Affordable Housing: Policies into Practice Louise Dwelly Housing Strategy & Enabling Manager October 2004

Why Training Now? Policy in place for a year Need for better understanding of how officers are using and developing the policy in practice An understanding of how we look at scheme viability and how the negotiation process works is becoming more critical

Training Objectives Understand the policy context for negotiating community benefits Review the policy provisions Achieve a better understanding of how the negotiation procedure works in practice Understand the importance of development economics

We are losing homes.... Gabbons Nursery affordable Block A maritime centre 4 Stary Dom 4 Poltair Road Penryn 15 Sandy Cove Porthtowan 10 Total affordable homes not approved

National Policy Context Main mechanism is section 106 of the Town & Country Planning Act 1990 (section 106 agreements) Rules about what benefits can be negotiated (reasonable and directly related) Circular 6/98 deals with affordable housing. Must “seek to negotiate” and must have regard to financial viability Fundamental review of policy guidance taking place

Carrick Policy (recap) Thresholds (15 urban and 2 rural) Targets –35% Truro (20% rent, 15% intermediate) –40% Falmouth-Penryn (20% rent and intermediate) –50% rural (20% rent and 30% intermediate) Intermediate includes low cost for sale, shared equity and key worker housing

BUT there is more flexibility than you think Provision can also be off site or a financial contribution in some circumstances The targets can be varied if more than 50% is affordable Provisions will most often be affected by whether there is any public subsidy

The Money Question Affordable housing without grant The local context Grant free but not everywhere all of the time Public subsidy is needed to deliver the Council’s 60 homes target and to deliver all the s106 opportunities Subsidy must come from somewhere (Gvnmt, Carrick, developer)

Sources of Funding Housing Corporation (£2-3 million over 2 years) 50 homes Carrick £500,000 (CTSH) 8-10 annually Commuted sums £1.6 million negotiated (26 homes but no money yet) Subsidy of £60,000-75,000 each

Options Seek additional developer subsidy Seek commuted sums on some developments to increase funding Only target grant at strategic sites RSLs can pay something towards homes where there is no grant but it means fewer homes......

What is Grant Free? The payment reflects what a housing association can pay by way of a mortgage secured against future rental income Rents are restricted by Gvnmt so....

Grant Free Values 1 bed 2 person flat46m££27,358 2 bed 3 person flat62m£33,302 2 bed 4 person house 76m£34,557 3 bed 5 person house 86m£37,437 4 bed 6 person house 101m£41,397

How we work Pre-application contact DC involve relevant officers for community benefits Joint discussions, full policy requirement is starting point Agree a final negotiating postion Affordable housing unit gives formal response and works with legal services to draft / modify any s106 obligation

What can affect what we ask for? Economic viability Abnormal costs (infrastructure, contamination) Not a strategic site and limited grant Area not suitable or already a concentration of affordable homes High density flatted scheme which does not meet need Other costly community benefits Limited evidence of need

Understanding the cost of development (development economics) We can use a range of tools: Developers’ financial appraisals Secondary data (house prices/land values) External technical expertise The Development Economics Toolkit

Developed by 3 Dragons and Nottingham Trent University for GLA Carrick (supported by Cornwall partners) developing first rural version Under development for a year and now in use Consultation with developers and housing associations complete

Purpose of Toolkit Provides information about the economics of residential development proposals Shows impact of affordable housing requirement Site area/number of dwellings is the only ‘MUST HAVE’ information Aid to decision making - does not make decisions!

Basis of Toolkit Residual value approach Residual is value less costs Takes account of availability of public subsidy Land value is not an ‘input’

Revenue and costs COSTS Build costs Infrastructure costs Professional fees Overheads/finance costs Marketing costs Contribution to developer REVENUE Market units X market value Affordable element TCI (less on costs) for social rent and shared ownership % of value for Equity Share and Low Cost Sale Capitalised rental value for sub-market rent

What ifs……... Can test for…... % different types and tenures affordable housing +/- Density +/- Market value Alternative planning obligations

More what ifs……... Can test for Exceptional development costs Alternative %TCI and with/without grant (and different % share for SO) Alternatives for Equity Share, Low Cost Sale and Sub-Market Rent Range of assumptions about costs

Lessons Learnt Community benefits is a process of negotiation Robust policies help but there is always that rogue appeal decision Flexibility is most often needed around difficult sites and grant availability The involvement of members and the community in understanding specific sites is crucial to develop consensus and support