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 not
• approved

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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 Councils
  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
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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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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 Sale
• Capitalised 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