Community Infrastructure Levy (CIL)

Object

Representation ID: 1718

Received: 30/01/2015

Respondent: Cogent Land LLP (Cogent)

The viability testing has been undertaken across a range of areas within the Borough and across a range of scales and typologies of development in an attempt to address this. The results of this testing shows that a significant number of scenarios across a significant number of areas would be rendered unviable by the proposed CIL rates (in particular the "nominal rates"). We are therefore concerned that a range of development types across all identified value areas in the Borough will not come forward for development if an unviable CIL rate is applied. A point further strengthened by the fact that a number of these development scenarios are already being shown to be on the margins of viability prior to the introduction of a CIL charge.

Object

Representation ID: 1719

Received: 30/01/2015

Respondent: Cogent Land LLP (Cogent)

This is a serious concern, indicating that the areas are at the margins of viability and therefore the application of a CIL charge could threaten the delivery of the Plan. We welcome therefore the Council's inclusion of a buffer on the proposed viability rates, but question whether the buffer is set at the correct level given the assumptions made in the testing scenarios, as discussed further in the sections below.

Object

Representation ID: 1720

Received: 30/01/2015

Respondent: Cogent Land LLP (Cogent)

When taking an average of completions across the plan period, SBC is on target to meet the housing need identified in the Core Strategy. However, we consider it unacceptable for a Council to use an 'average' figure to make up for shortfall in completions within other years and effectively 'mask' a persistent under delivery. As such we would expect a 20% buffer to be applied to the calculation of Objectively Assessed Need (OAN) to take account of the persistent under delivery in housing across the Borough since 2007. We therefore believe that the Council currently has a housing land supply of 4.75 years, as applying a 20% buffer to the OHN indicates a need for 2,003 dwellings.

Based on this above analysis, it is therefore vital that all identified sites in the Borough come forward. The Council should therefore take steps to ensure that the CIL charges are set well below the margins of viability to ensure that they do not threaten the delivery of the identified housing need. An argument supported by the CIL Guidance, which states that "charging authorities should set a rate which does not threaten the ability to develop viably the sites and scale of development identified in the relevant Plan".7

Object

Representation ID: 1721

Received: 30/01/2015

Respondent: Cogent Land LLP (Cogent)

Values
The approach taken by BNP in assessing the BLVs is complex and does not appear to be directly linked back to the five year land supply. The four BLVs quoted do not appear to be supported by market evidence and there is no explanation of how these BLVs apply to each of the identified market areas.
We would therefore ask that SBC provide further market evidence and commentary to explain, in relation to each market area, which BLV is most appropriate and how this relates back to the land supply coming forward in these areas (i.e. which BLV is most appropriate in each market area). This will ensure that the analysis of the viability appraisals in each area is appropriate given the nature of the sites coming forward for development.

Comment

Representation ID: 1722

Received: 30/01/2015

Respondent: Cogent Land LLP (Cogent)

Application
Large, strategic sites require a significant amount of land to enable them to deliver certain items of on-site infrastructure, such as public open space and educational facilities. Consequently the reduction from gross land area to net developable area can range substantially with reductions ranging from 40 - 60%.
Whilst the development density applied to the net site area may be appropriate within the Viability Study, the gross land take is particularly important when comparing the Residual Land Value (RLV) with the BLV. If the BLV is reported on a per net acre basis, it is therefore important that the RLV is applied to the correct net area. Similarly, if the BLV is on a gross basis then the RLV should be applied to the total (gross) site area.
Looking at the viability summary tables contained in the BNP viability study it is unclear whether the BLV has been applied to the net or gross site area. We would therefore ask that BNP confirm what assumption has been made as this is critical in establishing whether or not the proposed rates of CIL are viable.

Object

Representation ID: 1723

Received: 30/01/2015

Respondent: Cogent Land LLP (Cogent)

Professional Fees
CLL is concerned that the level of professional fees adopted is too low (10% across all typologies). In our experience, the level of professional fees do not vary across location or market areas but depend on the size and complexity of the site in question. We would therefore advocate that large greenfield and complex brownfield sites are likely to attract higher professional fees on account of enabling works and additional abnormal costs (i.e. remediation, demolition).
We would therefore request that a minimum allowance of 12% for professional fees be adopted across all typologies to reflect the nature of the five year land supply coming forward.

Comment

Representation ID: 1724

Received: 30/01/2015

Respondent: Cogent Land LLP (Cogent)

Cashflow & Distribution of Costs
We understand that BNP adopt a bespoke spreadsheet model to undertake the appraisals for each of the typologies. Within the Viability Study, the appraisal summary sheet detailing the inputs for each typology has been attached as an appendix to the report. There is little explanation in the viability assessment on the distribution of the costs throughout the development period. We would welcome further disclosure of the cashflow assumptions used during the appraisals.

Object

Representation ID: 1725

Received: 30/01/2015

Respondent: Cogent Land LLP (Cogent)

Developer's Profit
The minimum acceptable profit margin for the lending institutions and national house builders is a minimum of 20% on GDV blended across both the private and affordable dwellings. At present, the viability appraisals assume 20% on GDV for the private housing and 6% on cost for the affordable, which equates to a blended rate of approximately 17.5% on GDV.
We would therefore ask that an allowance of 20% on GDV is included in the viability testing. This profit level was endorsed via the Manor appeal decision in Shinfield. It has also been included in Maldon District Council's supporting viability work produced by HDH Planning & Development who are currently preparing supporting viability evidence for 24 Local Authorities.14

Object

Representation ID: 1726

Received: 30/01/2015

Respondent: Cogent Land LLP (Cogent)

We have reviewed the Viability Study supporting the PDCS, in particular the results of the viability appraisals run by BNP. Our client's particular concern relates to the "nominal" rate of £20 per sq m proposed by BNP, which has been applied to Market Areas 1-3.
We have reproduced the viability appraisal results for Typologies 7-9, which are based on policy compliant affordable housing (30%) provision and a residual Section 106 allowance of £1,012 per unit:
All of these results show that the Market Area 1-3 sites cannot support a CIL rate, even with varying BLVs. A point acknowledged by BNP, who commented "the results indicate that viability of residential development is currently challenging in certain locations". Even with reductions in affordable housing levels, BNP acknowledges that "the results indicate that viability of residential development is currently challenging in certain locations". These certain locations refer to Market Areas 1-3, with Areas 2-3 remaining widely unviable and Area 1 completely unviable.

Object

Representation ID: 1727

Received: 30/01/2015

Respondent: Cogent Land LLP (Cogent)

We therefore question how a CIL rate of £20 per sq m can be justified when the supporting viability evidence clearly shows that it is unviable. A point that becomes even harder to understand when you consider the local housing supply position, which indicates a reliance on windfall sites and a previous under-delivery. The Council does not therefore know where a significant amount of housing will be delivered, which puts an even greater importance on the CIL rates be set at a viable rate in all market areas. The following commentary by BNP is therefore concerning:
"For residential schemes, the application of CIL is unlikely to be an overriding factor in determining whether or not a scheme is viable. When considered in context of total scheme value, CIL will be a modest amount, typically accounting for between 0.9% and 1.6% of value. Some schemes would be unviable even if a zero CIL were adopted. We therefore recommend that the Council pays limited regard to these schemes."