Transcript Savills Navy template

Viability Testing of CIL and Local Plans
Effective Practice
Melys Pritchett BSc (Hons) MRICS
Associate Director, Development Research & Consultancy
23 September2013
savills.com
Contents
The emerging picture
Aligning objectives
Balancing risk
Achieving consistency
The national position
39
103
69
28
25
25
• Committed to CIL
• Producing their evidence base
• Preliminary Draft Charging Schedule stage
• Draft Charging Schedule stage
• Examination stage
• Charging Schedule Adopted or Implemented
Source: Savills, 22 September 2013
CIL Rate (% of sales value)
Max Resi Rate
25%
Source: Savills
Min Resi Rate
30%
Draft Consultation
Preparing evidence/Charging Schedule
£800
15%
£600
10%
£400
5%
£200
0%
£0
Local Authorities with a published rate of CIL
Relative Sales Value per sq.m.
20%
Blaenau Gwent
ondda Cynon Taff
Mansfield
Rossendale
Caerphilly
Carlisle
West Lindsey
Rotherham
Tameside
Fenland
Allerdale
Wakefield
Preston
Powys
Flintshire
elford and Wrekin
Wellingborough
t Northamptonshire
South Derbyshire
Waveney
kley and Bosworth
Rugby
Gloucester
Leeds
Ribble Valley
Dover
Ryedale
Worcester
Huntingdonshire
Medway
Cheshire East
Broadland
South Lakeland
Derbyshire Dales
St Edmundsbury
Wiltshire
Braintree
ntral Bedfordshire
Harlow
West Dorset
Canterbury
Basildon
Dartford
th Cambridgeshire
bridge and Malling
West Oxfordshire
West Berkshire
Broxbourne
Tunbridge Wells
Tandridge
eigate & Banstead
Sevenoaks
Greenwich
Hertsmere
Harrow
Elmbridge
Lambeth
Islington
CROSSRAIL
Wide variation in the emerging rates of CIL
Relative Sales Value (RHS)
Adopted
£1,200
Submitted for examination/examination closed
Preliminary Draft Consultation
£1,000
Synergy of objectives
Local authority
Developer
Land to come forward
for development
Land to come forward
for development
to meet Local Plan
objectives including
housing targets
to deliver the return
on capital expected
by corporate investors
The third dimension
Local authority
Developer
Land to come forward
for development
Land to come forward
for development
to meet Local Plan
objectives including
housing targets
to deliver the return
on capital expected
by corporate investors
Landowner
Return to landowner for it
to be released for
development
What is a competitive developer return?
House builder objectives have shifted from volume
to margin, to meet market expectations
Competitive return across the cycle
= 20%+ margin on revenue
across the market cycle
Does CIL come out of land value?
Residual land
value that can be
created
YES
Return to the
landowner
NOT IF the return
is less than
threshold land
value
Is CIL policy designed to push down land value?
Not in the NPPF
To ensure viability, the costs of any requirements likely to be applied to development, such as
requirements for affordable housing, standards, infrastructure contributions or other
requirements should, when taking account of the normal cost of development and mitigation,
provide competitive returns to a willing land owner and willing developer to enable the
development to be deliverable.
NPPF (para 173)
Is CIL policy designed to push down land value?
Not in the CIL Guidance
Charging authorities should avoid setting a charge right up to the margin of economic viability
across the vast majority of sites in their area.
CIL Guidance Apr 2013 (para 30)
Both RICS and Harman guidance are based on
market evidence of land value
Establishing a site value benchmark for viability where plan
policies are being tested
Reduce by
adjusting in light of
policies
Market Value
assuming no
planning obligations
But not below a
‘boundary’ reflecting
competitive returns
Threshold at which
land can be
assumed to come
forward
Add % premium based
on evidence that
represents competitive
returns in local market
conditions
Common Ground
Assumptions made in
setting and/or adjusting
the boundary or
premium should be
evidence-based and
draw on local expertise
Current Use Value
(Market Value in
existing use)
RICS approach
LHDG approach
Is CIL policy designed to push down land value?
Not in the Harman Guidance
In setting out a Threshold Land Value, it is important to avoid assuming that land will come
forward at the margins of viability.
To guard against this, planning authorities should consider incorporating an appropriate
‘viability cushion’ in the testing in order to ensure that the sites upon which the Local Plan
relies in the first five years will, on the balance of probability, come forward as required.
Harman Guidance Jun 2012 (page 30)
Balancing risk
 Historic delivery
 Historic Section106 achievement
 Local Plan policy costs
 Benchmark land value
 Land supply characteristics and profile
 Viability buffer
What is the delivery context?
Is delivery meeting housing targets?
Evidence of historic Section 106 payments is relevant if:
 the site has been delivering recently
 the context in which delivery was viable is properly understood
 overall delivery is meeting housing targets
Section 106 and CIL
 Explicit policy on the balance between Section 106 and CIL
 Draft regulation 123 list – what will be excluded from Section 106 funding?
 Proposed changes to the Regulations – what will be excluded from Section
278 funding?
 The proposed changes to the regulations will tighten the restriction on pooling
of Section 106
 Must be allowed for within the viability appraisals
Affordable housing and CIL compete for the same pot
Local Plan
Viability
CIL
Affordable housing
Other Section 106
Standards
The impact of the land value benchmark
EUV+
land value
benchmark
Higher
threat to
delivery
Market
land value
benchmark
Lower
threat to
delivery
What is the land supply?
 What land underpins the Local Plan?
 Is there a 5 year land supply identified?
 What types of site make up most of the Local Plan land supply?
 What types of site?
 In which local sub-markets?
The viability conclusions should relate back to these answers
Applying the viability buffer
‘Generosity’ on all assumptions including contingency
v
Apply a % reduction to a theoretical maximum CIL rate
v
Set land value to include a viability cushion
CIL Rate (% of sales value)
Max Resi Rate
25%
Source: Savills
Min Resi Rate
30%
Draft Consultation
Preparing evidence/Charging Schedule
£800
15%
£600
10%
£400
5%
£200
0%
£0
Local Authorities with a published rate of CIL
Relative Sales Value per sq.m.
20%
Blaenau Gwent
ondda Cynon Taff
Mansfield
Rossendale
Caerphilly
Carlisle
West Lindsey
Rotherham
Tameside
Fenland
Allerdale
Wakefield
Preston
Powys
Flintshire
elford and Wrekin
Wellingborough
t Northamptonshire
South Derbyshire
Waveney
kley and Bosworth
Rugby
Gloucester
Leeds
Ribble Valley
Dover
Ryedale
Worcester
Huntingdonshire
Medway
Cheshire East
Broadland
South Lakeland
Derbyshire Dales
St Edmundsbury
Wiltshire
Braintree
ntral Bedfordshire
Harlow
West Dorset
Canterbury
Basildon
Dartford
th Cambridgeshire
bridge and Malling
West Oxfordshire
West Berkshire
Broxbourne
Tunbridge Wells
Tandridge
eigate & Banstead
Sevenoaks
Greenwich
Hertsmere
Harrow
Elmbridge
Lambeth
Islington
CROSSRAIL
We are not yet seeing a common approach that
reflects national policy consistently
Relative Sales Value (RHS)
Adopted
£1,200
Submitted for examination/examination closed
Preliminary Draft Consultation
£1,000
Visit www.savills.co.uk/cil
savills.com