Nationwide CIL Service Developing A Viable Community Infrastructure Levy.

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Presentation transcript:

Nationwide CIL Service Developing A Viable Community Infrastructure Levy

Nationwide CIL Service Key Elements Infrastructure Assessment CIL Evidence Base CIL Viability Assessment CIL Regulation Compliance Charging Schedule setting out CIL Rates

Nationwide CIL Service Infrastructure Assessment Establish the Infrastructure required to Support Growth Determine the Infrastructure Projects desired to be funded by CIL and assess the Delivery Costs Determine Alternative Funding Sources Calculate the Infrastructure Funding Deficit Confirm the Infrastructure List for Examination

Nationwide CIL Service Evidence Base – Statutory Guidance Key guidance contained within paras of the CIL Charge Setting and Charging Schedule Procedures March An area based approach – a broad test of viability across that area rather than rates being relevant to specific development sites Appropriate available evidence across the area as a whole – sampling of development sites will be appropriate but if a differential CIL system is desired more fine grained sampling will be required to justify the differential approach.– not fully comprehensive or exhaustive. Charging Authority should demonstrate that CIL rates are ‘informed by’ the evidence and consistent with it. No requirement for rates to mirror the evidence – there is room for pragmatism

Nationwide CIL Service Evidence Base – Statutory Guidance Charging Authorities should take account of regulatory requirements that impact on the cost of development eg Affordable Housing policy Authorities may consider changes to economic circumstances over the lifetime of a charging schedule (eg sensitivity testing) Authorities may rely on published data but may want to ensure CIL rates take account of current market conditions by sampling recent market transactions.

Nationwide CIL Service Evidence Base - Practicalities Undertake an area wide survey of land and property values. Existing evidence may be used (eh SHLAA, AH Surveys, VOA Reports) but it should rely on consistent assumptions. Obtain evidence of construction costs, fee rates, statutory fees, warranties, contingency rates that is applicable to the local area If a differential rate CIL system is desired, the evidence base should be sufficiently comprehensive and detailed to justify different rates for different categories and locations of development. The valuation evidence should be sufficiently detailed to enable charging zone boundaries to be justified in a differential rate system

Nationwide CIL Service Evidence Base – Sub Markets Investigate potential variations in economic sub-markets for both residential and commercial property This is an overview to determine broad variations and potential CIL charging zones and may therefore rely on area wide evidence rather than the sort of market specific evidence required to justify development viability (eg VOA comparative data) Values within the chosen test areas (eg wards, parishes, post codes) will tend to group together to inform potential CIL Charging Zones. Residential C3 Ward A, B, E, F Ward C, D, G, Ward S, T, U, V, W, Ward H, I J, X,Y, Z Ward K, L, M, N, O,P,Q, R Av House Price£170,000£200,000£240,000£270,000£320,000

Nationwide CIL Service Evidence Base – Land & Property Valuation Residential (C3) - Land Values per Ha, Land Values per ‘house type’ plot based on relevant density assumptions Commercial - Land Values per Ha & Development Values :- General Retail (A1, A2, A3, A4, A5) Food Retail (A1) Industrial (B1b, B1c, B2, B8)Offices (B1a) Hotels (C1)Residential Institutions (C2) Institutional and Community (D1)Leisure (D2) AgriculturalSui Generis - sample based on planning history. ResidentialWard A, B, E, F Ward C, D, G, Ward S, T, U, V, W, Ward H, I J, X,Y, Z Ward K, L, M, N, O,P,Q, R Land Value (Ha)£800,000£1,100,000£1,400,000£1,700,000£2,300,000 Sales Value (Sqm)£1800£2000£2300£2500£3,000

Nationwide CIL Service Fixed Rate or Differential Rates Fixed rates are simple to apply and administer Fixed rates may be appropriate in homogenous urban areas. Fixed rates may unreasonably tax public services e.g. schools and community buildings. Differential rates may better reflect the economic circumstances of larger Authorities with significant variations in character, land and property value. Differential Rates recognise that many types of development and development in disadvantaged locations will not be capable of making any CIL contribution. Differential Rates must be based solely on economic viability evidence and require greater justification and more fine grained viability assessment

Nationwide CIL Service Charging Zones Determine Charging Zone Complexity – a direct reflection of micro economic circumstances or a broad overview? Charging Zones may be quite simple (urban/rural) but in many cases the economic circumstances will justify a more sophisticated approach Influence of Local Policy Residential Zones are likely to differ from Commercial Zones and require separate Maps. Charging Zones may be based on any type of boundary (Parishes, Wards, Post Codes) but must be robust and defensible based on the valuation evidence Future Proofing

Nationwide CIL Service Viability Assessment – The Principle CIL will generally be extracted from the increase in land value resulting from planning permission. The approach to land valuation assumptions is essential to establishing a robust CIL system NPPF March 2012 – “To ensure viability, the costs of any requirements likely to be applied to development should provide competitive returns to a willing land owner and willing developer to enable the development to be deliverable”. Development Value CIL Planning Obligations Developers Profit Construction Costs Land Value

Nationwide CIL Service Land Valuation Market Value of Proposed Land Use Comparable Evidence Assuming PP Gross Residual Value Existing Use Value Comparable Evidence Assuming no PP Margin For Landowners Profit & Local Authority Contributions Margin For Landowners Profit & Local Authority Contributions 60% To Landowner 40% To Local Authority 40% To Local Authority UPLIFT Margin For CIL Local Authority Margin For CIL Local Authority Existing Use Value Benchmark Market Land Value Benchmark Market Land Value Market Value Benchmarking

Nationwide CIL Service Land Value Benchmarks Residential Base Land Value Assumptions 3 Bed House Plot Value Zone 1Zone 2Zone 3Zone 4Zone 5 Greenfield to Residential Industrial to Residential Residential to Residential Commercial Land Value Assumptions Food Retail Land Value Sqm Zone 1Zone 2Zone 3Zone 4 Greenfield to Food Retail Industrial to Food Retail Food Retail

Nationwide CIL Service Viability Assessment – The Model Development Value (Based on Floor Area) Eg 2000sqm Industrial £1,100 per sqm £2,200,000 Development Costs Land Value£400,000 Construction £450sqm£900,000 Abnormal Construction Costs (Optional) £0 Professional Fees (% Costs) £90,000 Legal Fees (% Value) £30,000 Statutory Fees (% Costs) £30,000 Sales & Marketing Fees (% Value) £40,000 Contingencies (% Costs) £50,000 Section 106 Contributions (Optional) £0 Finance Costs (% Costs) £100,000 Developers Profit (%Return on cost or revenue) £350,000 Total£1,990,000 Output Gross Margin£210,000 CIL Rate (Maximum Levy per sqm) £105

Nationwide CIL Service Affordable Housing Assessment Residential Viability Appraisal DEVELOPMENT SCENARIO Mixed Residential Apartments10 BASE LAND VALUE SCENARIOGreenfield to Residential 2 bed houses20 DEVELOPMENT LOCATION (ZONE)Zone 1 3 Bed houses40 DEVELOPMENT DETAILS0 Total Units 4 bed houses20 Affordable Proportion30%0 Affordable Units 5 bed house10 Affordable Mix30%Intermediate20%Social Rent50% Affordable Rent Development Floorspace6489 Sqm Market Housing2163Sqm Affordable Housing Development Value Market Houses 7Apartments65sqm2200£ per sqm£1,001, bed houses70sqm2200£ per sqm£2,156, Bed houses88sqm2200£ per sqm£5,420, bed houses115sqm2200£ per sqm£3,542, bed house140sqm2200£ per sqm£2,156,000 Intermediate Houses60%Open Market Value 3Apartments65sqm1320£ per sqm£231, Bed house70sqm1320£ per sqm£415, Bed House88sqm1320£ per sqm£209,088 Social Rent Houses40%Open Market Value 2Apartments65sqm880£ per sqm£102, Bed house70sqm880£ per sqm£184, Bed House88sqm880£ per sqm£92,928 Affordable Rent Houses50%Open Market Value 5Apartments65sqm1100£ per sqm£321, Bed house70sqm1100£ per sqm£321, Bed House88sqm1100£ per sqm£92, Total Units Development Value £16,702,686

Nationwide CIL Service Viability Testing – The Results Maximum Residential CIL Rates per sqm 25% Affordable Housing Charging Zone/Base Land Value Mixed Residential Development Starter HousingApartment Block3 Bed Houses 1 High Value Greenfield to Residential£159£172-£49£183 Industrial to Residential£138£146-£78£161 Residential to Residential-£84-£48-£145-£37 2 Medium Value Greenfield to Residential£50£65-£140£115 Industrial to Residential£30£41-£169£90 Residential to Residential-£167-£132-£225-£81 3 Low Value Greenfield to Residential-£116-£80-£467-£62 Industrial to Residential-£136-£103-£496-£83 Residential to Residential-£281-£229-£532-£210

Nationwide CIL Service Determine development floorspace projections for chargeable categories of development over the plan period Test various rates of CIL against development projections and establish draft CIL rates Calculate total CIL revenue from all chargeable development and compare with the Infrastructure Funding Deficit It will be important to demonstrate that the overall revenue raised by CIL does not exceed the level required to meet the Infrastructure Funding Deficit …….. If it does, CIL rates have been set too high. This will be the first test of examination. CIL Revenue Projection

Nationwide CIL Service CIL Regulation 14 requires that a Charging Authority, in setting CIL rates:- Must aim to strike what appears to the Charging Authority to be an appropriate balance between ‘the desirability of funding infrastructure from CIL’... ‘and the potential effects (taken as a whole) of the imposition of CIL on the economic viability of development across its area’ Ensure rates are set in accordance with the Statutory Guidance (CSCSP March 2010 – Paras on consistency of approach) Where the evidence indicates negative or very marginal viability, zero CIL rates may be considered CIL is not a policy tool. Statutory Guidance advises that rates should only be set in accordance with economic viability evidence Selectively favouring certain categories of development by zero rating them to encourage growth may breach State Aid rules. CIL challenges may emerge beyond Examination CIL Rate Setting – The Appropriate Balance

Nationwide CIL Service CIL Charging Schedule When CIL Charging Zones and Proposed CIL Rates have been fixed and approved by the Authority, a Preliminary Draft Charging Schedule can be prepared for public consultation. For a Variable Rate system the PDCS will comprise a Charging Zone Map and a table of CIL rates for each category. Additional maps and tables will be required where Charging Zones differ between Commercial and Residential uses.

Nationwide CIL Service CIL - Queries Adrian Kerrison nationwidecilservice.com Tel