Community Infrastructure Levy - Draft Charging Schedule (Nov 2014)

Comment

Representation ID: 1786

Received: 12/12/2014

Respondent: Cogent Land LLP (Cogent)

The majority of sites coming forward in Southend-on-Sea are brownfield sites. There is subsequently a strong likelihood that additional abnormal costs will be associated with their redevelopment, which will incur additional professional fees. We would also highlight that as the BLVs for these sites are based on existing use value, it is assumed that these sites do not benefit from planning permission. In our experience the following professional fees would therefore apply:
*Planning application fees;
*Planning consultant fees;
* Architects;
*Quantity Surveyor;
*Engineer;
*Site surveys (i.e. building, demolition, asbestos, ground conditions);
*Building Regulation fees; and
*NHBC and EPC certificates.
In light of the above and the nature of the sites coming forward in the Borough over the plan period, we would recommend that 12% would be a suitable allowance for professional fees.

Comment

Representation ID: 1787

Received: 12/12/2014

Respondent: Cogent Land LLP (Cogent)

Abnormals
We note that BNP have confirmed in the response document that no abnormal costs have been factored in to the appraisals and it is not possible or reasonable to incorporate abnormal costs such as for remediation within an area wide viability study. These costs are site specific and as such will vary across all sites. The main reason for In light of this, we would recommend that the proposed CIL rates are set with a significant buffer (minimum 40%). This will ensure that there is sufficient room for site specific abnormal costs and prevent the CIL rates being set at the margins of viability.

Object

Representation ID: 1788

Received: 12/12/2014

Respondent: Cogent Land LLP (Cogent)

Benchmark Land Values
In our PDCS representation, we questioned the methodology and assumptions relating to the BLVs. We are therefore disappointed to note that the Council has failed to acknowledge our request for confirmation of which BLV is most appropriate for each market area. This is essential as the viability results vary substantially depending on which BLV is applied.
It is currently unclear how BNP has established which BLVs are appropriate in the absence of a Site Allocations Document to understand what type of site will be coming forward for development in each value area. We would therefore ask that the Council provides confirmation of which BLV is applicable to each typology in each of the Market Areas. This will ensure that the analysis and interpretation of the viability results is correct.

Object

Representation ID: 1789

Received: 12/12/2014

Respondent: Cogent Land LLP (Cogent)

Residual Section 106 Assumptions
Having now had the opportunity to review the revised draft Regulation 123 list and Planning Obligations SPD, we remain concerned that the assumption within the BNP viability appraisals for Section 106 and 278 obligations (£1,012 per unit)is not reflective of the Councils proposed strategy post -CIL implementation.
In the Planning Obligations SPD, we note that reference is made to an allowance of £850 per unit for Section 106 obligations. We would therefore ask that the Council provide a breakdown of the £1,012 per unit against the items indicated in the SPD to remain under Section 106.
Finally, we would note that additional comments in respect of the Planning Obligations SPD have been submitted by Savills on behalf of Cogent.

Object

Representation ID: 1790

Received: 12/12/2014

Respondent: Cogent Land LLP (Cogent)

Alternative Viability Appraisals
Each of the points raised above will result in additional development costs for each of the typologies modelled. This will subsequently have a negative impact on the residual land value. We believe that BNP have under-estimated the costs associated with brownfield development across the Borough, which would reduce the capacity for sites to support CIL even further.
Given these concerns, we have produced a set of alternative viability appraisals in order to demonstrate the impact of the underestimation of these inputs on the residual land values (RLV). For the purpose of reaching a consensus on appropriate residential CIL rates, and to enable the Examiner to make direct comparisons between our evidence and that of the Council, we have focused on two points which we feel are of the upmost importance:
*Developer's Profit
*Professional Fees

Object

Representation ID: 1791

Received: 12/12/2014

Respondent: Cogent Land LLP (Cogent)

It should be noted that failure to run sensitivity testing on consider the additional points (i.e. Section 106) discussed above does not indicate acceptance of these assumptions. However, until further evidence is provided by the Council in support of these assumptions we have excluded them from our analysis. We therefore reserve the right to submit further comments and/or sensitivity testing once this additional information has been made available.
For simplicity, using the same assumptions BNP has used for T3 - 12 Houses , we have prepared a base appraisal and then undertaken subsequent sensitivity testing on alternative assumptions as set out in the table below.

Comment

Representation ID: 1792

Received: 12/12/2014

Respondent: Cogent Land LLP (Cogent)

BNP have provided their viability appraisals in Appendix 1 of the Viability Study. We have therefore been able to use the appraisal summary of T2 -12 Houses to re-create, as close as possible, the residual land value reported by BNP. In doing so we have used ARGUS Developer appraisal software and incorporated the assumptions set out in Table 1.
We have subsequently used the above RLV as our baseline position for comparison purposes. The results of the sensitivity testing for the alternative assumptions is set out in Table 3:

Object

Representation ID: 1793

Received: 12/12/2014

Respondent: Cogent Land LLP (Cogent)

When both the profit margin and professional fees are combined, in appraisal D, the cumulative impact is significant and results in the site becoming unviable. This is important, as if assumptions are set incorrectly (as in the BNP appraisals); the appraisals over-estimate the capacity for CIL.
We would therefore ask that further viability testing is undertaken on all of the typologies, incorporating the points discussed above.

Are the proposed rates informed by, and consistent with, the evidence on economic viability across the Borough?

Object

Representation ID: 1794

Received: 12/12/2014

Respondent: Cogent Land LLP (Cogent)

No further viability testing has been undertaken since the Viability Study (May 2014) and Viability Addendum (July 2014), which was produced in support of the PDCS. We have therefore assumed that these documents form the Councils appropriate available evidence and have set out our comments below.

Interpretation of Results
As discussed in our PDCS representation, the PPG CIL Guidance clearly states that shows that the areas includes a zone, which could be a strategic site, which has low, very low or zero viability, the charging authority should consider setting a low or zero levy rate in that area. The same principle should apply where the evidence shows similarly low viability for particular types and/or scales of We are therefore concerned that despite the Viability Study indicating that there is limited capacity to pay CIL in the low value areas across the Borough that a flat residential rate of £20 per sq m has been proposed across Market Areas 1-5.
We note that in the CIL Overview Document BNP has commented that: The CIL 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 to 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.
As BNP highlight, the PPG welcomes Local Authorities taking a pragmatic approach to setting their rates. However, do not believe that the Council has justified their interpretation of the viability results and subsequent proposed CIL rates. We would therefore ask that the Council confirms the following:
1) Which BLV is relevant for each typology?
2) Which typologies are anticipated to be most prevalent in each Market Area?
Without this information it is hard to understand how the proposed CIL rates have been determined. For example, looking at the results for Market Area 6 (South Central Area) it is clear that the results vary significantly depending on the typology and BLV being applied.

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.