Assessing Development Viability In Difficult Times: The Local Authority

Perspective

Anthony Hodge & Victoria CarrCheshire West and Chester Council

Demand/Supply

• Forecast population increase by 11% (ONS)• SHMA concluded an annual shortfall of circa 2,700

market dwellings and 1,300 affordable dwellings pa • 2010/11 - 654 new homes completed, of which 306

were affordable homes which benefited from public sector subsidy. As a consequence, in 2010/11 only 348 market homes were completed

Affordability

December 2006

December 2007

December 2008

December 2009

December 2010

December 2011

1 bed Prices (Flat) £94,203 £102,967 £92,789 £94,672 £82,566 £87,722

2 bed Prices (Flat) £139,378 £139,760 £137,001 £128,731 £134,764 £124,578

2 bed Prices (House) £136,967 £141,759 £137,785 £136,243 £140,121 £132,343

3 bed Prices (House) £174,504 £177,937 £180,126 £177,379 £180,307 £170,809

4 bed Prices (House) £301,609 £322,208 £306,409 £311,571 £304,973 £302,033

Source: Hometrack

Average Property Prices in Cheshire West and Chester

Affordability

Median Income

1-bed Flat 2-bed Flat 2-bed House 3-bed House 4-bed House0

50000

100000

150000

200000

250000

300000

350000

0

2

4

6

8

10

12

14

1.00

3.35

4.75 5.05

6.52

11.52Average price

Ratio of Price to Median Income

Pro

perty

Val

ue

Inco

me

Mul

tiplie

r

A Developers View

• Affordable housing requirements too onerous• Viability assessments – local authority in the dark• Commercially sensitive information• Timescale• Members

Fixing the Process

• Appointed in-house resource (MRICS)• Introduction of service to key teams • Lead on viability negotiations and assessments• Provides direct advice to Development Management• Development of Viability Checklist, Values and

Costings Database, Use of viability software• One point of contact, one consistent approach

Handling AssessmentsHow can we ensure that we are in a strong negotiating

position?• Build a strong evidence base of local costs and

values• Talk to the market• Keep track of approved developments (did they

achieve the values anticipated?)• Strong Market Knowledge = Strong Negotiating

Position

Handling Assessments

• Internal note - initial guidance to Development Management

• Seek specialist advice where necessary

Site Issues

Long-term developments & Marginal Sites• Use of software to ‘build in’ uplift• Use of overage clauses in sc106-some reluctance

Some ExamplesRural Housing Sites, Cheshire (affordable housing)• Costs for historic building-sourced from generic

reportCommercial Site, Northwich (sc106)• Evidence provided in relation to abnormal costs• Checked with site-owner at time of purchase, some

of these were known abnormals at time of site purchase

• Worked with Agents to negotiate value inputs• All third party cost quotes provided

……..but is it just about viability

• 6,000 units with planning approval• Schemes for 3,000 units coming into the system