Final Affordable Housing Economic Viability Assessment

101 Pages·2010·2.15 MB·English

Oldham
Local
Development
Framework
Affordable Housing Economic
Viability Assessment

September 2010
1 Availability of Document 2
2 Executive Summary 3
3 Abbreviations 5
4 Glossary 6
5 Introduction 8
6 Background 10
7 Need for Affordable Housing in the Borough 13
8 Methodology 16
8.1 Planningthe Assessment 16
8.2 Assessment Model 19
8.3 Site Revenue 21
8.4 Land Acquisition 23
8.5 Build Costs 25
8.6 Abnormals 26
8.7 Finance 27
8.8 Total Cost and Projected Profit 28
9 Results 29
10 Assessment of Alternative Scenarios 45
11 Delivery of Affordable Housing 58
12 Issues and Challenges 59
13 Conclusions and Recommendations 63
14 Appendices 65
14.1 AppendixA - Gross Developmentof NotionalSchemes by
65
Ward
14.2 AppendixB - Land Purchase Price of NotionalSchemes by
84
Ward
14.3 AppendixC - Land AcquisitionCosts 86
14.4 AppendixD - Build Costs of NotionalSchemes 88
14.5 AppendixE - Total DevelopmentCost 94
14.6 AppendixF - Project Profit 96
14.7 AppendixG - Worked example of methodology 98
Final Affordable Housing Economic Viability Assessment
1 Availability of Document
1.1 Thisdocumentcanbemadeavailableinotherformats.Pleasecall01617701672for
information.
2 Final Affordable Housing Economic Viability Assessment
2 Executive Summary
2.1 The Affordable Housing Economic Viability Assessment (the assessment hereafter)
looks at the potential implications that affordable housing would have on the viability
of housing developments throughout the borough.
(1)
2.2 PlanningPolicyStatement3onHousing(PPS3) requireslocalplanningauthorities
tosetanoveralltargetfortheamountofaffordablehousingtobeprovidedwithintheir
LocalDevelopmentFramework(LDF),supportedbyaneconomicviabilityassessment.
2.3 The main aim of the assessment is to identify an appropriate level of developer
contributiontowardsaffordablehousingthatwillnothaveadetrimentalimpactonthe
viability of housing development throughout the borough. The assessment tests a
series of variables, including affordable housing thresholds, to examine the impact of
seeking affordable housing on development viability, through the use of a clear and
robust methodology that will allow regular monitoring and updating.
2.4 The assessment tests various thresholds in relation to the percentage of Gross
Development Value (GDV) available for affordable housing. The thresholds tested
were 5%, 7.5%, 10% and 15%. The split between social rented and intermediate
affordable housing will be an important component of the housing mix on a site,
however,itisnotnecessarytofeedthisintothemodelasthefinalfigureproducedby
the model will be the sum of money that is available for affordable housing whether
this is delivered through social-rented or intermediate housing.
2.5 Thisisastrategicassessment. Itinitiallyfocusesondevelopmenttypesthatarelikely
to come forward by the market. The model reflects a range of variables that take
account of different development factors across the borough. The assessment does
not seek to test the viability of specific sites. Development proposals may require a
site-specificeconomicviabilityassessmenttoreflecttheirindividualcircumstancesas
andwhenaplanningapplicationissubmitted. Thiswillneedtotakeaccountofarange
of factors affecting the local housing market.
2.6 This assessment has taken into account the current property climate and the latest
information available has been used in constructing the model used to inform the
assessment. The assessment model culminates in a projected profit figure which is
then used to determine the proportion of the GDV that can go towards affordable
housing provision, whilst ensuring that the proposed development remains viable for
the developer to proceed. This represents the baseline position. It is recognised that
inthecurrentclimateobtainingaffordablehousingprovisionmaybedifficult,however,
theassessmentwillneedtotakealongtermviewto2026onhowtheviabilityofsites
can help to meet the shortage in affordable housing over the longer term.
2.7 In order to understand how the ability to deliver affordable housing may change we
haveconsidered'poor','average'and'good'marketconditionsthroughalteringspecific
factorsbuiltintothemodel.Thebaselinepositionrepresents'average',whilstthe'poor'
is represented by a fall in GDV and build out rate, and 'good' is represented by an
increase in GDV and build-out rate.
1 June2010,CommunitiesandLocalGovernment
Final Affordable Housing Economic Viability Assessment 3
2.8 The findings of the assessment demonstrate that the viability of developments and
their ability to provide affordable housing varies significantly across the borough
dependinguponthelocationofthedevelopmentandtheland/salesvaluesachieved
within that area. There are issues around the viability of development in Alexandra
wherethetotalcostofdevelopmentconsistentlyexceedsthetotaldevelopmentsales
value, which will prevent developments coming forward unless there is gap funding
available. Developments are most viable within the three Saddleworth wards.
2.9 Informed by the findings this assessment proposes a number of recommendations:
a. Itisproposedtocontinuetoapplytheminimumsitethresholdsetoutinnational
policy, PPS3.
b. It is proposed to continue with the borough-wide approach (proposed in the
Preferred Options Core Strategy) with a target to 7.5% of the total development
sales value for the provision of affordable housing within the borough. The
preference will be the affordable housing to be provided on-site in partnership
with an RSL that forms part of the Oldham Housing Investment Partnership.
c. The assessment does not identify a particular proportion of social rented or
intermediate affordable housing to be delivered. The general presumption on a
boroughwide basis is that 80% should be in the form of social rented
accommodation and 20% intermediate housing. However, it is also important to
consider the type of affordable housing to be delivered on a case by case basis
dependingontheneedswithintheboroughandlocality,forexample,thecurrent
preferenceisforon-sitesociallyrentedaffordablehousinginpartnershipwithan
RSL.
d. Itisproposedtoupdatethisassessmentonannualbasis,aspartoffutureAMRs
after the Joint DPD has been adopted, to take into account changes in market
conditions and other circumstances, where appropriate.
e. It is proposed that a proforma be created, setting out the information required
from developers when submitting an economic viability assessment.
2.10 The findings of the assessment will be used to inform the council's approach to
affordable housing and preparation of our LDF. In particular it will help to inform the
settingofanaffordablehousingsitethresholdandtargets.Thefindingswillalsosupport
deliveryofthecouncil'sAffordableHousingStrategyandmaybeusedbyDevelopment
Management when assessing planning applications, or when undertaking
pre-application discussions, to inform decision-making around affordable housing
provision.
2.11 AdraftassessmentwassubjecttopublicconsultationinSpring2010. Thefindingsof
thatconsultationhavebeentakenonboard,whereappropriate,inpreparingthisfinal
assessment.
4 Final Affordable Housing Economic Viability Assessment
3 Abbreviations
Annual Monitoring Report - AMR
Association of Greater Manchester Authorities - AGMA
Building Cost Information Service - BCIS
Communities and Local Government - CLG
Community Infrastructure Levy - CIL
Gross Development Value - GDV
Homes and Communities Agency - HCA
Housing Market Areas - HMA
Housing Needs and Demands Study - HNDS
Local Development Document - LDD
Local Development Framework - LDF
National Affordable Housing Programme - NAHP
North West of England Plan Regional Spatial Strategy - RSS
North West Regional Assembly - 4NW
Planning Policy Statement 3 on Housing - PPS3
Registered Social Landlord - RSL
Strategic Housing Market Assessment - SHMA
Unitary Development Plan - UDP
Final Affordable Housing Economic Viability Assessment 5
4 Glossary
Affordable Housing
Affordable housing is defined within PPS3 as including 'social rented and intermediate
housing,providedtospecifiedeligiblehouseholdswhoseneedsarenotmetbythemarket.
Affordable housing should:
Meettheneedsofeligiblehouseholdsincludingavailabilityatacostlowenough
forthemtoafford,determinedwithregardtolocalincomesandlocalhouseprices.
Include provision for the home to remain at an affordable price for future eligible
households or, if these restrictions are lifted, for the subsidy to be recycled for
alternative affordable housing provision.
Gross DevelopmentValue
The total revenue generated from the sale of properties.
HousingNeed
'Housingneed'referstohouseholdslackingtheirownhousingorlivinginunsuitablehousing
and who cannot afford to meet their needs in the market.
IntermediateHousing
IntermediatehousingisdefinedwithinPPS3as‘housingatpricesandrentsabovethoseof
socialrent,butbelowmarketpriceorrents,andwhichmeetthecriteriaset[aboveinPPS3].
These can include shared equity products (e.g. Homebuy), other low cost homes for sale
and intermediate rent’.
Lower Quartile
‘Lowerquartile’referstothelowerlevelsofthehousingmarketandareconsideredthemost
likely to be able to be purchased by households on lower incomes or households entering
the market for the first time.
PreviouslyDeveloped Land
PPS3 defines previously developed land as 'that which is or was occupied by a permanent
structure, including the curtilage of the developed land and any associated fixed surface
infrastructure'.The definition includes defence buildings, but excludes:
Land that is or has been occupied by agricultural or forestry buildings.
Landthathasbeendevelopedformineralsextractionorwastedisposalbylandfill
purposes where provision for restoration has been made through development
control procedures.
Land in built-up areas such as private residential gardens, parks, recreation
groundsandallotments,which,althoughitmayfeaturepaths,pavilionsandother
buildings, has not been previously developed.
Land that was previously developed but where the remains of the permanent
structureorfixedsurfacestructurehaveblendedintothelandscapeintheprocess
of time (to the extent that it can reasonably be considered as part of the natural
surroundings.
6 Final Affordable Housing Economic Viability Assessment
Social Rented Housing
Social rented housing is defined within PPS3 as ‘rented housing owned and managed by
local authorities and registered social landlords, for which guideline target rents are
determined through the national rent regime’.
Strategic HousingMarket Assessment
Annex C of PPS3 states that a SHMA should:
Establish housing need and demand in terms of affordable and market housing.
Determinehowthedistributionofneedanddemandvariesacrosstheplanarea,
for example as between the urban and rural areas.
Considerfuturedemographictrendsandidentifytheaccommodationrequirements
of specific groups such as, homeless households, Black and Minority Ethnic
groups, first time buyers, disabled people, older people, Gypsies and Travellers
andoccupationalgroupssuchaskeyworkers,studentsandoperationaldefence
personnel.
SustainableCommunities
Placeswherepeoplewanttoliveandwork,nowandinthefuture(source-PlanningPortal).
Final Affordable Housing Economic Viability Assessment 7
5 Introduction
5.1 The Affordable Housing Economic Viability Assessment (the assessment hereafter)
looks at the potential implications that affordable housing would have on the viability
of housing developments throughout the borough.
5.2 The main aim of the assessment is to identify an appropriate level of developer
contributiontowardsaffordablehousingthatwillnothaveadetrimentalimpactonthe
viability of housing development throughout the borough. The assessment tests a
seriesofvariablestoexaminetheimpactofseekingaffordablehousingondevelopment
viability, through the use of a clear and robust methodology that will allow regular
monitoring and updating.
5.3 Thisisastrategicassessment. Itinitiallyfocusesondevelopmenttypesthatarelikely
to come forward by the market. The model reflects a range of variables that take
account of different development factors across the borough. The assessment does
not seek to test the viability of specific sites. Development proposals may require a
site-specificeconomicviabilityassessmenttoreflecttheirindividualcircumstancesas
andwhenaplanningapplicationissubmitted. Thiswillneedtotakeaccountofarange
of factors affecting the local housing market.
5.4 The findings of the assessment have been used to inform the council's approach to
affordable housing and preparation of our Local Development Framework (LDF). In
particular, it has helped inform the setting of an affordable housing site threshold and
targets. The findings will also support delivery of the council's Affordable Housing
Strategy and may be used by Development Management when assessing planning
applications,orwhenundertakingpre-applicationdiscussions,toinformdecision-making
around affordable housing provision.
5.5 This report is split into six chapters:
Chapter 6 looks at national, regional and local planning policy and strategies
relating to the provision of affordable housing within the borough.
Chapter 7 looks at the need for affordable housing in the borough, focusing on
local evidence that has recently been completed.
Chapter 8 outlines the methodology used within the assessment and how the
information used to inform the assessment model has been collated.
Chapters 9, 10 and 11 assess the findings of the assessment with the former
looking at the results of the baseline position and the latter exploring alternative
scenarios.
Chapters12and13lookatissuesandchallenges,andconcludesthereportand
sets out a series of recommendations in light of the assessment findings.
5.6 There are also a series of appendices attached to the report which provide the detail
of the variables included within the assessment model.
8 Final Affordable Housing Economic Viability Assessment
5.7 The council undertook public consultation on the draft assessment in Spring 2010. A
workshop was held on 25th May 2010 that included a range of RSL's, developers,
agentsandcouncilofficers. Thefindingsoftheconsultation,whereappropriate,have
helped inform the preparation of this final assessment.
Final Affordable Housing Economic Viability Assessment 9