Draft Charging Schedule

Object

Representation ID: 68038

Received: 10/04/2015

Respondent: Gladman Developments

Previously submitted evidence by Carter Jonas to support response. This was not recorded in summarisations, so has been re-submitted as part of this consultation as although some dates and figures may have changed it is still relevant and important to the Charging Schedule development.
Introduction:
CIL is intended to have a positive effect on development. The Council is required to strike an appropriate balance between the desirability of funding from CIL and the potential effects (taken as a whole) of the imposition of CIL on the economic viability of development across the local authority area. Must consider the impact of CIL together with the policies contained in the Local Plan on developments within the borough when deciding an appropriate CIL rate.
Funding gap/evidence base:
CIL should not be used by Council's as a mechanism for creating an unrealistic 'wish list' of infrastructure projects in their area. When establishing a funding gap that CIL receipts are intended to contribute towards filling, it is vital that the Council take account of every possible income stream, including accurate assessments of New Homes Bonus and council tax/business rate receipts and government funding. Also included should be an assessment of statutory undertakers' asset management plans.
The Council need to have an up to date, robust evidence base that fully justifies the infrastructure needs based on the amount of development required. These should be drawn from infrastructure planning that underpins the LP, identifying the quantum and type of infrastructure required. An incomplete evidence base will make the charging schedule unsound.
When calculating the level of infrastructure needed as a result, the Council must distinguish between new and existing demands. New houses do not always create new pressure.
CIL is expected to have positive economic effects across an area in the med - long term. CIL rates will also need to be appropriate over time, bearing in mind land values, market conditions and the wider economic climate change rapidly. The viability impact of incremental policy obligations must be assessed and reflected in the charging schedule. believe that it is inappropriate to set the levy based on a partial understanding of these infrastructure costs and in particular if the total money needed for infrastructure is unknown.
Differential charging rates:
Regulation 55 of the CIL Regulations allows local authorities to grant relief for exceptional circumstances from liability to pay CIL. Such provision should be factored into the Council's CIL and will avoid rendering sites with specific and exceptional cost burdens unviable should exceptional circumstances arise.
Payments in kind:
An allowance for infrastructure payments should be made available by the Council, recognising that there may be time, cost and efficiency benefits in accepting land or infrastructure from parties liable for payment of the levy.
Requirement to consult:
Consider the need to engage meaningfully with local developers and others in the property industry early and throughout the process crucial to the production of a robust CIL.
Examination:
The examiner must be independent and have the appropriate qualifications and experience e.g. a planning inspector
Conformity with Framework:
Fundamental that the Council ensures that the proposed levy rates are realistic and not set too high. Arbitrarily high rates may jeopardise the delivery of housing schemes within the area. This would be contrary to the Government's aim to boost the supply of housing as schemes may not come forward due to viability issues.
When testing the impact of CIL it is vital that the assumptions that underlie the standard residual valuation approach used to test the impact on viability of CIL are realistic and accurate. This should include abnormal costs, contingency costs, preliminary costs, and developer profit, which should reflect the current level of risk perceived in the market.
Urge the Council to adopt an instalments policy for CIL payments as this will give developers the flexibility to pay contributions in line with development phasing schemes and will facilitate cash flow. Council should also accept the phasing of planning permissions, with each phase treated as a separate chargeable development.
Need to review CIL tariffs as the economic climate will inevitably change over the course of the plan period.
The Local Plan will need to be in place prior to the CIL being adopted. The Council needs to have a clear understanding of the level of residential development to be brought forward in the plan period when preparing the charging schedule as this will directly influence the scale of CIL. Without this the charging schedule will not reflect the relevant and true infrastructure needs. This is particularly problematic as the Local Plan remains subject to objections related to the full objectively assessed housing needs and where further concerns are being raised about the requirement of Warwick to meet some of the unmet need of Coventry. The Council must consider that changes to the CIL may be required in order to consider issues which arise from the examination in public.

Object

Representation ID: 68046

Received: 10/04/2015

Respondent: Gladman Developments

Appended Carter Jonas Letter:
The CIL Viability Study on the Council's website has nothing under the appendix headings. They are grouped at the end making study harder.
Residential tariff has not been robustly evidenced and if implemented would have adverse impact on the delivery of new housing (including affordable). Proposed Charging Zones are unduly complex and will lead to inequitable CIL cost burden.
WDC Zones B and D are the second highest rate proposed in the East and West Midlands with only a small area in Dudley being higher and reduced for affordable housing of 25%
WDC is not proposing a differential residential CIL rate to take account of the percentage of affordable housing to be provided. Additionally, Zones B and D cover 90% of the district
The CIL Viability Study notes that one risk of setting a high residential charge rate (that vastly exceeds the current S106 obligations levels) is that it could shock the land market, thus land supply will fall. No evidence is given against which to assess the likely cost differential for different forms of development under S106 and CIL Charging Schedule. In rural areas, under current proposals, it would be likely that there would be a substantial increase in the sums to be paid from new residential schemes towards infrastructure. To reduce the risk, the gap between the level of S106 contributions currently secured per unit and the per unit CIL Charges Rates for much of the district should be reduced by lowering the CIL Charge Rates for Zones B and D.
The proposed boundaries for the Charging Zones are not robustly justified and it is not clear how the Council has determined the need for more than one Charging Zone in and around certain villages e.g Radford Semele.
Residential Development Scenarios:
A major factor influencing development value, and therefore development viability, is the scale and density that is achievable on a site. The Viability Study recognises that in many cases the gross site area will need to be netted down, to make an allowance for site specific constraints, open space provision and landscaping. On large strategic sites the Viability Study assumes only 50% of the gross site area will be used for housing. On other greenfield sites, the assumption is that 67% of the gross site area will be used for housing. Carter Jonas endorses the allowances made to move from gross to net developable site areas.
In rural areas on the edge of settlements it will often be appropriate to reflect the pattern of existing development for any new housing to provide a soft interface between village and countryside. Furthermore the current trend is for detached and semi-detached 2, 3 and 4 bedroom houses. Together, these factors suggest the Viability Study should test low development densities, including 20 dwgs/ha shown in Table 4.11.1. Lower density assumptions will deliver lower Gross Development Values and a reduced sum of money being available for CIL payments.
Affordable Housing Assumptions:
Assumed that 40% of the units on qualifying sites will be affordable split with tenure of 80% rented and 20% intermediate housing. The appraisals assume no grant funding.
The assumed value of affordable housing is considered unreasonable.
Concern in relation to how the assumptions used in the Viability Study fit with those made in the Affordable Housing Viability Assessment, the latter underpinning the affordable housing policy in the emerging Local Plan.
The Affordable Housing Viability Assessment assumes Section 106 costs of £6,650 per unit, when assessing the viability of different percentages of affordable housing. This level of contribution is broadly equivalent to the CIL contribution required in Charge Zone A, but is below the level of contribution required in Charge Zone C, and significantly below the contribution required in Charge Zones B and D. On non-strategic sites in Charge Zone D, the contribution per 3-bedroom unit will be circa £19,000.
The delivery of more affordable housing in Warwick District remains a priority. It is therefore concerning that the Viability Study accepts that as a result of the proposed CIL Charge Rates, a number of developments will only come forward if the Council accepts less than 40% provision.
Financial Assumptions:
The Viability Study is light on evidence in relation to the average sales values. Would like to see the evidence particularly when considering properties on the market with regard to discount against marketing price. Would recommend a 10% discount on new build.
The allowance of £1,500 per dwg. On non-strategic sites for S278 contributions and any residual S106 contributions is considered low.
All residential developers assess development margin requirements against the Gross Development Value of the scheme. Whilst the minimum developer return will vary between house builders at any one time depending upon their own particular circumstances, there is a much closer degree of consistency with traditional bank funders' minimum requirements. For a standard build, the minimum return has been on average 20% of Gross Development Value (for the last two to three years).
BNP Paribas has used 20% of Gross Development Value in their viability modelling. As noted above, this is the minimum return that should be allowed for, with no allowance for non-standard builds.
BNP Paribas has included a 5% contingency provision on build costs. This is supported, and is a basic bank funding requirement, without which funding will not be available.
Benchmark Land Values:
The Viability Study commentary on benchmark land values makes no reference to two leading documents on planning and viability - the RICS Financial Viability in Planning and Viability Testing Local Plans. This is an important and significant oversight. Furthermore, the Viability Study makes reference to a number of appeal decisions published between 2007 and 2009. These decisions were made in a different economic time, and pre-date publication of the RICS Financial Viability in Planning and Viability Testing Local Plans.
To arrive at appropriate bench mark land values. Para 3.4.3 of the RICS Financial Viability in Planning (FVP) is a key consideration. "The residual land value (ignoring any planning obligations and assuming planning permission is in place) and current use value represent the parameters within which to assess the level of any planning obligations. Any planning obligations imposed will need to be paid out of this uplift but cannot use up the whole of this difference, other than in exceptional circumstances, as that would remove the likelihood of the land being released for development."
The gap between the two parameters needs to be understood and a judgement reached in each case as to how the market would assess the "competitive return" for the landowner. In the context of 'competitive returns to a landowner', consideration also needs to be given to Viability Testing Local Plans (VTLP) advice, which complements the RICS advice, stating that:
"....threshold land value should represent the value at which a typical willing landowner is likely to release land for development..."
For greenfield sites, VTLP recommends the use of benchmarks based on local market evidence and typical minimum price provisions used in developer / site promoter agreements involving similar sites. No such evidence is provided in the BNP Paribas Viability Study.
Planning appeal decisions and Secretary of State determinations prior to the publication of FVIP were made in the absence of professional guidance on viability testing. Future decisions / determinations are likely to have regard to the FVIP - so some of the conclusions made in earlier decisions / determinations may now be considered historic.
Example given of post FVIP appeal decision. Suggest that WDC revisits justification for base land values and running more appropriate land values through the model lowering the proposed CIL Charge Rates accordingly.
The cumulative impacts of the issues summarised is likely to lead to a very different view of the viability of the proposed Charge Rates for residential development.