Guest speaker: Peter Ollivere (Durham County Council)

County Durham – Approach to CIL and Viability “Use what you’ve got” Peter Ollivere Summer 2013

Todays Presentation 1.Getting Started on CIL & Viability 2.Working on CIL 3.DM Case Studies 4.Relationship with Developers 5.Conclusions and Tips for Other LPA’s

County Durham New Unitary Authority – 2009 Located between 2 conurbations 504,000 population 4 th biggest nationally Rural West & Industrial East 12 Regeneration Towns Decline of Traditional Industries 1 City & WHS Ambitious plans to drive economy Tourist Economy

Context in County Durham Local Plan and CIL examination next summer Our Infrastructure Delivery Plan requires funding CIL seems appropriate to deliver LP Viability becoming more important Didn’t want to spend £30,000+ We wanted to build up viability expertise in Policy, DM and Assets

In 2012 – Major Progress 1.Affordable Housing and CIL Viability Study – included % targets and differential rates 2.CIL Rationale & Preliminary Charging Schedule 3.Specific Site Appraisals for Development Management – Negotiated 100s of AH’s and £1000’s for S106

1. Getting Started

Didn’t really understand viability Unsure how to calculate CIL No experience in Development Economics And I was rubbish at Maths!

..Read all about it…. The Guidance vs the Regs… NPPF Go on course like this..! Attend Examinations In Public Talk to Developers Most importantly, begin to ‘pool’ knowledge internally from within the Council

Utilise Assets/Estates Team In-house Chartered Surveyors Property valuing & rents They buy & sell Council land Experience of Development Appraisals Terminology – RLV, GDV, BRIC etc

...Getting Started DM, Policy and Assets collaborate - Viability crucial for all 3 disciplines We were a little green so… -We appointed a consultant in 2011 as a critical friend Remember, the guidance is already there!

…Is it all about the… division of labour….? NO – It’s the Pooling of Skills!

Durham Team.. The A-Team Face – Policy Background BA – DM Manger & Section106 Hannibal – The Consultant Murdoch – DM & Assets

2. Working on CIL & Viability

Post Inception Meeting, the A-Team went to work, their mission was to; Find appropriate available evidence Map viability across County Durham; Collect information for Viability Appraisals; Run and alter appraisal sheets; Co-write CIL & AH Study and Preliminary Charging Schedule

Appropriate available evidence…  HMR dismissed straightaway – Housing Team gave us HMR boundaries  Employment sites – Funding team had evidence that employment sites required RDA Money to become viable  Supermarkets – Our Strategic Investments team had been in detailed discussion with Supermarkets

Mapping Residential Viability

Zoning – Rightmove Sales Prices

Viability Appraisals Based on Residual Valuation 16 notional sites for modelling Sites range from 2 dwellings to 288 We ran appraisals ourselves and collated following information…

Assumptions For Appraisal A figure (£ per house) required for S106 - Policy & DM input DM knew what AH had been achieved in each former district area SHMA set different targets per area Capital Grants and Rents from Housing Revenues (Sales Prices) Zoopla SR/m2 of GIA = Sales Price m2

CIL Info- Lessons Learnt Appropriate Evidence can be more obvious that you think New Build Prices often higher than your perception of the market area Differential rates for resi is not easy Calculate your own Sale Prices Check, double check, and triple check appraisal sheets Know your appraisal sheet

3. DM Case Studies

Viability and DM Every Site is a battle over AH and S106. DM being challenged and we believe that challenging assumptions by Developer is necessary. We are getting more and more effective at negotiating. Only going to mention victories!

Durham City Suburb

Developers original application asserted scheme wasn’t viable with any AH then an application for 70 units with only 10% AH. Council undertook its own appraisal based on sales prices evidence gathered from area. Our appraisal indicated scheme could bear over 10%. 23% affordable housing secured, based on viability and negotiations with applicant.

Regeneration Town

Original Application 616 Houses 0 Affordable Houses £0 Contribution to S106 (despite being unsustainable site) Council had strong Policy Card; then after back and forth appraisals….. We were told 12% AH was their full and final offer.

We held out and received… 500 units with15% AH on a 70/30 split Education – £0.1m 'S106 costs' for bus service, car share, PROW, highways works - £0.5m All possible because assumptions had been altered An increase in sales price of £2,500m2 for 2 and 3 bed units, £5,000 for 4+ The 'Residual Land Value’ dropped considerably

Pit Village in Coalfield

Developer wants double the Land Value that LA have suggested for landowner Weight of Plan Policy contested We said Revenues on low side Developers saying mortgage availability is poor in area We say their build costs are too high This one resulted in stalemate.

DM Lesson Learnt One Size does not fit all. Every site is different. Schemes which are in locations which are not critical to the delivery of the plan can allow more room for negotiation. Sometimes negotiations turn into wars of attrition & on- going exchanges, sometimes better to meet. 5-Year supply of deliverable housing could be a factor in some locations as Developers will have one eye on appeal.

4. Developers & Industry…

Arranged Stakeholder Day – 50 guests ‘Workshops’ on Viability Assumptions, CIL and Infrastructure Requirements Received formal response from Savilles Received formal and Informal Comments from individual house builders Continuous Engagement through DM Spoke at House Builders Forum

Challenges from Developers.. Land Prices are too low – should be circa £500,000/ha (minimum) Landowners are in no rush to sell Disagreements on BCIS costs Abnormal costs should be included in calculations for GF sites Contingencies were too low

Feedback cont…. Our Sales Prices are too HIGH – we used Land Registry Data! (HBF gave us some alternative data) Our Broad Patterns of Viability were discredited To be fair, they made some good points

Broad Patterns of Viability

CIL Charging Zones

Developer 1 – Mr Orange Has long term land holdings Land was bought cheaply 20 yrs ago RLV out of Viability equation Likely to have site allocated Build out rates are slower Less money on sales etc Happy to pay CIL/S106

Developer 2 – Mr Pink Buys land when close to Planning Permission Land Value crucial to Viability equation Build out rates high, More money on sales, promotions etc Profits margin are tighter Unhappy to pay CIL/S106

Developer Lessons Learnt.. They are the experts, no question but.. They have a responsibility to their company to make profit for shareholders & landowners They have excellent local knowledge. They have different business models Challenge there Assumptions They will challenge yours!

Lessons Learnt/Tips.. Read the Guidance. Pool knowledge and build on it Difficult to get ‘Appropriate Evidence’ for differential residential rates and zoning Not so difficult for other land uses Check and re-check Appraisals and then re-check again. Use local and website data

Lessons Learnt/Tips.. House builders have different business models. Challenge developer’s assumptions They will challenge yours!

THE END

Any Questions? Durham Local Plan CIL and AH Viability Study