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"In London dozens of schemes are being 'called in' by the Mayor and the amount of affordable housing is being reduced from the target set by boroughs. In one borough, Southwark, the local pressure group 35 Percent estimates that the new guidance has seen an avoidance of £265 million in off-site affordable housing payments required by the borough’s policy. Extend that across London and the loss of affordable housing is staggeringly high.
"Most local authorities simply haven’t the energy or the expertise to challenge developers. It’s like a game of who can blink first. On the one hand developers say sites will stay empty if they cannot get their way and councils don’t want sites standing empty. But developers then provide questionable figures to make their case. They under-estimate sale prices and over-estimate their costs in order to plead poverty. They won’t provide the full picture because it is 'commercially sensitive'. In the Heygate estate in Southwark Lend Lease even made a human rights argument to avoid revealing their profits.
"Apparently, developers must get their 20 percent profit or it’s not worth their while. On a £10 million scheme that is £2 million. Anecdotally, development staff will tell you that developers have one set of accounts for public consumption and another for internal use. In recent times a number of consultancies have appeared offering advice to developers on how to reduce their section 106 contributions. 'If the profit margin for your scheme is pushed to below 17.5% by Section 106 payments - you should talk to us,' says this firm."
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| "Are Affordable Housing, Section 106 payments or the Community Infrastructure Levy threatening the viability of your development project?" (Link for solution!) |
"If so, then we can help. S106 Management only works for developers and is completely free from conflicts of interest with Local Authorities.
"Every Planning Authority without exception have policies that allow the relaxation of Section 106 requirements for affordable housing and other Section 106 community benefits if those costs threaten the profitability of the underlying project.
"S106 Management can produce a Section 106 viability report to establish the profitability of your project and thereby reveal unviable Section 106 obligations. This is achieved using specialist spreadsheets such as the Housing Corporation Economic Appraisal Tool (HCEAT), the Three Dragons Development Appraisal Tool Kit, and the Greater London Authority Affordable Housing Toolkit (GLA Toolkit). The structure of these spreadsheets includes many costs that a more simplistic examination would omit and, accordingly, give a more realistic view of profitability.
"Building costs are justified by reference to BCIS Data revenues by extrapolation of Land Registry Data.
"This is not necessarily an adversarial process causing delay to your planning application. Quite the reverse, a properly presented Section 106 viability report using an accepted Toolkit is invariably looked for in adopted planning policy and should ideally be used in pre application discussions. In many cases a Section 106 viability report will be required to accompany your planning application before it will even be validated and registered.
"One of our Section 106 viability reports will be welcomed by planning officers at any stage of a planning application and will speed the planning process because the Section 106 viability information is presented in a format that is understood and accepted by Planning Officers and Affordable Housing Officers.
"This is not an all or nothing process. Our extensive experience shows that if a Section 106 viability report cannot entirely extinguish your liability to provide Section 106 affordable housing and the like – profitability can be improved through delivering Section 106 affordable housing of a type that is more valuable to you, making a commuted cash payment or identifying and prioritising those types of contribution that are most important to the Local Planning Department.
"Our Reports provide is a very robust picture of Section 106 viability, directly related to the proposed development, that will be acceptable to any LPA.
"If you already have planning permission with an existing Section 106 agreement or unilateral undertaking, the same principles apply, but the approach varies depending upon your exact situation.
"If you don’t understand any of this, have a look at our FAQ page.
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