A presentation from a Planning Advisory Service event on Viability.

1. Place
VIABILITY – A LOCAL
AUTHORITY PERSPECTIVE
Jim Cliffe
Planning Obligations Manager
Bristol City Council

2. Place
Areas covered

Implementing CIL

Approach to site specific viability appraisals

Why the affordable housing policy compliant
percentage is not always achieved

3. Place
CIL – Implementation

Keep it simple – there are not many benefits to
making CIL complicated but there are dis-
benefits:
− Higher risk of successful challenge
− It will almost certainly take longer to implement
− Higher chance of errors in calculating, monitoring
and enforcing CIL

6. Place
CIL - Implementation
Don’t be greedy – be generous with developers
costs, cautious with sales values, and leave a
significant viability buffer

7. Place
CIL - Implementation

When setting residential CIL rates we followed
the following mantra “Our CIL rates will be set at
a level that will not make residential development
that is currently policy compliant and viable,
unviable” …..

….. and we didn’t worry too much about
residential development that was unviable even
with no CIL

8. Place
CIL - Implementation
Think very carefully about how to deal with
strategic sites – they may well need a lower or
even a £nil CIL rate due to the level of on-site
infrastructure required. Swindon and South
Gloucestershire are good examples of Councils
that have taken this approach

9. Place
What the inspector wants
Development type Maximum
viable CIL
rate
Proposed
CIL rate
CIL as % of
maximum
viable rate
CIL as
% of
costs
CIL as
% of
GDV
Inner Zone
Residential
£130 £70 54 2.2 1.9
Outer Zone
Residential
£90 £50 56 1.6 1.5
Retail £250 £120 48 4.5 3.4
Student
Accommodation
£220 £100 45 3.2 2.8
Hotel £160 £70 44 1.9 1.8

10. Place
CIL viability information – how
it helps you
Your CIL viability study will provide large
amounts of information on costs and values that
you can use as a reference point in dealing with
site-specific viability appraisals.

11. Place
Other viability information
available due to CIL

Once CIL is implemented you need access to
BCIS data, which provides up to date costs data

Sales prices are available on the Land Registry
web site, and for all consents granted after CIL
was implemented, the GIA is known. Therefore
you can start building up a dataset of sales
values per square metre

12. Place
Site Specific Viability – Issues
for Bristol

We had no structured process in place for
dealing with viability appraisals

We spent lots of time and resource disputing
viability appraisals, whilst making little progress
towards resolving differences

We sometimes forgot the bigger picture and
spent too much time and effort focussing on
the cost of taps and flooring

13. Place
3 Stage approach – Stage 1

Identify issues of concern

Commission consultant

Consultant assesses viability appraisal and
reports back to Council – no meetings with
applicant at this stage

If necessary, consultant undertakes their own
appraisal based on nil affordable housing, to
see what excess there is that could be applied
to affordable housing

14. Place
3 Stage approach – Stage 1

If the consultant agrees with the level of
affordable housing the applicant claims can be
afforded the issue is concluded.

Stage 1 is completed within a month

15. Place
3 Stage approach – Stage 2

Meetings held with applicant to try to
understand areas of difference and see if an
agreed position can be reached

Stage 2 has a cut off time of a month

16. Place
3 Stage approach – Stage 3

If agreement cannot be reached, the Council
offers independent arbitration to look solely at
the areas of disagreement, and agrees to
accept the view of the arbiter

Council and applicant each put their case to
the arbiter in writing and have the option of one
meeting with the arbiter

Stage 3 is completed within a month

17. Place
Benefits of the staged
approach

We don’t spend months arguing about areas of
difference whilst making no progress

Applicants know where they stand

Helps the Council deliver consents in a timely
manner

Offer of arbitration lessens the chances of
appeals on viability grounds

18. Place
Why do we not always secure
policy compliant levels of
affordable housing?

Challenging sites

Government Initiatives

Impact of RICS Professional Guidance

Rising GDV often goes hand in hand with rising
Site Values and Build Costs

19. Place
Brownfield Sites

Urban brownfield sites often have high Existing
Use Values, which translates to high Site Values

There is less of an uplift in value on such sites
for residential uses.

Development costs tend to be higher due to the
constrained nature of the sites

Therefore there is less potential to secure
affordable housing from brownfield sites

20. Place
Greenfield Sites

Suburban and rural greenfield sites often have
low Existing Use Values.

There is more of an uplift in value on such sites
for residential uses.

Sites tend to be large and less constrained
meaning that there are economies of scale and
fewer abnormal design costs, therefore costs
tend to be lower

Consequently there is more potential to secure
affordable housing from greenfield sites

21. Place
Government Policy / Initiatives
The following have all had an adverse impact on
the ability of Local Authorities to secure
affordable housing:

National Planning Policy Framework (2012)

Section 106 BA (2013)

Vacant Building Credit (2014)
Also, and most significantly:

RICS Professional Guidance (Financial Viability
in Planning) (2012)

22. Place
Market Value / Site Value

Market Value = the price agreed for the land
between a willing buyer and a willing seller

Site Value = Market Value but taking account of
Development Plan Policies

23. Place
Impact of RICS Guidance –
General Hospital example
Had the General Hospital viability been before
publication of the RICS Guidance, the Site Value
would have been approx £2,500,000 (Existing
Use Value of £2,000,000 plus £500,000 incentive
for the landowner to bring the site forward).
As it was after publication of the RICS Guidance,
the Site Value was approx £6,250,000, as that
was the price paid for the site, and other bidders
were prepared to pay a similar price.

24. Place
Rising Residential Values
Increasing residential values help viability but:

Profits are based on value so the actual profit
also increases

Build Costs are also increasing (up 13%
nationally in the past two years)

Fees and contingency are based on a
percentage of costs so these also increase

Land is changing hands for higher prices (up
15% nationally in the past two years) as house-
builders are competing for a scarce resource

25. Place
Hypothetical Example
Scheme value increases by 17% / Site value
increases by 15% / Build costs increase by 13%
2013 2015
Scheme Value £2,000,000 £2,340,000
Build Costs £1,000,000 £1,130,000
Profit (20% of Value) £400,000 £468,000
Professional Costs (10%
of Build Cost)
£100,000 £113,000
Contingency (5% of
Build Cost)
£50,000 £56,500
Residual Land Value £450,000 £572,500
Site Value £300,000 £345,000

26. Place
General Observations

Flatted developments may deliver less
affordable housing than estate developments
as they contain approx 20% unsellable
floorspace (lift shafts, stairwells, corridors etc)
and have higher build costs

Experience suggests it is possible in the
current market to secure 30% affordable
housing on suburban estate developments on
clean sites, but in and around the City Centre
viability is much more challenging