representation ID: 1801

Received: 12/12/2014

Respondent: Cogent Land LLP (Cogent)

Secondly, we do not believe that the Council can demonstrate that the CIL Viability Evidence supports the proposed CIL rates and will not threaten the delivery of the Development Plan. We have set out our specific comments and reasoning on this point below:

Local Context
Analysis of viability results should always be considered in the context of the relevant Development Plan and the identified housing supply. In Local Authorities where there has been a historic under-delivery of housing (both private and affordable), as is the case in SSBC, greater attention needs to be paid to the proposed rates, as if they are set at unviable levels the Development Plan will be put at risk.
It is therefore essential that the proposed CIL rates do not prevent sites coming forward for development.

Object

Representation ID: 1802

Received: 12/12/2014

Respondent: Cogent Land LLP (Cogent)

Whilst we acknowledge that the proposed 'nominal' CIL rate of £20 per sqm in Zone 1 (Market Areas 1-3) represents a small proportion of the development costs, we fundamentally disagree with BNP's assertion that this would not prevent sites from coming forward.
Once set, CIL is a non-negotiable tax. There is subsequently no potential for flexibility or negotiation. It should also be acknowledged that whilst the CIL rate as a % of GDV are relatively low, the proposed CIL rates represent a much higher proportion when illustrated as a % of land value. This is important; as if landowners' aspirations in terms of land values are not met then land will not come forward for development.

Object

Representation ID: 1803

Received: 12/12/2014

Respondent: Cogent Land LLP (Cogent)

As discussed, the viability testing results clearly show that CIL rates cannot be supported in certain areas. It is therefore misleading to quote CIL as a % of GV, as the Councils own evidence demonstates that the proposed CIL rates are not supported by the viability evidence. We would therefore ask that the nominal CIL rates be removed and that an appropriate viability buffer is applied to all the Market Areas.

Object

Representation ID: 1804

Received: 12/12/2014

Respondent: Cogent Land LLP (Cogent)

Three Way Trade Off
Cogent and Savills are concerned to note that BNP is suggesting that already unviable sites should be disregarded or the purposes of CIL testing and will not be a material consideration -
In BNPPRE's experience the proposed residential CIL rates will be a marginal factor in a scheme's viability representing an opportunity cost of cica 4% affordable housing ....In light of this BNP Paribas Real Estate consider that even in setting a nil rate of CIL would not ensure that the Council achieves its target level of 20/30% affordable housing in every site in the Councils area.

Comment

Representation ID: 1805

Received: 12/12/2014

Respondent: Cogent Land LLP (Cogent)

It is therefore important that the current Affordable Housing policy is fully tested in the viability evidence, in order to be able to assess whether meeting these standards will put the housing supply at risk. A view supported by the Dacorum Borough Council CIL Examiner who commented that "the sensitivity testing is useful evidence but for CIL testing purposes the greatest weight must be placed on current (or at least recent) evidence and full policy compliance on matters such as affordable housing content"
We would therefore ask that limited weight is given to this testing. In any event, we would highlight that the sensitivity testing on the larger sites illustrates limited viability in the majority of scenarios tested (see extract below) even with reduced affordable housing. To ensure certainty for both the Council and developers we would therefore ask that the proposed rates are set based on the current affordable housing policy.

Comment

Representation ID: 1806

Received: 12/12/2014

Respondent: Cogent Land LLP (Cogent)

Viability Buffer
Site specific circumstances mean that the economics of the development pipeline will vary from the typical levels identified via analysis of the theoretical typology. This is inevitable given the varied nature of housing land supply and costs associated with bringing forward development. It is therefore important when setting rates that the Local Authorities apply an appropriate viability 'buffer' as discussed in the PPG: "It would be appropriate to ensure that a 'buffer' or margin is included, so that the levy rate is able to support development when economic circumstances adjust. This is particularly relevant in the case of Southend-on-Sea for the following reasons:
*Unplanned Development a significant proportion of development is anticipated to take place on windfall sites. The exact nature and scale of these developments is subsequently unknown;
*Brownfield Sites brownfield sites. The viability testing supporting the CIL rates makes no allowance for site specific abnormal costs; and
*Delivery the area experiences persistent under-delivery and there has been failure to achieve annual housing targets since 2007
Each of these points means that the Council is at a greater risk of failing to deliver its housing numbers. It is therefore of paramount importance that the Council can demonstrate that these risks have been taken in to account when setting their CIL rates. Failure to do so will result in the Regulation 14 test being failed, as the CIL rates would threaten the delivery of the housing supply anticipated to come forward during the Plan period.

Object

Representation ID: 1807

Received: 12/12/2014

Respondent: Cogent Land LLP (Cogent)

Whilst we acknowledge that the Southend-on-Sea viability testing models a range of scales and typologies of development, in an attempt to address the unplanned nature of development in the Borough, we are concerned that the results have been disregarded in the setting of the proposed CIL rates. As discussed in the previous section, the results of the viability testing shows that a significant number of scenarios would be rendered unviable by the proposed CIL rates and that a limited viability buffer has been applied.

The table highlights that a buffer ranging from 0 -40% has been applied across the Market Areas. However, no explanation has been provided as to the level of development anticipated in each area or the justification for a lower buffer being applied in certain areas.

Object

Representation ID: 1808

Received: 12/12/2014

Respondent: Cogent Land LLP (Cogent)

We acknowledge that the Council wishes to keep the Charging Schedule relatively simple. However, the Councils own evidence suggests that certain areas cannot support CIL rate, suggesting that an additional Charging Zone covering Market Areas 1-3 should be included with a rate of £0 per sq m. Based on all of the points set out above, we would therefore suggest that the Council undertakes the following:
*Revised viability testing incorporating the points discussed in Section 2; and
*Application of a minimum viability buffer of 40% to the maximum CIL rates to take account of the persistent under-delivery in housing and reliance on unplanned development (brownfield windfall sites).

Comment

Representation ID: 1812

Received: 12/12/2014

Respondent: Cogent Land LLP (Cogent)

Conclusions
This Representation has been prepared by Savills on behalf of Cogent Land LLP. As set out at the start of these representations there are three key tests at Examination:
i)That "the charging authoritys Charging Schedule is supported by background documents containing appropriate available evidence
ii)The 'the proposed rate or rates are informed by and consistent with, the evidence on economic viability across the charging authoritys area, and
iii)That 'evidence has been provided that shows the proposed rate would not put at serious risk overall development

Object

Representation ID: 1813

Received: 12/12/2014

Respondent: Cogent Land LLP (Cogent)

The assessment of planned development and its viability is therefore an inherent test of the Examination, making the following points significant:
*Unviable Rates - The current proposed CIL rates are unviable and risk rendering a significant proportion of the housing supply across the District undeliverable;
*Incorrect Assumptions - A number of the key viability inputs adopted by PBA are incorrect. This results in an over-estimation of the maximum CIL rates that can be supported;
*Housing Delivery Cogent believes it is important to highlight that an unviable CIL poses a real risk of a materially reduced housing delivery, which in turn will affect the level of receipts collected. This is important as the Council is relying on CIL contributing to the significant funding gap in the Borough;
*Charging Zones - scale of development. Whilst the principle of applying differential rates is not questioned, the proposed Charging Zone 1 includes areas that the viability evidence proves cannot support a CIL rate; and
*Housing Supply There has been persistent under-delivery housing supply is heavily reliant on unplanned development across the Borough. This is particularly important as the future housing requirements for the Council, based on emerging information from the Thames Gateway Partnership, indicates significantly higher numbers than previously delivered under the Core Strategy. It is therefore essential that a higher buffer (minimum of 40%) is incorporated to reflect the already existing risk to the housing supply and to ensure the delivery of infrastructure and community facilities required to support the enhanced level of growth across the Borough, whilst ensuring that SBCs strategic objectives are met.

Object

Representation ID: 1814

Received: 12/12/2014

Respondent: Cogent Land LLP (Cogent)

In light of this, Savills and Cogent would recommend that SSBC review their supporting "appropriate available evidence" In particular we would ask that the Council undertakes the following:
*Undertaking additional viability work, incorporating the points raised above, to ensure that the proposed CIL rates are viable. In particular, this should look at the blended profit margins that are being applied;
*Removing 'nominal' rates, and
*Reviewing the proposed CIL Charging Zones in light of the above.

Comment

Representation ID: 1815

Received: 12/12/2014

Respondent: Cogent Land LLP (Cogent)

Savills and Cogent consider it necessary to stress that if the CIL level is set too high, it will have a negative impact on a large proportion of development coming forward, especially bearing in mind the historic under delivery in the Borough.