Guildford Borough Council’s Community Infrastructure Levy ... · PDF fileCommunity Infrastructure Levy Preliminary Draft Charging ... Guildford Borough Council CIL PDCS ... 1.8 The

Local Housebuilder Consortium February 2015

Guildford Borough Council’s Community Infrastructure Levy Preliminary Draft Charging Schedule

Consultation response on behalf of a Housebuilder Consortium

savills.co.uk

Guildford Borough Council CIL PDCS


Consortium of House Builders February 2014 1

Contents Executive Summary 1

1. Introduction 3

2. Summary of National Policy and Legal Context 6

3. Planning and Infrastructure Delivery 9

4. Viability Appraisal 13

5. Effective Operation of CIL 29

6. Conclusion 31

Appendix 1 – List of Documentation

Appendix 2 – CIL Getting it Right, Savills

Appendix 3 – Developer Profit, Savills

Appendix 4 – Savills, ARGUS Development Appraisal

Appendix 5 – PBA Viability Appraisals

Appendix 6 – Timing Assumptions Email from GBC




Executive Summary

This representation has been prepared by Savills (UK) Limited on behalf of a local housebuilder consortium, hereafter known as

“the Consortium”. It is made in respect of Guildford Borough Council’s (GBC) emerging Preliminary Draft Charging Schedule

(PDCS) for the Community Infrastructure Levy (CIL).

The CIL Guidance contained within the Planning Practice Guidance (PPG) is clear on the narrow focus of the CIL Examination

process permitted by the Regulations:

The Statutory CIL Guidance is clear on the narrow focus of the CIL Examination process permitted by the Regulations: -

“The Examiner should establish that:

The charging authority has complied with the required procedures set out in Part 11 of the Planning Act 2008

and the CIL Regulations;

The charging authority’s draft charging schedule is supported by background documents containing

appropriate available evidence;

The proposed rate or rates are informed by and consistent with, the evidence on economic viability across

the charging authority’s area; and

Evidence has been provided that shows the proposed rate (or rates) would not threaten delivery of the

relevant Plan as a whole.”1

This representation explores whether GBC has presented appropriate, available evidence, made reasonable conclusions and is

able to demonstrate that it “strikes an appropriate balance” in accordance with Regulation 12(1) of the CIL Regulations, when

formulating their proposed PDCS rates.

The Consortium has fundamental concerns with the approach taken by GBC in proposing its rates, notably:

Unviable Rates - The current proposed CIL rates are unviable and risk rendering a significant proportion of the housing

supply across the District undeliverable;

Incorrect Assumptions - A number of the key viability inputs adopted by PBA are incorrect. Specifically, the allowance

for Section 106 contributions is insufficient with a number of the other costs out of date, This results in an over-estimation

of the maximum CIL rates that can be supported;

1 Paragraph 038, Reference ID 25-038-20140612, CIL Guidance (revision date 12

th June 2014)




Risks for delivery of Strategic Sites – The appraisals relating to the large, strategic residential sites do not take into

account the significant ‘opening up’ and abnormal costs for the delivery of sites of this scale. We would strongly recommend

that the Council considers applying a zero rate for their strategic residential development sites, especially given the stage of

the Local Plan process.

Alternative Viability Appraisals – We have undertaken alternative viability appraisals looking at the impact of Section 106

obligations, profit margin, and abnormal allowances on the level of CIL that can be supported.

Whether the proposed rates of CIL and evidence are updated to reflect the recent amendments to the PPG with respect to

the recommended threshold restricting affordable housing and S106 being sought for schemes of 10 or less units.

We have subsequently prepared the following representation, which can be split up as follows:

Section 1.0 - provides an introduction to the representation;

Section 2.0 - provides an overview of the planning and legal background in the Borough;

Section 3.0 - outlines specific points about the available evidence bases;

Section 4.0 - provides scrutiny of the available viability evidence (PBA, December 2014);

Section 5.0 - outlines the position of the Consortium in respect of the effective operation of CIL;

Section 6.0 - provides conclusions.

Where relevant this representation provides comment on the supporting evidence / existing guidance and also makes reference

to policy documents, a list of which can be found at Appendix 1. Savills has submitted a separate representation on behalf of

Wisley Property Investments Ltd, specific to the ongoing land promotion coordinated by Savills on land at the former Wisley

Airfield.




1. Introduction

1.1 This representation has been prepared by Savills (UK) Limited, hereafter known as “Savills”, in respect of Guildford

Borough Council’s Preliminary Draft Charging Schedule consultation, on behalf of the following (in alphabetical order):

Countryside Properties

Crest Nicholson

Taylor Wimpey

1.2 Hereafter referred to as the ‘Consortium’.

1.3 The Consortium controls significant land interests within Guildford Borough, which include consented residential

development and sites promoted in the emerging Local Plan. The land interests play an important part in the delivery of

Guildford’s growth aspirations and housing land supply. The rate of CIL is therefore of critical importance to the

Consortium.

1.4 This representation has been submitted to influence the emerging Community Infrastructure Levy (CIL) Preliminary

Draft Charging Schedule (PDCS) and our comments relate to the proposed rates for residential development.

1.5 The Consortium has concerns. In particular, with the assumptions and allowances that have been made within the

Viability Study produced by Peter Brett Associates (December 2014) which we understand GBC has used to formulate

their proposed PDCS rates. The lack of any Section 106 contributions within the appraisals is particularly concerning

With the reason given for this that at this stage the Council believe specific infrastructure requirements are unknown.

Yet Appendix B of the GBC Draft Local Plan (July 2014) contains an Infrastructure Schedule. This Schedule sets out

the infrastructure needed to support the strategic sites.

1.6 Savills has submitted a separate representation on behalf of Wisley Property Investments Ltd, specific to the ongoing

land promotion coordinated by Savills on land at the former Wisley Airfield.

Savills Research

1.7 Savills in January 2014 published research that assessed the impact of CIL on development viability2 (see Appendix

2). The research focused on the level of CIL balanced against affordable housing provision and demonstrated that

there is a trade off required to enable a deliverable five year housing land supply. The key finding of the report is that

“for local planning policies to be viable, there is a three way trade-off between the costs of CIL, Section 106 funding of

infrastructure and affordable housing policy, with the costs of local standards and the move to zero carbon being

additional costs to be factored into the trade-off” (emphasis added).

1.8 The research notes that the ability of an area to afford CIL largely depends on the strength of its housing market.

Where the housing market is stronger (higher £ per sq ft) the total “pot” available for these contributions is higher. In

contrast, lower value areas see reduced viability and subsequently a reduced “pot”. It therefore becomes a question for

local authorities to consider the appropriate trade-off.

2 CIL – Getting it Right, Savills (UK) Ltd, January 2014




1.9 A high CIL rate, together with high site mitigation and affordable housing requirements will put a strain on the viability

of development and hence the five year housing land supply.

1.10 The PDCS sets different rates for different locations of development, strategic scale residential development has a

proposed rate of £400 per sqm, except the Slyfield site that has a rate of £150 per sqm. It is worth noting that over 40

Local Authorities have taken a pragmatic approach to CIL, choosing to set a £0 per sqm CIL rate for their strategic

sites. These authorities therefore recognise that the delivery of these sites is vitally important and should be enabled

via Section 106.

1.11 Guildford Borough consulted on their Draft Local Plan Strategy and Sites July to September 2014. This contained

Guildford Borough’s preferred strategy, which is largely reliant on greenfield sites (73% of the total supply in the first

five years). The sites identified within the preferred strategy largely are coming from development adjoining

settlements, strategic urban extensions and a new settlement. By way of example, the three strategic sites (Wisley

airfield, Gosden Hill and Blackwell farm) will deliver 6,350 dwellings (51% of the total supply over the 20 year plan

period).

1.12 It is evident that there will be significant reliance on the delivery of greenfield sites and the emerging strategic

allocations. It is therefore crucial that the developers’ interest and subsequent delivery of sites must not be

compromised by the introduction of an unviable level of CIL.

1.13 In addition, the National Planning Policy Framework (NPPF) requires Councils to boost significantly the supply of

housing, and identify annually a supply of housing sufficient to provide five years worth of housing against their housing

requirements3. The on-going delivery of housing is therefore required and it is important that the proposed CIL rate

does not harm the viability of achieving a rolling supply of housing; which is particularly important in the absence of an

up to date Local Plan.

1.14 It is the case that Guildford Borough only have 1.1 years of housing land supply. GBC have acknowledged that there

is a significant housing shortfall (Annual Monitoring Report 2013/14, page 8) stating that “we are not currently able to

demonstrate a five year supply of deliverable housing land without amendments to the Green Belt boundaries and use

of countryside land”. Furthermore GBC have failed to meet their housing targets over the period in six out of the last

eight years, which has led to an undersupply of 1,563 units.

1.15 These aspects demonstrate the importance of a CIL rate that does not further restrict housing delivery in an authority

area that is already struggling to provide housing.

Purpose

1.16 The following representation is made in the context of the Community Infrastructure Levy (Amendment) Regulations

2014 and relevant guidance (which was added to the national Planning Practice Guidance in June 2014).

1.17 The desirability of funding from CIL is a key test of the Regulations. The purpose of CIL is to facilitate the delivery of

development, including new housing to meet the key NPPF objective for a significant boost in the supply of

3 Paragraph 47, NPPF




housing. This NPPF objective provides perspective on how desirable CIL funding may or may not be, in relation to the

range of legal and planning mechanisms available to secure infrastructure delivery. There is no obligation on the

Council to pursue CIL by a certain date or to pursue it at all (particularly as existing mechanisms are available to

secure site mitigation costs).

1.18 The adoption of the CIL must be made in the context of the collective interest to deliver well planned, viable and

feasible development in order to meet the needs of the District. It must not jeopardise the objective for a significant

boost in the supply of housing. The plan for housing and infrastructure delivery in Guildford over the next 20 years has

not yet been finalised; the current Local Plan is out of date. The introduction of CIL at this stage, particularly at the

wrong rate, would have significant ramifications on the delivery of housing and future strategic sites.

1.19 In submitting this representation, the Consortium is only commenting on particular key areas of the evidence base.

Where this representation is silent on other parts to the evidence base this must not be taken as agreement with them

and the Consortium reserves the right to make further comments upon the evidence base at the subsequent stages, in

the event the Council pursues their current proposals.




2. Summary of National Policy and Legal Context

2.1 In respect of the preparation of Charging Schedules and support documentation, it is important to have regard to the

Government policy, guidance and law. This includes:

National Planning Policy Framework (NPPF)

Part 11 of the Planning Act 2008; Community Infrastructure Levy Regulations 2010 (as amended)

Planning Practice Guidance (PPG) CIL Guidance 2014 (as amended)

2.2 The Consortium’s comments are based on the above.

National Planning Policy Framework (NPPF)

2.3 It is important that the preparation of CIL is in the spirit of the NPPF, notably that it is delivery-focused and “positively

prepared”4.

2.4 The NPPF outlines 12 principles for both plan making and decision taking, notably that planning should “proactively

drive and support sustainable economic growth”5. Plan making should “take account of market signals such as land

prices and housing affordability” and that “the Government is committed to ensuring that the planning system does

everything it can to support sustainable economic growth”6.

2.5 Furthermore, the NPPF refers to the “cumulative impacts”7 of standards and policies relating to the economic impact

of these policies (such as affordable housing) and that these should not put the implementation of the Plan at serious

risk. Existing policy requirements should therefore be considered when assessing the impact of CIL on development

viability.

2.6 The NPPF calls for local authorities to boost significantly the supply of housing8. It requires local authorities to:

Meet the full, objectively assessed needs for housing, including identifying key sites;

Identify deliverable sites to provide five years worth of supply and developable sites further ahead;

Provide a housing trajectory for the plan period describing how the five year supply is to be maintained.

4 Ibid, Paragraph 182, March 2012

5 Ibid, Criterion 3, March 2012







2.7 The NPPF expressly states that CIL “should be worked up and tested alongside the Local Plan” and “should

support and incentivise new development”9. To comply with this policy, CIL Charging Schedules must be

demonstrated to have positive effects on development and have regard to an up-to-date Local Plan. The absence of

adverse effects on the economic viability of development, whether serious or otherwise is not enough to justify CIL

proposals. Charging Authorities have a positive duty when it comes to setting CIL rates and formulating their approach

on the application of CIL.

Planning Act 2008 (as amended)

2.8 Section 205 (2) of Part 11 of the 2008 Act (as amended by the Localism Act 2011) states that:

“In making the regulations the Secretary of State shall aim to ensure that the overall purpose of CIL is to ensure that

costs incurred in supporting the development of an area can be funded wholly or partly by owners or developers of

land in a way that does not make development of the area economically unviable.”

2.9 Examiners are required in particular to have regard to the matters listed in Section 211(2) and 211(4). This requires

examiners to consider whether the relevant charging authority has had regard to the following matters:

Actual and expected costs of infrastructure;

Matters specific by the CIL Regulations relating to the economic viability of development;

Other actual and expected sources of funding for infrastructure; and

Actual or expected administrative expenses in connection with CIL.

2.10 Regulation 14 of the CIL Regulations (as amended) expands on these requirements, explaining that charging

authorities must, when striking an appropriate balance, have regard to:

The desirability of funding from CIL (in whole or in part), the actual and expected estimated total cost of

infrastructure required to support the development of its area, taking into account other actual and expected

sources of funding; and

The potential effects (taken as a whole) of the imposition of CIL on the economic viability of development across its

area.

2.11 The Examiner will need to determine whether appropriate evidence on infrastructure needs and development viability

has been presented by the Council.

Planning Practice Guidance (PPG)

2.12 Relevant to CIL, the PPG (2014) states:

Charging schedules should be consistent with, and support the implementation of, up-to-date relevant Plans10.

The need for balance (as per Regulation 1411); and


10 Paragraph 10, Reference ID: 25-010-20140612, PPG CIL Guidance 2014 11

CIL Regulations 2010 (as amended)




The need for “appropriate available evidence to inform the Draft Charging Schedule” (as per Schedule 211(7)(a) of

the 2008 Act12.

2.13 The PPG reaffirms the requirement of paragraph 175 of the NPPF which states that, where practical, charging

schedules should be worked up and tested alongside the Local Plan. It also states that “a charging authority may use a

draft plan if they are proposing a joint examination of their relevant Plan and their levy charging schedule”13

.

2.14 The policy direction from central government is very much towards facilitating development. This policy imperative

should have a major material bearing on the CIL rates. This applies to the evidence to support the balance reached

between the desirability of funding infrastructure through CIL and the potential effects on economic viability of

development across that area.

2.15 The Guidance states that it is up to charging authorities to decide how much potential development they are willing to

put at risk through CIL (the “appropriate balance”). Clearly this judgement needs to consider the wider planning

priorities. Furthermore, the CIL Guidance outlines that CIL receipts are not expected to pay for all infrastructure but a

“significant contribution”14

. The overall approach and rate of CIL will have to pay attention to the development plan

and intended delivery.

2.16 The Guidance also states that charging authorities may adopt differential rates in relation to:

geographical zones within the charging authority’s boundary

types of development; and/or

scales of development15

.

2.17 It explains that where a particular type or scale of development has low, very low or zero viability, the charging

authority should consider setting low or zero rates for that type of development.

Recent relevant changes to the PPG

2.18 On 28th

November 2014, the PPG was updated to include the recent content of the ministerial statement by Brandon

Lewis about the minimum thresholds required to trigger the need for affordable housing and tariff based contributions.

The Government position is that contributions for affordable housing and tariff style planning obligations should not be

sought from developments of 10-units or less. In rural areas Local Authorities may choose to apply a lower threshold of

5-units or less.

2.19 This guidance must be reflected in GBC’s viability appraisals.

12

Paragraph 19, Reference ID: 25-019-20140612, PPG CIL Guidance 2014

13 Paragraph 11, Reference ID: 25-011-20140612, PPG CIL Guidance 2014

14 Ibid, Paragraph 95, Reference ID 25-095-20140612

15 Ibid, Paragraph 21, Reference ID 25-021-20140612




3. Planning and Infrastructure Delivery

The Development Plan

3.1 The Development Plan for Guildford includes the Guildford Borough Local Plan adopted in 2003. The Council does not

have an up-to-date development plan.

3.2 Guildford Borough recently consulted on their Draft Local Plan Strategy and Sites document (dated July 2014). This

document sets out the Borough’s preferred strategy on housing and includes a number of draft allocations to meet the

housing target. Guildford have since said that they will reassess the Local Plan (November 2014).

3.3 The Consortium questions how the Council can be certain about the infrastructure requirements of the District without a

well advanced or adopted Local Plan. This is demonstrated by the failure of PBA to include any Section 106 costs

within any appraisals on the basis of there being unknown infrastructure requirements. The Council will need to

demonstrate at the CIL Examination that it has had full regard to actual and expected costs of infrastructure to support

delivery to meet the housing needs; and pertinently would not render the supply of development unviable to achieve its

rolling five year supply, as required by the NPPF. At such an uncertain stage in the preparation of the emerging plan it

is unclear how this can be achieved.

Housing Delivery

3.4 Guildford’s Local Plan policy H1, which sets out the housing provision over the plan period, was not ‘saved’ and as a

result when the South East Plan was revoked on the 25 March 2015, GBC no longer had an ‘up to date’ policy setting

out their housing provision. In addition to this, the Borough successfully challenged the South East Plan requirement in

the High Court in 2010, which quashed that aspect of the South East Plan.

3.5 Local Planning Authorities are required to boost their supply of housing (NPPF, paragraph 47). Given that Guildford’s

Local Plan is out of date and there is no ‘saved’ policies in place that address development needs beyond 2006, GBC

have a significant housing shortfall.

3.6 The housing target is included within the draft Local Plan (652 dwellings per annum). The latest AMR (June 2014) and

the accompanying Housing Topic Paper (July 2014) acknowledge that the Borough is currently unable to demonstrate

a five year supply of deliverable sites. In addition, both of these documents recognise the significant under supply of

housing which has accumulated over the last eight years.

3.7 Savills have undertaken their own assessment of GBC’s five year supply, it concludes that there is 1.1 years of supply

when SHLAA sites are excluded (73% of the SHLAA sites are Green Belt sites, the majority of which are unlikely to

come forward in the short term particularly when the Local Plan has stalled). The supply rises to 3.6 years when

SHLAA sites are included. It is also apparent that the District is an area of persistent under-delivery, where the 20%

buffer is applied to the five year supply calculations in accordance with the NPPF.

3.8 It is therefore important that the requirements and implications of CIL are assessed in this context. The Consortium is

of the view that pursuing a charging schedule now is premature for the following reasons:




Guildford does not have an up-to-date local plan and work has paused on the emerging Local Plan

The District is an area of persistent under-delivery and is likely to require a significant number of dwellings brought

forward over the future plan period.

Certainty over the infrastructure needs to support future growth is required, but it is not possible at this stage as

confirmed by the PBA Local Plan Viability & Affordable Housing Study.

3.9 Should a schedule be advanced, then Section 106 costs should be incorporated into the appraisals and an additional

viability buffer must be applied to the appraisals, to reflect the uncertainty over plan production. The CIL rate should

be set at the level to enable the majority of schemes to come forward. It is relevant to note that the Borough places

priority on the delivery of previously developed sites, in Guildford town for example. This is in order to minimise the

loss of Green Belt land. The rate of CIL within Guildford is of particular relevance.

Strategic Sites

3.10 There is little acknowledgement throughout the supporting literature of the PDCS that Greenfield residential sites will

inevitability have higher upfront mitigation / infrastructure costs, making such development unviable.

3.11 Within the accompanying PBA Appraisals it appears that it has been assumed that only if the site is brownfield there

will be abnormal costs, yet Savills’ view is that abnormals should be incorporated within all the appraisals. The level

of average abnormal costs might not be the same on brownfield and greenfield sites generally, but on the

development on any sites there are likely to be unexpected issues.

3.12 With regards to opening up costs, the PBA Viability Report notes that on greenfield sites an allowance should be

made for opening up costs in terms of utilities, land preparation, SuDs and spine roads. Savills agree with PBA in that

it is likely that these costs will increase as schemes get bigger. However some of PBA’s other assumptions are

contested. The appraisals do not include opening up costs on any sites less than 50 units, yet these sites will still be

subject to some opening up costs, particularly if these sites are urban infill.

3.13 The PBA Local Plan Viability and Affordable Housing Study states that for 501 or more units the opening up costs

would be assumed at £20,000 per unit. Yet within the PBA Appraisals the opening up costs for the large strategic

sites vary significantly, but it is unclear what the reasons are for this. For instance the three emerging strategic sites

with a proposed rate of £400 per sqm (Wisley airfield, Gosden Hill and Blackwell Farm) are all for approximately

2,000 units and the PBA Viability Appraisals apply the assumed rate of £20,000 per unit. However the opening up

costs for Slyfield do not apply the assumed rate but instead apply a rate nearly four times that of the other sites

(£78,413 per unit) for a 1,000 unit scheme. There appears to be no justification for doing this in any of the supporting

text.

3.14 The three strategic sites of Wisley airfield, Gosden Hill and Blackwell Farm will contribute to 51% of the total

proposed housing supply of the plan period. The Council must recognise the importance of the delivery of these

types of sites to the housing supply. Other Councils have supported their rates with fine-grain viability work on

strategic sites, which establishes that such sites would be unable to support CIL in addition to policy compliant

affordable housing and large “site mitigation” Section 106 contributions. Without evidence to the contrary, the

conclusion that the bulk of housing will not come with significant on-site/site specific S106 requirements is not

accepted by the Consortium.




3.15 Whilst the Council appear to have tested these three sites, the Consortium have concerns over a number of the inputs

within the appraisals, particularly with the lack of inclusion of specific infrastructure information within any of the

appraisals (apart from Slyfield). These concerns are fully detailed in Section 4.

3.16 The Council’s position in this regard is incongruous with the current status of the development plan; which is out-of-

date and without a robust housing strategy; and a significant shortfall in housing land supply.

3.17 The Consortium recommends that the PDCS is not progressed until such time when the emerging Local Plan is at an

appropriate stage of preparation and where an examination is possible. The Council would then be in accordance with

PPG CIL Guidance which states “A charging authority may use a draft plan if they are proposing a joint examination of

their relevant Plan and their levy charging schedule”.

CIL/Section 106 Relationship

3.18 The Draft Guildford Borough Infrastructure/Regulation 123 List identifies that to ensure that there is no duplication

between CIL and infrastructure they will not accept a planning obligation for any infrastructure included on the

Regulation 123 List (the ‘relevant infrastructure’ list). The draft 123 List does not list any specific projects, it is very

general in its approach. For instance under each of the categories excluded from the list is improvements directly

related to a development. This approach will mean that on strategic sites in particular, the level of Section 106 costs

are not likely to be massively different to what they are now. Until such a time that the Regulation 123 List is more

defined, an assumption must be made in the viability appraisals for similar levels of Section 106 that have previously

been agreed.

3.19 The Council recognise that on larger sites it is likely that substantial infrastructure requirements will continue to be

considered through S10616

. Yet these costs have not been factored into the appraisals. The reason given by PBA is

that specific infrastructure requirements are unknown. The Consortium are extremely concerned with the lack of any

S106 costs within the appraisals. Savills’ have undertaken their own appraisals (in Section 4 of this report), recent

planning permissions have been reviewed to ensure that an appropriate level of S106 is included. The review showed

that current S106 costs per dwelling ranged from between £7,000 (68 units, planning reference 13/P/01829) to

approximately £20,000 (400 units, planning reference 12/P/01973).

3.20 The PBA Local Plan Viability & Affordable Housing states that “for the majority of smaller sites (under 10 dwellings) are

likely to be met through off site delivery of infrastructure such as schools expansions, open space enhancements,

SANGS or transport improvements”. Savills do not contest this view, however these sites do not make a significant

contribution to the land supply over the plan period. The vast majority will be delivered through larger sites.

3.21 The Consortium is concerned about the lack of clarity about how the CIL/S106 relationship will be taken forward. This

creates confusion within the process and introduces the potential for “double dipping”.

16

Paragraph 5.3.29 PBA GBC Local Plan Viability & Affordable Housing Study (December 2014)




Council’s approach to SANG

3.22 The Council is proposing that mitigation for the Thames Basin Heath SPA will be sought through CIL. Both PDCS and

draft Local Plan (policy 17) identify that GBC will prioritise CIL spending to provide Suitable Available Natural Green

Space (SANG). GBC confirm that this priority for SANG will be formalised in the new Local Plan and in the Regulation

123 List17

. It is though the case that the emerging strategic sites will provide their own SANGs on-site, and hence

secured as relevant 'site specific' infrastructure.

3.23 The PDCS also identifies that Strategic Access Management and Maintenance (SAMM) will continue to be secured

through planning obligations18

.

Affordable housing/S106: 10 or less unit schemes threshold

3.24 The effect of this recent Government guidance on small scale typologies is worthy of consideration. Whilst, the likely

CIL rate may increase (as no affordable housing would be secured), the Consortium is keen that the “fair share”

principle applies for CIL, and that adequate funding is obtained for all sources to deliver the infrastructure needed.

3.25 The CIL Regulations clearly permit the differentiation of CIL rates by scale.

17

Paragraph 15 CIL PDCS (January 2015)

18 Paragraph 21 CIL PDCS (January 2015)




4. Viability Appraisal

4.1 Section 211 (7a) of the Planning Act 2008 (as amended), requires Councils to use “appropriate available evidence”

to inform their Charging Schedules. In the case of the PDCS, we have assumed that GBC have relied upon the

Guildford Borough Council Local Plan Viability & Affordable Housing Study (Final Report) prepared by PBA 19

produced

by PBA as their ‘appropriate available evidence’. We have critically examined this report as part of this representation

to determine if the Council has sufficiently met the requirements of Section 211 (7a) in proposing their rates.

4.2 The fundamental premise is that to enable delivery, sites must achieve a competitive land value for the landowner and

provide developers the required return on investment; otherwise development will be stifled. This is recognised by the

NPPF20

and is ‘in-built’ within the CIL 2010 Regulations (as amended). It is also the basis of the definition of viability

within the Harman Report.21

4.3 Owing to the key test of Regulation 14(1)22

it is important that the viability appraisals prepared are fit for purpose, as it

is clear that at Examination the Charging Schedules will need to be supported by “relevant evidence”23

. Within the CIL

2010 Regulations (as amended), LPAs must strike an appropriate balance and justify that balance with evidence at the

Examination, showing and explaining how the rates will contribute towards the implementation of their relevant Plan.24

The PBA Viability Assessment

4.4 We have reviewed the viability evidence prepared by PBA and split our response in respect of the viability work in to

the following:

Part 1 - outlines the areas that the Consortium has concerns over and justification for any differences.

Part 2 - includes our revised appraisals taking the points discussed in Part 1 in to account.

Part 1 – Areas of Concern

“Up-to-date” Evidence

4.5 It is fundamental that the appraisals are run with assumptions reflective of the current market to ensure that the rates

are set at viable levels. The Consortium is therefore concerned that the Viability Assessment will be relying on data

that has not been updated for some time, such as build cost allowances, is discussed below. It is fundamental that the

CIL rates are formulated on up-to-date evidence, especially since the PDCS consultation is running in parallel with the

emerging Local Plan consultation.

19

Peter Brett Associates LLP Local Plan Viability & Affordable Housing Study December 2014 20

NPPF, Paragraph 174, March 2012

21 Section One , Viability Testing Local Plans, Chaired by Sir John Harman, June 2012

22 CIL Regulations 2010 (as amended)

23 Ibid. Regulation 11(1) (f) / 19(1) (e)

24 Paragraph 009, Reference ID 25-009-20140612, CIL Guidance (2014)




Section 106 Contributions

4.6 There has been no allowance for Section 106 obligations costs within the PBA appraisals for any of their typologies

tested either small or large sites. The PBA Viability Report25

states “On larger sites it is likely that substantial

infrastructure requirements will continue to be considered through S106. However at this stage the specific

requirements are unknown, so in determining a suitable level of CIL, sufficient headroom needs to be available to fund

likely S106 requirements.”26

4.7 As stated in Section 3 we strongly disagree with the methodology taken by GBC, which seems to be to omit any

Section 106 costs and to rely on “sufficient headroom” within their proposed rates. The Consortium feels this is a gross

failure in approach for all typologies but specifically strategic sites, which will not only incur the greatest infrastructure

costs but will be responsible for the majority of new housing supply. Ultimately, this approach risks significantly under-

estimating the true costs of development resulting in unrealistic capacities for sites to pay for CIL.

Infrastructure and Site Opening Costs (“Scheme Enabling”)

4.8 Opening costs have been taken into account for Brownfield Sites at between £150,000 to £200,000 per net hectare for

large Brownfield and Brownfield sites respectively. On Greenfield sites an allowance of up to £20,000 per unit has

been made for sites of over 501 units, with a sliding scale decreasing in allowance by number of units. Although the

Consortium agrees in principle that infrastructure/opening costs should be applied to both Brownfield and Greenfield

sites, we would disagree with the amounts levied. It is felt that abnormal costs and opening up costs are not exclusive,

therefore it should not be assumed that Greenfield sites do not have abnormal costs and conversely that Brownfield

sites do not require substantial costs to enable development.

4.9 Considering Abnormal costs in more detail and using an example site we seek to demonstrate a substantial

underestimation of costs. Site 1627

a 30 unit flatted scheme has site abnormal costs of £60,000, equating to only

£2,000 per unit. PBA consider Abnormal costs would include demolition and remediation works, in principle the

Consortium disagrees with this definition of Abnormal costs and believes typically demolition would be a separate

allowance. It is felt for Brownfield sites the Abnormal costs allowance is acceptable for remediation works only,

additional costs for demolition and the incorporation of opening up costs should also be allowed for to take full account

of the associated costs. An alternative to working out abnormal costs would be to increase the percentage of

contingency which has been allowed for in the appraisals.

4.10 Opening costs for Greenfield sites range from £0 to £20,000 per unit, with the higher figure only applicable for sites of

over 501 units. The Consortium feels this allowance is too low and does not represent realistic costs. Guidance

dictates that infrastructure/opening costs should be set between £17,000 and £23,000 per unit for large scale

developments as per the LHDG ‘Harman Report’ (June 2012)28

.

25


Paragraph 5.3.29 Peter Brett Associates LLP Local Plan Viability & Affordable Housing Study December 2014 27

PBA Viability Appraisals – Appendix 5 28

Viability Testing Local Plans June 2012




Promotion Costs

4.11 The cost of promoting a site through the planning process can be considerable, especially with the larger strategic

sites. The viability appraisals provided by PBA do not seem to recognise or allow for these costs and we would

therefore ask that they are considered in further detail prior to setting the CIL rates. This is fundamental for large

strategic sites, notably those which are presently in the Green Belt, which may be subject to extensive promotion

periods.

Build Costs

4.12 The levels of build costs applied within the Viability Study29

are of concern to the Consortium, because build costs have

increased rapidly over the past 10 months as a result of rising material and labour costs. The impact of this is

highlighted in Table 1 below, which shows the movement since April 2014:

Table 1 – Movement in BCIS Build Costs

Source: Savills.

*In order to calculate Medium sized housing build costs, the figures stated for small housing schemes and Estate housing have been

interpolated. The figure given is the median between the two figures stated. Median build Costs, adjusted to Guildford have been used.

4.13 This indicates an average increase of 10.7% in build costs for houses and flats since April 2014. It is therefore

imperative that GBC updates their Viability Study to reflect current build cost estimates. It should also be highlighted

that as the build costs link to a number of other inputs; an incorrect base build costs risks a significant underestimation

of the true costs of development.

4.14 The Consortium was provided with appraisal summaries for each typology after requesting the information from GBC30

.

After reviewing these documents it has become apparent that build costs stated within the Viability Study have not

29


PBA Viability Appraisals – Appendix 5




been used for each typology, some utilising lower build costs. We would therefore ask that GBC provide more

evidence to justify these variations.

4.15 Additionally the Consortium is concerned about the allowance for ‘extra-over’ costs at £450 per unit for compliance to

2014 Building Regulations. PBA comment that England Build Regulations 2014 seeks a 6% improvement to the 2010

Building Regulations standard, and this is unlikely to be reflected in BCIS costs at the time of tender in April 2014. PBA

have therefore assumed a rate of £450 per unit increase in build costs over units that were built under the 2010

Building Regulations, which is taken from the Government’s Regulatory Impact Assessment findings.

4.16 The PBA appraisals do not take into account any increased price for completing homes to a level within the Code for

Sustainable Homes. PBA have assumed that as the Code for Sustainable Homes is to be phased out, GBC have not

indicated within their Draft Local Plan to introduce a mandatory policy requiring development to meet a higher level of

sustainable development. The Consortium disagrees with this view, and feel that even if the Code for Sustainable

Homes is abolished, new homes will still need to conform to a similar level of sustainability through Building

Regulations. This change will require an additional cost and although unknown as this time, it should be factored into

the cost assumptions, chiefly for large scale development which will be built out over a long period of time.

Developers Profit

4.17 PBA has chosen to adopted a profit margin of 20% on Gross Development Value (GDV) for the private housing and

6% on GDV for the affordable housing, reflecting a blended rate in the region of 17.5% on GDV within their appraisals.

We would like to make it clear the minimum profit margin that the lending institutions are currently prepared to accept,

on residential development, is 20% on GDV and therefore the blended profit rate adopted by PBA is below the

minimum level required by national house builders.

4.18 The NPPF states that to ensure viability, developments should provide competitive returns to a willing land owner and

willing developer. A competitive return to a developer is one that provides a sufficient return for the developer to

continue a successful business through the economic cycle, taking account of the risk profile of the business. We are

therefore concerned that PBA’s assumption is too low and does not take account of the minimum returns required by

shareholders of quoted Plc house builders.

4.19 We have attached a report on competitive developer return (Appendix 3), which provides evidence on the minimum

profit margins required by Plc house builders. The key focus is the distinction between gross (site level) margin and net

operating margin. A point discussed in the Harman Report, which suggests that “overheads for house-building typically

lie in the range of 5%-10% of gross development value”. This is particularly relevant for large Greenfield sites and

regeneration areas, where large up-front costs have an impact on a developer’s required Return on Capital Employed

(ROCE), as a higher margin is required to reflect the higher risk. This is new evidence, provided to counter previous

Examiners decisions on profit, which were made in the absence of any evidence on this matter.

4.20 Taking this into account, we would therefore ask that a minimum profit level of 20% on GDV (blended) plus 25% ROCE

across all tenures, subject to consideration of the risk profile of the scheme, is adopted in the viability testing.




Benchmark Land Value (BLV)

4.21 The Consortium has a number of concerns relating to the methodology and assumptions made by the Viability Study in

determining the BLVs. PBA state that the “threshold/benchmark land value is based on a review of recent viability

evidence of sites currently on the market, a review of submitted viability appraisal by applicants, published data on land

values and discussions with stakeholders.”31

4.22 The BLVs are based on both serviced land sales with planning consent, and disposals of land (existing use) without

the benefit of planning permission. Land with planning will vastly differ in value to land without planning. It is therefore

unclear how the BLVs have been calculated from these comparables.

4.23 When considering BLVs the Consortium is concerned that these are set too low and do not reflect market expectations,

this is particularly the case for Brownfield sites with higher Existing Use Values. It is concerning that there is no

comparable evidence provided to support the figures stated in the Viability Study. We would therefore ask that GBC

provide more evidence to justify these values.

4.24 The Consortium has provided market evidence of Guildford town centre Brownfield site acquisitions, of these two

comparable sites ranging from a small housing development and high density flatted scheme, the average land value

per Net Hectare has come to Circa £9.9m. Considering the relatively small data set the evidence could be interpreted

as not being fully representative, however this evidence does highlight that the BLVs in the Guildford town centre

fluctuate hugely. This evidence also demonstrates that the BLV set within the Viability Study for Guildford Brownfield

sites at £3,000,000 per Net Hectare should be considered as the lower range and does not truly represent market

expectations.

General Appraisal Assumptions

4.25 The Consortium fundamentally disagrees with a number of the assumptions made by PBA in the Viability Study32

and

appraisal work, in addition to those above:

Timing – The PBA Viability Report does not provide any timing assumptions for build or sales rates or general

appraisal timing. GBC provided further details33

to the Consortium upon request, which states sales rates mirror

build rates with a lag of 6 months. Although rates move with scheme size, the 6 month lag (lead-in) for sales stays

the same. Meaning on large strategic sites it is assumed the first unit sale will be 6 months after ground is broken.

This is an extremely unrealistic assumption and we would request further clarity on the timing assumptions that

have been applied. It must be noted like Build Costs, timing assumptions do not follow the additional information

provided, with some appraisals differing from the adopted assumptions. Lastly it must be noted that no assumption

has been made for the sale of Affordable Housing, meaning it is considered they sell in the same process as open

market units, which is unrealistic and does reflect the market.

Finance – The finance rate is set at 6% of land value. In principle the Consortium has adopted this assumption in

analysis, although a rate of 7% would be more market appropriate.

31

3.13 Peter Brett Associates LLP Local Plan Viability & Affordable Housing Study December 2014 32


Timing Assumptions Email from GBC Appendix 6




Commercial Elements – The larger typologies for strategic sites make no account for commercial elements of the

scheme, meaning there is a gross underestimation of costs. Much like with site specific infrastructure costs the

Consortium recognises the difficulties in estimating unknown costs, however it is felt an assumption must be made

to account for such substantial costs.

Errors – As mentioned above a number of small errors have been made throughout the appraisals. Although these

issues may seem minor, small changes within a residual appraisal can have huge effects on end values. Within the

Viability Study SAMM costs are to be levied at an average amount of £700 per unit, however this figure becomes

£750 per unit within the appraisals. As alluded to above, often the timing assumptions for sales rates do not follow

the adopted assumption. It has become apparent that the cost of finance in the PBA appraisals differs from our own

mirrored appraisals, demonstrating the need to use industry standard software.

Appraisal Inputs & Assumptions

4.26 Table 2 below summarises the relevant assumptions that have been adopted by PBA and the Consortium’s opinion on

those assumptions. Where the Consortium’s opinion differs we have sought to provide an alternative assumption.

Table 2 - Alternative Viability Appraisal Assumptions

Viability Appraisal

Assumptions

PBA Adopted Figure Consortium Opinion

Values

Open Market Value (OMV) Location

House price /m2 Flat Price

Agree

Guildford (town) £4,584 £3,667

Ash & Tongham £3,170 £2,121

South East Rural £3,407 £3,167

West Rural £3,317 £1,894

North East Rural £3,520 £3,826

East Rural £4,550 £4,159

Affordable Housing Value 55% - 65% Agree

Densities

Per Hectare 33 - 125 Agree

Dwelling Sizes (sq.m)

Open Market Housing Flats (GIA) Flats (NIA) 2 bed house 3 bed house 4+ bed house

70 66 90 110 130

Agree

Affordable Housing Flats (GIA) Flats (NIA) 2 bed house 3 bed house 4+ bed house

70 66 90 110 130

Agree

Acquisition Costs

Purchaser’s Costs 5.75% Agree

Stamp Duty Land Tax HMRC variable rate Agree




Viability Appraisal

Assumptions


Construction Costs

Build Costs (£/m2 ) Type House price /m2

Flat price /m2

House price /m2

Flat price /m2

Small housing scheme £1,467 (£136 /ft2)

£1,185 (£110 /ft2)

£1,668 (£155 /ft2)

£1,306 (£121 /ft2)

Medium sized house scheme

£1,234 (£114 /ft2)

£1,185 (£110 /ft2)

£1,377 (£128 /ft2)

£1,306 (£121 /ft2)

Estate housing £1,001 (£93 /ft2)

£1,185 (£110 /ft2)

£1,087 (£101 /ft2)

£1,306 (£121 /ft2)

Infrastructure / Opening Costs Greenfield: Less than 50 units: 50-100 units 101-200 units 201 – 500 units 501 or more units

£0 per unit £5,000 per unit £10,000 per unit £15,000 per unit £20,000 per unit

£5,000 per unit £10,000 per unit £23,000 per unit – (Average estimate)

Abnormals Brownfield Large Brownfield

£200,000 per net ha £150,000 per net ha

2% of build costs

Building Regulation Standards

2014

(Extra-over BR2014)

£450 per unit Disagree

Contingency 5% of build costs + externals Agree

Professional Fees 10% of build cost Agree (plus Planning costs)

Section 106

Affordable Housing 40% - 45% Agree

S106 Financial Contribution

(per unit)

£0 Disagree

SAMMS £750 per unit Disagree (£700 per unit)

Section 278

Financial Contribution Unknown Disagree (in S106 for large

scale sites)

Profit

Developer Profit 20% on Private 6% on Affordable 20% on GDV

Timescales

Build Rate (units per month)

5 Units 0.36 Disagree



1,000 Units 9.52 Disagree

Sales Rate (units per month)




1,000 Units 9.52 Disagree

Affordable Sales distribution Unknown Quarterly payments




Viability Appraisal

Assumptions


Finance

Debit Rate 6% Disagree. Should be 7%.

Sales Fees

All fees and marketing 3% of open market GDV Agree (on private but disagree

on affordable)

Source: ‘Savills analysis’

Overall

4.27 The Consortium consider that whilst the general methodology of utilising residual appraisals within the Viability

Assessments is in line with industry practice, the report provided by PBA contains some assumptions which are

concerning the HBF Consortium, which may undermine the validity of the evidence that is being relied upon to justify

the proposed CIL rates. As a result, the Consortium cannot agree to some of the points that have been raised by the

report and feels that the rates set have not been based upon a robust evidence base, where it can be concluded that

development will not be put at serious risk.

4.28 Our clients therefore request that certain elements of the evidence be revised and made readily available, as

summarised by the list below:

Incorporation of a reasonable developers profit;

Incorporation of promotional & abnormal costs on large scale sites;

Evidence of benchmark land values;

Full detailed appraisals assumptions for each typology;

Inclusion of site specific S106 costs for large scale sites; and

Evidence of an appropriate viability buffer – given the proposal to adopt CIL prior to an up to date development

plan.

Part 2 - Alternative Viability Appraisals

4.29 Given the concerns set out above, we have produced a set of alternative viability appraisals in order to demonstrate

the impact of the underestimation of the following on the calculation of the maximum CIL rate:

1) Construction and Sales Timing;

2) Allowance of Abnormal and Infrastructure/Opening Costs;

3) Promotion/Planning Costs;

4) Developer’s Profit;

5) Section 106 Allowance for Site Specific Costs; and

6) Build Costs.

4.30 Savills has sought to reproduce appraisals produced by PBA, however there are a number of issues preventing us

from doing so accurately. The appraisals have been constructed using ‘in-house’ appraisal software rather than

industry recognised software, this has meant there are limitations to the level of accuracy that can be achieved. As




mentioned above it is not entirely clear as to the timing assumptions for building and sales rates in addition to general

timing assumptions.

4.31 We have been able to reproduce PBA’s 50 and 2,000 unit typology appraisals, as close as possible, and have using

our own ARGUS Developer appraisal software and have incorporated the assumptions set out in Tables 3, 4 and 5

above. We have also created a 400 unit Greenfield typology extrapolating PBA assumptions. We have sought to

produce three specific typologies because we feel this is representative of proposed housing supply and demonstrates

a good cross section of typologies. In addition, for the 400 unit and 2,000 unit typologies, these were in part selected

because we have been able to make reference to exiting and estimated Section 106 cost estimates.

4.32 Table 3 - Alternative Viability Appraisal Assumptions for 50 unit typology

Viability Appraisal

Assumptions

PBA Adopted Figure –50 unit typology Savills Assumptions – 50 unit

typology

Values

Open Market Value (OMV) Private m2 £/m2

Agree

Flats (GIA) 12 £3,667

2 bed house 84 £4,584

3 bed house 96 £4,584

4+ bed house 48 £4,584

Affordable Rent Value Affordable Agree

Flats (GIA) 33.6 £2,017

2 bed house 44.8 £2,512

3 bed house 28 £2,512

4+ bed house 5.6 £2,512

Intermediate Rent Value Intermediate Agree

Flats (GIA) 14.4 £2,384

2 bed house 19.2 £2,980

3 bed house 12 £2,980

4+ bed house 2.4 £2,980

Densities

Per NDA 46 Agree

Dwelling Sizes (sq m)

Open Market Housing Flats (NIA) 2 bed house 3 bed house 4+ bed house

66 90 110 130

Agree

Affordable Housing Flats (NIA) 2 bed house 3 bed house 4+ bed house

66 90 110 130

Agree

Net Developable Area (NDA)

NDA (Ha) 1.10 Agree

Acquisition Costs

Purchaser Costs 5.75% Agree

Stamp Duty Land Tax HMRC variable rate - (Within Purchaser costs) Agree




Viability Appraisal

Assumptions

PBA Adopted Figure –50 unit typology Savills Assumptions – 50 unit

typology

Construction Costs

Build Costs (£/m2) Type House price /m2

Flat price /m2

House price /m2 Flat price /m2

Estate housing £1,070 (£99/ft2)

£1,269 (£117/ft2)

£1,087 (£101/ft2)

£1,306 (£121/ft2)

Externals 10% of build costs Agree

Abnormals (£200,000) per net ha Agree

Site Opening Costs (£5,000) per unit Agree

Contingency 5% of build costs Agree

Professional Fees 10% of build cost Agree

Section 106

Affordable Housing 30 Private, 14 Intermediate and 6 Shared

Ownership

Agree

S106 Financial Contribution £0 £0

Code for Sustainable Homes


2014

(Extra-over BR2014)

£450 per unit Agree

Profit

Developer Profit Private

Affordable

20%

6%

20% of GDV

Timescales

Build Rate/Period Unknown 2.08

Sales Rate/ Period 25 units/pa 0.8 (private)

Finance

Debit Rate 6% This has been adopted, but Savills

opinion is that the rate should be

7%.

Sales Fees

Sales cost 3% of GDV Agree (+1% for affordable)

SPA Mitigation

SAMM £750 per unit (£37,500) £700 per unit (£35,000)

Table 4 - Alternative Viability Appraisal Assumptions for a 400 unit typology – East Rural

Viability Appraisal

Assumptions

PBA Adopted Figure – 400 unit typology Savills Assumptions – 400 unit

typology

Values


Agree

Flats (GIA) 1.5 £3,667

2 bed house 10.5 £4,584

3 bed house 12 £4,584




Viability Appraisal

Assumptions


typology

4+ bed house 6 £4,584


Flats (GIA) 4.2 £2,017

2 bed house 5.6 £2,512

3 bed house 3.5 £2,512

4+ bed house 0.7 £2,512


Flats (GIA) 1.8 £2,384

2 bed house 2.4 £2,980

3 bed house 1.5 £2,980

4+ bed house 0.3 £2,980

Densities

Per NDA n/k 50.8



66 90 110 130

Agree


66 90 110 130

Agree


NDA n/k 7.86

Acquisition Costs



Construction Costs


Flat price /m2



£1,269 (£117/ft2)

£1,087 (£101/ft2)

£1,306 (£121/ft2)


Abnormals - 2%




Section 106

Affordable Housing 240 Private, 112 Affordable rent and 48

intermediate units.

Agree

S106 Financial Contribution - £7,950,000 (£19,875 per unit

(Taken from consented 400 unit

scheme))




Viability Appraisal

Assumptions


typology



2014 (Extra-over BR2014)

£450 per unit Agree

Profit


Affordable

20%

6%

20% of GDV

Timescales

Build Rate/Period - 8.69

Sales Rate/ Period - 5.21

Lead in Period 6 month pre-construction

Finance



7%.

Sales Fees


SPA Mitigation

SAMM £750 per unit (£300,000) £700 per unit (£280,000)

Table 5 - Alternative Viability Appraisal Assumptions for a 2,000 unit typology

Viability Appraisal

Assumptions

PBA Adopted Figure – 2,000 unit typology Savills Assumptions – 2,000 unit

typology

Values


Agree

Flats (GIA) 1.5 £3,667

2 bed house 10.5 £4,584

3 bed house 12 £4,584

4+ bed house 6 £4,584


Flats (GIA) 4.2 £2,017

2 bed house 5.6 £2,512

3 bed house 3.5 £2,512

4+ bed house 0.7 £2,512


Flats (GIA) 1.8 £2,384

2 bed house 2.4 £2,980

3 bed house 1.5 £2,980

4+ bed house 0.3 £2,980

Densities

Per NDA 41.3 Agree




Viability Appraisal

Assumptions


typology



66 90 110 130

Agree


66 90 110 130


NDA n/k 48.4

Acquisition Costs



Construction Costs


Flat price /m2



£1,269 (£117/ft2)

£1,087 (£101/ft2)

£1,306 (£121/ft2)


Abnormals - 2%




Section 106

Affordable Housing 1,100 Private, 900 Affordable rent and 630

intermediate units.

Agree

S106 Financial Contribution - £46,000,000 (£23,000 per unit

(Informed by market knowledge))



2014 (Extra-over BR2014)

£450 per unit Disagree

Profit


Affordable

20%

6%

20% of GDV

Timescales

Build Rate/Period n/k 12.5

Sales Rate/ Period n/k 12.5

Lead in Period 6 months to first sale 18 month pre construction. 12

month lag between construction

start and first sale.




Viability Appraisal

Assumptions


typology

Finance



7%.

Sales Fees


SPA Mitigation

SAMM £750 per unit (£1,500,000) £700 per unit (£1,400,000)

Source: Savills. See Appendix 4 for copies of the ARGUS Development appraisal

Table 6 – Alternative Maximum CIL Rates


4.33 The results in Table 6 demonstrate when market facing assumptions and a 40% viability buffer is applied, only the

Guildford, Brownfield (Zone 3) CIL rate of £500 appears viable. On the basis of the 400 unit typology it is clear that an

alternative CIL rate would only become viable at between 30% to 35% less than the proposed rate, for East Rural and

West Rural respectively. When analysing the Strategic 2,000 unit typology, the maximum CIL rate is considerably

under the proposed rate. Although the Strategic CIL rate would appear viable, the Consortium is still concerned over

the adopted BLVs, as market knowledge would suggest the BLVs especially for Brownfield sites are set too low;

leading to a significantly lower level of or no headroom. A 40% viability buffer is justified given the potential headroom

for CIL without a buffer (and hence increased risk that more schemes are rendered unviable as each site/ scheme is

different) and also as the housing land supply situation is very poor.

Table 7 – Alternative Maximum CIL Rates with Benchmark Land Value Amendments


4.34 As stated at paragraph 4.24, market evidence would illustrate that the adopted BLV for Guildford, Brownfield sites is far

too low. The Consortium was able to provide comparable evidence which demonstrates BLVs in the region of

£10,000,000 pre Net Hectare, far higher than PBA. Taking a rough mid-point BLV of £6,000,000 pre Net Hectare, we

are re-assessed the 50 unit typology, which now shows a minus capacity, deeming it unviable. The Consortium has

serious concerns over the adopted BLVs and relatively high proposed CIL rates, accordingly the Consortium seeks

clarity on the comparable evidence utilised to arrive at the BLVs.

Typology ZoneNet Site

Area (Ha)RLV (£/ha) BLV (£/ha)

Max. CIL

Capacity

CIL

Chargeable

Floor Space

(Sq M)

Private

GIA per

HA (Sq M)

Max. CIL40%

Buffer

Proposed

CIL Rate

50 Unit 3 1.10 £5,461,325 £3,000,000 £2,461,325 3,144 2,858 £861 £517 £500

400 Unit (East Rural) 1 3.93 £4,065,820 £3,000,000 £1,065,820 25,152 6,400 £167 £100 £300

400 Unit (West Rural) 1 3.93 £4,065,820 £2,500,000 £1,565,820 25,152 6,400 £245 £147 £300

2,000 Unit (Strategic) Strat 48.4 £2,027,768 £1,000,000 £1,027,768 110,000 2,273 £452 £271 £400

Typology ZoneNet Site

Area (Ha)RLV (£/ha) BLV (£/ha)

Max. CIL

Capacity

CIL

Chargeable

Floor Space

(Sq M)

Private

GIA per

HA (Sq M)

Max. CIL40%

Buffer

Proposed

CIL Rate

50 Unit 3 1.10 £5,461,325 £6,000,000 -£538,675 3,144 2,858 -£188 -£264 £500




4.35 Graph 1 below uses the Savills Benchmarking Model to test the viability of the proposed CIL rate (£400 per sq m)

which is applicable to large scale residential, strategic sites. This is plotted alongside local LPAs with similar sales

values, and with a similar reliance on large scale Greenfield development for housing delivery.

4.36 The box below explains how to interpret the results.

Graph 1 Strategic Sites, Low Value Results of Savills Benchmark Model (£400 sqm) CIL

4.37 This indicates that the proposed CIL rate for GBC combined with the current affordable housing policy would render a

significant proportion of schemes unviable. This is concerning as the other proposed CIL rates are higher than £400

per square metre. A trade-off between CIL and affordable housing will therefore be needed if the delivery of these large

Greenfield sites is not to be threatened.




Recommendation

4.38 The Savills appraisals supports the Consortiums view that the proposed CIL rates will jeopardise the delivery of

housing in the Borough and will prevent a five year land supply as required by the NPPF. It is recommended that GBC

revisit the methodology and evidence used to inform BLVs, with a view to bringing them inline with market

expectations. Additionally it is clear from Table 6 above that when utilising market assumptions with the LPA affordable

housing policy and CIL costs, the proposed CIL rates do not provide a sufficient viability buffer to ensure the delivery of

housing and therefore requires substantial reduction. Primarily we would recommend that a £nil charge would be levied

for major strategic residential development and a significant drop in other CIL rates namely Guildford Town (Zone 3) to

ensure future viability.




5. Effective Operation of CIL

5.1 Despite the narrow scope of the Examination, the Consortium urge the Council to make clear at the earliest opportunity

the supporting documentation needed to operate CIL and to make it available for consultation. Practically, this needs to

be done prior to the Examination so that participants and stakeholders are able to comment on the effective operation

of CIL. Whilst this supporting information is not tested at Examination, this information is critical to allow for the

successful implementation of CIL and to demonstrate that the CIL has been prepared positively and supports

sustainable development.

5.2 The documentation should include:

Guidance on how to calculate the relevant chargeable development/level of CIL;

Guidance on liability to pay CIL/Appeals process;

Policy for payments by instalments;

Approach to payments in kind;

Guidance on relief from CIL and a policy on exceptional circumstances for relief from CIL.

5.3 The GBC CIL PDCS does not currently include clear explanation of any of the above. GBC recognise that there is

scope for them to exempt certain development and/or introduce an instalments policy34

.

Mandatory Relief

5.4 The Council must clarify its position as the PPG states “A collecting authority must give full relief from the levy on the

portions of the chargeable development which are intended for social housing”35

.

Instalments Policy

5.5 The Consortium would welcome the introduction of an Instalments Policy. Developer cash flow is an important

consideration, notably in respect of upfront infrastructure costs typically associated with strategic scale development. A

proposed Instalment Policy should aim to reflect, as closely as possible, the timing of delivery of the development, to

ensure that the CIL does not put unnecessary pressure on cash flow and viability.

Payment in kind

5.6 The CIL Regulations now allow for Payment in Kind through the provision of infrastructure. However, there remain

notable deficiencies in the operation of CIL, caused primarily by the CIL Regulations, which places the Council and the

development industry in a difficult position.

5.7 The scope to reduce the CIL liability via utilisation of Payment in Kind is therefore restricted to those items of

infrastructure which are not required to mitigate the impact of a development, which for strategic scale sites would

exclude most (if not all) site-specific and “scheme mitigation” infrastructure.

34

Paragraph 1 GBC CIL PDCS (January 2015)

35 PPG CIL Guidance 2014, Paragraph 122, Reference ID: 25-122-20140612




5.8 Payment in Kind is therefore not a credible option, which further emphasises the need to ensure that the Regulation

123 List does not include any items of infrastructure intended to be delivered through Section 106 agreements on any

of the strategic scale sites.




6. Conclusion

6.1 This representation has been prepared by Savills on behalf of a consortium of house builders. As set out at the start of

this representation there are four key tests at Examination:

i. The charging authority has complied with the required procedures set out in part 11 of the Planning Act 2008 and

the CIL Regulations;

ii. The charging authority’s draft charging schedule is supported by background documents containing appropriate

available evidence;

iii. The proposed rate or rates are informed by and consistent with, the evidence on economic viability across the

charging authority’s area; and

iv. Evidence has been provided that shows the proposed rate (or rates) would not threaten delivery of the relevant

Plan as a whole

6.2 The following points are key concerns for the Consortium:

Unviable Rates - The current proposed CIL rates are unviable in the round and risk rendering a significant

proportion of the housing supply across the District undeliverable;

Incorrect Assumptions - A number of the key viability inputs adopted by PBA are incorrect. Specifically, the

allowance for Section 106 contributions is insufficient with a number of the other costs out of date, this results

in an over-estimation of the maximum CIL rates that can be supported.

Risks for delivery of Strategic Sites – The appraisals relating to the large, strategic residential sites do not

take into account the significant ‘opening up’ and abnormal costs for the delivery of sites this scale. We would

strongly recommend that the Council considers applying a zero rate for their strategic residential development

sites, especially given the stage of the Local Plan process.

Alternative Viability Appraisals - We have undertaken alternative viability appraisals looking at the impact of

Section 106 obligations, profit margin, and abnormal allowances on the level of CIL that can be supported.

6.3 Notwithstanding the concerns about the principle of introducing a charging schedule when there is no up to date Local

Plan, it is necessary to stress that if the CIL level is set too high, it will certainly have a negative impact on a large

proportion of development coming forward, especially bearing in mind the likely reliance on strategic sites in delivering

the housing the District requires.

6.4 The Consortium is open to a meeting with the Council and their advisors to discuss the approach taken and to discuss

amendments to the proposed CIL rate.

Documents

Guildford Borough Council’s Community Infrastructure Levy ... · PDF fileCommunity Infrastructure Levy Preliminary Draft Charging ... Guildford Borough Council CIL PDCS ... 1.8 The