. Step 2: Calculate the Residual Land Value: The next step is to work backwards from that hypothetical sales value to find out how much the developer could afford to pay for the site. When is an affordable housing financial viability assessment required? Published: 13 November 2014. %%EOF 3.7 Residual values have been generated that reflect the Affordable Housing targets and also a contribution of £10,000 per unit to additional Section 106 items including for example… trailer x�b```f``���$�x���Y862`�����k3��31Qg��#cޯ�5� This is far below the affordable housing policies of the local authorities in this study, which on average require that 28% of new homes built should be affordable homes. 0000000016 00000 n %PDF-1.4 %���� 3.7 Residual values have been generated that reflect the Affordable �a�2@��9���^gq�m�}Tdr5[�.\j01 The final step is to work backwards from the benchmark land value to calculate what sales revenue the developer needs to generate in order to turn a reasonable profit. 5. 0000000636 00000 n Step 3: Calculate the Benchmark Land Value:  The benchmark land value is the value of a site in its existing use (say, use as an office building) plus a margin which could be between 10-30% (the margins quoted in the SPG). The assessment should: generate a residual land value, include a benchmark land value against which the viability of the development can be assessed, include evidence to support all values and costs included in the assessment, including the benchmark land value, identify and justify all the assumptions used in the viability assessment … This is step 5. In the workshop we also run through calculations showing how early and late viability reviews work  (post-planning) under the Mayor’s SPG. Table 1 displays the count of all properties by type, the maximum and minimum prices achieved in the sample along with the median and mean values. Viability assessment should not compromise sustainable development but should be used to ensure that policies are realistic, and that the total cumulative cost of all relevant policies will not undermine deliverability of the plan. TWO Methods of delivery 2.1 On all sites consisting of 10 or more dwellings, developers are required to make a contribution towards the provision of affordable housing in line with policy CP6, subject to viability. Example viability assessment scenarios 32 Appendix 2. affordable housing targets of 0% through to 50%, including 10%, 20%, 30%, 40% and 50%. In his Supplementary Planning Guidance (SPG) on Affordable Housing and Viability issued last August, Sadiq Khan refers to the ‘circularity’ this causes: land prices are higher than they should be because buyers and sellers are not factoring in delivering much affordable housing. Affordable Housing Viability Assessments, provide a detailed analysis of a development costs and developable value. The Mayor wants to stop this by ’embedding’ delivery of policy compliant levels of affordable housing into land prices. The report will determine whether or not the levels of affordable housing and CIL should be amended from current quantities. Delivery of units on that basis simply would not generate enough sales value for the developer to have paid the price they need to pay for a site with a valuable existing office use. report: ‘Stage 1 Assessment of the Viability of Affordable Housing, ommunity Infrastructure Levy and Local Plan.’ 2. Please contact us for more information. startxref In fact, in order to bother selling the site at all, the owner will want to get a bit of a margin over and above that existing use value (often referred to as “existing use plus”). This aims to recognise the reality that if a site has a valuable price in its existing use, no one is going to sell it for a lower price than that. 1.1 The aim of this Affordable Housing Viability Assessment (AHVA) is to inform Pembrokeshire County Council’s Local Development Plan (LDP), in accordance with the requirements of the Welsh Assembly Government’s Technical Advice Note 2 (TAN 2) which emphasises the importance of testing the viability of affordable housing policy targets. City and County of Swansea Affordable Housing Viability Study – August 2013 Page 5 1.7 This study focuses on the percentage of affordable housing sought on mixed tenure sites and the size of site from above which affordable housing is sought (the site size threshold). These can include costs associated with unusual ground conditions, contamination, etc. 0000001505 00000 n 0000004167 00000 n Affordable Housing Viability Assessments Affordable Housing can be a significant cost to Residential and Mixed Use development schemes and providing Affordable Housing in compliance with the Local Authority’s target can render some development schemes unviable. From: Homes and Communities Agency. 0000006657 00000 n For example, if a site is delivering a proportion of market and affordable housing (including starter homes) and, perhaps commercial uses, they can share development costs (including the provision of services and other infrastructure) and help improve the viability of the custom build element of a scheme. They paid more than the benchmark land value for their sites, yet the Mayor is using the benchmark value to calculate what he deems should be viable for them to provide. The role for viability assessment is primarily at the plan making stage. endstream endobj 168 0 obj<> endobj 169 0 obj<> endobj 170 0 obj<>/Font<>/ProcSet[/PDF/Text]/ExtGState<>>> endobj 171 0 obj<> endobj 172 0 obj<> endobj 173 0 obj<> endobj 174 0 obj[/ICCBased 182 0 R] endobj 175 0 obj<> endobj 176 0 obj<> endobj 177 0 obj<> endobj 178 0 obj<> endobj 179 0 obj<>stream This post is part of the following categories: In this blog post, we explain in simple terms how a developer is now expected to set the level of affordable housing which the Mayor of London deems viable for a particular site. But for those developers who bought land before the SPG was published, what is viable for them to deliver in the real world and what the Mayor deems viable for them to deliver simply may not tally. ���@u�@��kT�ܻ�`�$�_�'�t߇eB6@�߇fxx�5�FH2 & [0��$ So the next step is to calculate this value. 1.3 The Council is building an evidence base alongside the viability work. 3.13 Figure 3.2 shows the residual values for a 30 dph scheme for each of the market value areas. In most cases this will be far less that the developer actually paid for a site. Sorry, your blog cannot share posts by email. The SHMA The contribution will normally be greatest in the form of affordable housing … Financial Viability Assessments based on such a premise are unlikely to carry any weight. Most frequently, VAs are used to seek a reduction in the amount of affordable housing which a LPA’s policy would otherwise require. 0000001655 00000 n AFFORDABLE HOUSING ECONOMIC VIABILITY ASSESSMENT GLOSSARY OF TERMS (The scope of this glossary is restricted to terms used in the study) A Abnormal Development Costs - Costs that are not allowed for specifically within normal development costs. NPTCBC – Affordable Housing Viability Assessment Procedures – March 2014 4 Number of Units This will also include the size of each unit in square metres (gross and net), number of beds and mix, car parking provision & number of storeys. Demonstrate the level of affordable housing that can be supported by a scheme; Produce a report confirming our findings; Negotiate directly with the Council or their representatives; Represent you in planning appeals – informal and formal appeal process; Act as an Expert Witness in support of the viability of the scheme Step 3: Calculate the Benchmark Land Value: The benchmark land value is the value of a site in its existing use (say, use as an office building) plus a margin which could be between 10-30% (the margins quoted in the SPG). Herbert Smith Freehills LLP is authorised and regulated by the Solicitors Regulation Authority. Step 5: How much affordable housing can the developer afford to deliver on this site, factoring in the benchmark land value? Adams Integra was instructed by Wiltshire Council to produce an Affordable Housing Viability Assessment that would address a number of issues, namely: Test the policy position of the Core Strategy. The Council wished to test viability for a range of sites, and an appraisal approach was undertaken that would permit this reflecting a prescribed level of affordable housing and housing mix. an informed assessment of the viability of any such percentage figure is a central feature of the Planning Policy Statement (PPS3) on affordable housing. Swansea Affordable Housing Viability Study – May 2016 Page 12 Testing assumptions 3.6 The analysis is based on a range of policy tests. For land sold now, the effect of the Mayor’s new approach may be to drive down prices to the benchmark land value level. This is part of our ‘back to basics’ affordable housing series. 167 17 There is a presumption that affordable housing … A viability assessment which supports the affordable housing requirements that will be set out as policy in the emerging Core Strategy/Local Plan and … ANALYSIS: A recent High Court judgment gives important guidance on valuation evidence for the purposes of viability assessments in planning applications and appeals. Viability Assessment under the Government’s new ‘Planning Rule Book’ ... (governing affordable housing and other obligations) are ‘iterative’ in drafting, ‘realistic’ and ultimately ‘deliverable’ upon adoption with affordable housing requirements to form fixed positions in plans. 1.7 To undertake the viability testing, a range of ‘typical example’ sites has been developed into Development Viability Assessment Models (DVAMs). Affordable Housing and Viability Assessment Process Information regarding the process for assessing affordable housing and viability can be found below. LPAs require an AHVS as part of their evidence base for use in preparing LDPs. Residual values at 30 dph. A district-wide affordable housing viability assessment for housing delivery over the lifetime of the Core Strategy/Local Plan.