Affordable Housing: Policies into Practice
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Transcript of Affordable Housing: Policies into Practice
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Affordable Housing: Policies into Practice
Louise Dwelly Housing Strategy & Enabling Manager
October 2004
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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
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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
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We are losing homes....
• Gabbons Nursery 50-75 affordable• Block A maritime centre 4 • Stary Dom 4• Poltair Road Penryn 15• Sandy Cove Porthtowan 10
Total 83-108 affordable homes notapproved
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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
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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
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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
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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)
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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
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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......
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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....
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Grant Free Values
1 bed 2 person flat 46m ££27,358
2 bed 3 person flat 62m £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
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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
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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
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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
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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
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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!
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Basis of Toolkit
• Residual value approach• Residual is value less costs• Takes account of availability of public
subsidy• Land value is not an ‘input’
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Carrick TCI Band
REVENUE COSTS
Gross residual valueLessPlanning gainSite abnormals(decontamination etc)
FINAL RESIDUAL VALUE
Compare withcommercial
value
PlusOther capitalcontribution
SCHEMECHARACTERISTICS
Density House pricesDevelopment costs TCIAmount/type affordable housing
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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 SaleCapitalised rental value for sub-market rent
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What ifs……...
Can test for…...• % different types and tenures affordable housing• +/- Density• +/- Market value• Alternative planning obligations
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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
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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