community infrastructure levy economic viability...

Project Ref: 27169

October 2012

Stratford-on-Avon District Council

Stratford-on-Avon CIL

Community Infrastructure Levy Economic Viability Study



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Document Control Sheet

Project Name: Stratford-on-Avon CIL

Project Ref: 27169

Report Title: Community Infrastructure Levy Economic Viability Study

Doc Ref: Final report/rev04

Date: October 2012

Name Position Signature Date

Prepared by: Mark Felgate Associate MF/NC

30/10/2012

Reviewed by: Nigel Clark

Development Director

NC/MF 30/10/2012

Approved by: J Baker Partner JB

30/10/2012

For and on behalf of Peter Brett Associates LLP

Revision Date Description Prepared Reviewed Approved

000 03/08/2012 Draft Report MF NC JB

02 09/08/2012 Final Draft MF NC JB

03 08/10/12 Final Report MF/NC MF/NC JB

04 30/10/12 Final Report (amended) MF JB

Peter Brett Associates LLP disclaims any responsibility to the Client and others in respect of any matters outside the scope of this report. This report has been prepared with reasonable skill, care and diligence within the terms of the Contract with the Client and generally in accordance with the appropriate ACE Agreement and taking account of the manpower, resources, investigations and testing devoted to it by agreement with the Client. This report is confidential to the Client and Peter Brett Associates LLP accepts no responsibility of whatsoever nature to third parties to whom this report or any part thereof is made known. Any such party relies upon the report at their own risk.

© Peter Brett Associates LLP 2012



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Contents

1 Introduction ............................................................................................................................... 7 1.1 Background .................................................................................................................... 7 1.2 Community Infrastructure Levy (CIL) ............................................................................. 8 1.3 Approach to Governance ............................................................................................. 10

2 Development Typologies ....................................................................................................... 12 2.2 Residential ................................................................................................................... 12 2.3 Non Residential ............................................................................................................ 12

3 Viability Assumptions ............................................................................................................ 17 3.1 Reviewing the Existing Viability Evidence (Value and Costs) ..................................... 17 3.2 Consultation with the Development Industry ............................................................... 18 3.3 Our Approach ............................................................................................................... 21

4 Residential Viability Assessments ....................................................................................... 24 4.1 Assumptions ................................................................................................................ 24 4.2 Dwelling Mix ................................................................................................................. 24 4.3 Coverage, or Saleable Floorspace .............................................................................. 25 4.4 Sales Value for Open Market Housing ........................................................................ 25 4.5 Sales Value for Affordable Housing ............................................................................. 27 4.6 Build Costs ................................................................................................................... 29 4.7 The Code for Sustainable Homes ................................................................................ 30 4.8 Developer’s Profit and Professional Fees and Financing ............................................ 31 4.9 Additional or ‘Abnormal’ Development Costs .............................................................. 31 4.10 CIL and Community Gain Package ............................................................................. 32 4.11 Generic Residential Viability Appraisals ...................................................................... 32 4.12 Sensitivity Testing ........................................................................................................ 33 4.13 Summary of Findings from Residential Analyses and Recommended CIL Approaches 36 4.14 Affordable Housing ...................................................................................................... 38 4.15 Design Costs ................................................................................................................ 38

5 Non-Residential Assessments .............................................................................................. 40 5.1 Non-Residential Assumptions ...................................................................................... 40 5.2 Approach ...................................................................................................................... 40 5.3 Establishing Gross Development Value (GDV) ........................................................... 40 5.4 Costs ............................................................................................................................ 41 5.5 Site Coverage .............................................................................................................. 41 5.6 Developer Profit ........................................................................................................... 41 5.7 Build Costs ................................................................................................................... 42 5.8 Professional Fees, Overheads .................................................................................... 42 5.9 Development Contributions Other than CIL ................................................................. 42 5.10 Finance ........................................................................................................................ 43 5.11 Marketing Fees ............................................................................................................ 43 5.12 Acquisition Fees and Land Tax ................................................................................... 43 5.13 Land for Non-residential Uses ..................................................................................... 43 5.14 Non Residential Development Analysis ....................................................................... 44 5.15 B-class Uses ................................................................................................................ 44 5.16 Retail Uses ................................................................................................................... 45 5.17 Leisure Development ................................................................................................... 46 5.18 Care Homes and Extra Care Living ............................................................................. 47 5.19 Other Non-residential Development ............................................................................ 47 5.20 Summary and Sensitivity Testing on Non-residential Development ............................ 48

6 Conclusion .............................................................................................................................. 51



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Tables

Table 2.1: Residential Notional Sites for Viability Testing ..................................................................... 12 Table 4.1: Typical Floorspace by Dwelling Type ................................................................................... 24 Table 4.2: Current Market Schemes ..................................................................................................... 26 Table 4.3: Market Summary .................................................................................................................. 27 Table 4.4: Residential Viability Findings ................................................................................................ 33 Table 4.5: Sensitivity Testing to Achieve Viability ................................................................................. 34 Table 4.6: Sensitivity Testing to maximise % of affordable housing with varying levels of CIL ............ 34 Table 4.7: Approach 1 ........................................................................................................................... 37 Table 4.8: Approach 2 ........................................................................................................................... 37 Table 5.1: Non Residential Uses – Rent and Yields ............................................................................. 40 Table 5.2: Non Residential Uses – Site Coverage Ratios ..................................................................... 41 Table 5.3: Non Residential Uses – Build Costs..................................................................................... 42 Table 5.4: B-class Development ........................................................................................................... 44 Table 5.5: Out of town centre retail uses ............................................................................................... 45 Table 5.6: Town Centre Residual Analysis ........................................................................................... 46 Table 5.7: Hotel Viability Levy ............................................................................................................... 46 Table 5.8: Mixed Leisure CIL Charge .................................................................................................... 47 Table 5.9: Care Homes Viability ............................................................................................................ 47

Figures

Figure 1.1: Evidence to Inform CIL Charging Schedule .......................................................................... 9 Figure 5.1 Scope for CIL ....................................................................................................................... 48 Figure 5.2 Sensitivity analysis – minus 10% on values ......................................................................... 49 Figure 5.3 Sensitivity analysis – plus 10% on values ............................................................................ 50

Appendices

Appendix 1: Residential Viability Appraisals Appendix 2: Non-Residential Viability Appraisals Appendix 3: Glossary

CIL Economic Stratford-on-Avon CIL

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1 Introduction

1.1 Background

1.1.1 Peter Brett Associates were commissioned to undertake an Economic Viability Assessment

of the proposed Community Infrastructure Levy by Stratford-on-Avon District Council. This

report is a viability assessment which seeks to set out the implications of differing levels of

viability for a variety of types of residential and non-residential developments, and how this

might support a Community Infrastructure Levy.

1.1.2 It should be noted that this report is not an independent scheme valuation for sites in

Stratford-on-Avon. No responsibility whatsoever is accepted to any third party who may seek

to rely on the content of the report for such purposes.

1.1.3 Government planning policy on viability and the deliverability of development is set out in the

National Planning Policy Framework (NPPF). It addresses the importance of ensuring

deliverability in paragraph 173:

“To ensure viability, the costs of any requirements likely to be applied to development, such

as requirements for affordable housing, local standards, infrastructure contributions or other

requirements should, when taking account of the normal cost of development and on-site

mitigation, provide acceptable returns to a willing land owner and a willing developer to

enable the development to be deliverable.”

1.1.4 The importance of delivery cannot be underestimated. To ensure robust and sound

development plan documents, local authorities must ensure that Local Plans are deliverable.

This effectively means that the infrastructure plans must be an integral part of spatial

planning and therefore funding issues are becoming increasingly important. This section

considers the opportunities for funding from developer contributions arising from the viability

of developments, both residential and commercial.

1.1.5 The main driver of development viability is the change in residual land value. If the residual

land value created by the proposed development is not substantially in excess of the existing

use value, then the development will not be considered viable by the market.

1.1.6 The basis of viability testing in this Report is through a series of generic site appraisals,

using the residual value (RV) approach. This needs to take account of a wide variety of

inter-related factors which are explored below, which include various items of planning

obligations and community gain expected to be delivered through the operation of the

planning system.

1.1.7 The key question is whether a suggested level of CIL, combined with other planning

obligations, including affordable housing will inhibit development generally, and conversely,

what level of CIL, and continuing contributions through S.106 Agreements, can be delivered

whilst maintaining economic viability?


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1.1.8 CIL is a new levy that local authorities in England and Wales can choose to charge on new

developments in their area. The introduction of CIL corresponds to changes in the way that

Section 106 obligations can work and it is likely that most Local Authorities in England will

choose to use CIL in order to continue using some of the value created by development to

fund the infrastructure required. In large schemes, typical infrastructure provision might

include new secondary schools, and green infrastructure.

1.1.9 It should be noted that not only should evidence of viability be presented, but as the Appeal

Court judgement in the case of Blyth Valley has made clear, viability assessments must be

founded on robust evidence and it is insufficient to rely on ‘custom and practice’ or ‘going

rates’.

1.1.10 One of the most significant items of community gain sought from residential development

sites is affordable housing, not currently sought through CIL, but secured through S.106

agreements. This reflects both the affordable housing need in the District, but also the

increasing role that planning contributions have taken in delivering new affordable housing

stock. As the importance of planning contributions in funding infrastructure increases, the

cumulative effect of the planning contributions can lead, in some circumstances, to the

economic viability of a site being called into question. Although the cost of contributions is

normally factored into site financial appraisals by developers when land purchase is

contemplated, the development industry needs to demonstrate a profit, since no business

exists without a profit motive.

1.1.11 It is increasingly important therefore that policy relating to planning obligations is realistic and

credible, taking into account the local housing market, the economics of development,

including price, supply, demand, need, and profit issues.

1.1.12 It is clear that the main issues relate to the viability of residential development. In our

experience, there are relatively few locations where ‘B’ class uses are able to support CIL,

although some forms of retail are clearly viable and able to bear a levy without compromising

viability (particularly large format convenience retail). It is necessary to understand the

viability of non-residential development, if only to underpin a decision to charge a £0 rate.

The council may want to review CIL when economic conditions are more favourable,

although it must be emphasised that there is currently a very significant viability gap.

1.2 Community Infrastructure Levy (CIL)

1.2.1 The Planning Act 2008 introduced the power to charge a Community Infrastructure Levy

(CIL) and the details of setting the charge are set out in the CIL Regulations and Guidance.

CIL is a new levy that local authorities in England and Wales can choose to charge on new

developments in their area.

1.2.2 Before a charging authority can apply a CIL, it has to produce a CIL charging schedule. This

charging schedule has to be informed by relevant infrastructure funding gap and viability

evidence. The process of developing a CIL charging schedule is illustrated in Figure 1.1

below.


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Figure 1.1: Evidence to Inform CIL Charging Schedule

1.2.3 The main points relating to CIL are:

CIL applies to most new buildings and charges are based on the size and type of the

new development. The exceptions are for non-residential development of less than 100

sq.m charitable uses or when there is no additional floorspace created. There is a

mandatory exemption for social housing.

Charging authorities (in this case Stratford-on-Avon) must produce a charging schedule

which sets out the rate for their levy.

The levy is intended to encourage development by creating a balance between collecting

revenue to fund infrastructure and ensuring that the rates are not so high that they put

development across the area at serious risk. CIL Regulation 14 recognises that the

introduction of CIL may put some potential development sites at risk.

These rates should be supported by evidence, such as the viability of new development

and the area’s infrastructure needs.

The charging authority can set one standard rate or it can set specific rates for different

areas and types of development. Any differential rate must be justified by the viability of

new development and differential CIL rates should seek to avoid undue complexity.

A charging authority is only required to use appropriate available evidence to 'inform the

draft charging schedule'. A charging authority’s proposed CIL should appear reasonable

given the available evidence, but there is no requirement for a proposed rate to exactly

mirror the evidence.

Charging authorities must consult their local communities – including local businesses

and neighbouring authorities – regarding their proposed rates for their levy.

The land owner is liable for the charge unless another party such as a developer has a

material and legal interest in the development. For clarification, if no one assumes

liability the charge is immediately payable by the land owner as soon as development

work starts.

Mainstream &

Other Funding

Infrastructure

Requirements

Total

Funding

Total

Costs

Funding

GapViability

Assessment

Set

CIL

Funding

Costs

balancing viability &

funding gap


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If the charging authority chooses it can adopt an exceptional circumstances policy to

allow relief from the Levy. However, there are state aid considerations that may arise

from exemptions.

While the charge becomes due at commencement, the charging authority can choose to

adopt a payment phasing policy.

The charging authority can use up to 5% of CIL receipts to finance administrative

expenses in connection with the Levy. It should be noted that on-going CIL

consultations suggests there should be no cap to administrative expense fee financed

from CIL receipts.

1.2.4 Our approach has been guided by the Planning Act 2008, the CIL Regulations (2010 and

2011) and the March 2010 Charge Setting and Charging Procedures statutory guidance

document. The fundamental premise is that the CIL is intended to enable the delivery of

growth and it must be set at a level that does not put at risk the overall level of development

in the area.

1.3 Approach to Governance

1.3.1 Although not part of this commission the council should start to think about the governance

of CIL. It could be considered that setting the CIL is the easy part: the hard part will be

thinking about deciding which infrastructure providers and projects get CIL funding.

1.3.2 There are tensions pulling CIL funding three ways. Local neighbourhoods are expected by

the Government to get a “meaningful proportion” of CIL funding to spend at local level; and

for Stratford-on-Avon there will be competing priorities between the district and county (let

alone the competition between departments within the authority). Then there are a range of

other stakeholders – from PCTs, Highways Agency and emergency services, all of whom will

want their slice of funding.

1.3.3 CIL Regulation 123 requires LPAs to specify a list of infrastructure projects intended to be

funded from CIL. It restricts the use of planning obligations for infrastructure that will be

funded in whole or in part by the CIL, to ensure no duplication between the two types of

developer contributions.

1.3.4 Although Charging Authorities will not be examined on these issues, it would be a very good

idea for stakeholders to agree a common protocol about how these issues be dealt with

once the CIL money starts flowing in. Although strictly speaking not within the remit of the

examination, the examination at Newark and Sherwood saw a two-hour debate about how

CIL funding would be shared out. The examiner’s report devotes a number of pages to the

issue that are worth reviewing. By contrast, Shropshire has taken a “place plan” approach

which sticks closely to very local priorities. Spending profiles are reviewed annually, and

these choices provide a basis for an annual revision of the Regulation 123 list.

1.3.5 It is clear that there will be a number of different approaches to the governance of CIL

funding as rates emerge around the country. Early discussions on principles will be valuable

before the money arrives. That way, discussions can be usefully kept quite abstract, rather


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than turning into a zero-sum argument about which agency gets the limited funding

available.

1.3.6 The NPPF stresses the need to ensure that the cumulative policies and standards set out in

a Local Plan do not render so much development unviable that the plan’s housing and other

development requirements cannot be delivered. Whilst the viability of a plan should not be

an overriding factor in the setting of plan policy, plans that do not take account of this are at

risk of failing to be found sound when examined.

1.3.7 The objectives of this report are to use the available evidence to assess the ability of

different types of development to support a CIL. The stages of the study are to:

Review the types of development likely to come forward during the plan period, use this

as a basis to generate some hypothetical development typologies;

Consider the evidence relating to the costs and values of different residential and non-

residential development in Stratford-on-Avon and establish assumptions to inform both

residential and non-residential viability appraisals; and

Undertake a series of viability tests on the hypothetical development typologies and

consider whether there is sufficient value to support a CIL.


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2 Development Typologies

2.1.1 We have identified a set of development typologies for Stratford-on-Avon District. These are

standard generic models, which have been informed by real situations, but are not intended

to represent any actual future developments. The selected typologies are purely for

modelling viability, and for the avoidance of doubt, are not policy options being considered

by the council.

2.2 Residential

2.2.1 The notional residential sites tested are set out in Table 2.1.

Table 2.1: Residential Notional Sites for Viability Testing

Generic Site Nominal Location

Dwelling Capacity

1 urban extension model Stratford-upon-Avon

2000

2 urban extension model Stratford-upon-Avon

500

3 urban extension model Southam 200

4 large PDL model Stratford-upon-Avon

120

5 Greenfield model Studley 75

6 PDL model Wellesbourne 30

7 Greenfield model Bidford-on-Avon 20

8 Greenfield infill model1 Alcester 10

9 Small PDL model Shipston 7

10 Greenfield infill model1 Kineton 5

11 Greenfield infill model1 Tysoe 5

2.3 Non Residential

2.3.1 Based on our understanding of Stratford-on-Avon District, previous experience and the

authority’s future development plans we have identified some ‘typical’ development

typologies. These have been informed by real situations, but are not intended to represent

any actual developments.

2.3.2 Whilst many developments may share the same use class, they are not necessarily the

same use in terms of Section 13 of the CIL Regulations. Therefore we have tested a range

of non-residential typologies within the same use class, as per the CIL regulations.

Retail uses (A1)

2.3.3 We have based our A1 assumptions on four retail typologies:

1 Please note that all infill sites are considered to be located within settlements


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Superstore and supermarkets – out of town centre/urban extension development of

gross 3,500 sq.m with a site coverage of 40%;

Retail warehouses – out of town centre development of six retail warehouses totalling

10,000 sq.m gross with a site coverage of 40%;

Town centre retail in Stratford-upon-Avon – Stratford-on-Avon’s Local Plan sets out the

town centre boundary which represents a reasonable delineation between in and out of

centre areas in functional terms. As the highest value area, it is considered that if town

centre development in this location is not viable then it won’t be viable in other centres;

and

Local convenience retail – all locations, size of 280 sq.m with site coverage of 80%.

2.3.4 In determining these convenience orientated typologies it is understood that the council has

not planned for any in centre supermarkets or superstores and therefore we have not

specifically tested this use – however it is understood that there is ongoing interest in out of

town centre locations and therefore we have tested these locations. If an in centre

convenience development does occur then the charge will be on the basis of the in town

centre appraised scheme.

Other Retail ‘A’ uses (A2 – A5)

2.3.5 Whilst other ‘A’ uses are differentiated in terms of the use class order it is considered for the

purposes of this work that as town centre uses they will generally compete for similar space

as retail units and therefore occupy the same sorts of premises. On that basis it is not

necessary to consider these individually for testing purposes as a reasonable approach

needs to be taken. Therefore any recommendations relating to town centre retail will also

apply to all these types of uses as well.

2.3.6 It should also be noted that many of these uses are unlikely to exceed 100 sq.m flooorspace

and therefore would not be eligible for a CIL charge.

B1 Business Offices

2.3.7 We have used two B1 Office typologies:

In town – 800 sq.m with building foot print site coverage of 90% (development over 5

floors); and

Edge of town development of gross 2,000 sq.m building foot print site coverage of 40%

(development over two floors).

2.3.8 The non-office B1 uses are covered by the B2/B8 uses discussed below.

B2 General Industrial

2.3.9 We have used two B2 general industrial typologies:


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Edge of town industrial units of gross 1,500 sq.m with site coverage of 40%. May

include subdivisions into smaller workshop units; and

Edge of town industrial unit of gross 5,000 sq.m with site coverage of 40%.

B8 Storage/Distribution

2.3.10 As per B2 General Industrial, in practice the activity will have the same types of premises

and similar values as the larger B2 typology; i.e. warehouse of gross 5,000 sq.m with site

coverage of 40%.

C1 Hotels

2.3.11 60 bedroom hotel of gross 2,000 sq.m on two floors on an edge of town site with 80% site

coverage.

Care Homes and Extra Care Living

2.3.12 In addition to residential development it is appropriate in Stratford-on-Avon to also test

different types of specific accommodation for the older population. To this end two models

have been tested – Care Homes and extra care living accommodation.

2.3.13 The former provides a residential setting where a number of older people live, usually in

single rooms, and have access to on-site care services – they will offer different levels of

care from basic personal care assistance to fully qualified nursing medical care. We have

tested a 40 unit scheme.

2.3.14 Our second model is extra care living, whereby you live independently in your own home, but

it is located within the grounds of a communal facility which again can provide a range of

services from personal care to medical care. We have tested a 50 unit scheme. It is

considered that for the purposes of testing at a strategic level the scheme to be tested will be

the basic facility which includes the individual units and basic communal facilities such as a

common room. It is noted that varying degrees of medical and restaurant facilities can also

form part of these schemes, however for the purposes of this study it is considered that

these are cost neutral and that if they are provided then they are effectively paid for by the

future residents on top of the basic purchase.

2.3.15 We have tested three different sites, edge of town centre, greenfield and greenfield with a

policy target of 35% affordable housing. Clearly if an affordable housing requirement is

added it will impact on the viability of the scheme to contribute to other S106 costs and CIL.

For the purpose of this study we have used the same blended proportion for affordable

housing as used in the residential appraisals.

D1 Non Residential Institutions

2.3.16 Non residential institutions will vary from public sector or charitable institutions such as

health centres, Children’s Centres, libraries and museums through to commercial uses such

as private sector child care facilities. Many of these will be charitable or public sector uses


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which are not viable in any commercial sense and we have not sought to test these. We

propose that the majority of other development falling into this category will be similar to

town centre shops – in that they are ‘selling’ services such as childcare.

D2 Assembly and Leisure

2.3.17 Assembly and leisure also varies considerably but with common factors. We have tested

two types of development which may come forward:

A mixed leisure scheme to include facilities such as cinema, bowling, health and leisure

complex, gambling and associated eating and drinking establishments; and

A stand-alone commercial health and leisure facility.

Sui Generis

2.3.18 Sui Generis uses include theatres; hostels providing no significant element of care; scrap

yards; petrol filling stations; shops selling and/or displaying motor vehicles; retail warehouse

clubs; nightclubs; launderettes; taxi businesses; amusement centres; and casinos. The

types of premises, value of uses and development costs for premises accommodating these

types of activity will vary considerably; and this means that Sui Generis uses cannot be

treated in the same way as the other use classes.

2.3.19 Our approach to this issue has been to consider the types of premises and locations that

may be used for Sui Generis and assess whether the costs and value implications may have

similarities with other uses. We have also considered the likely developments within the plan

period as a guide to whether more detailed work might be useful.

Theatres – very few new theatres are being developed in the UK and the exceptions –

such as Chester – are in locations with large catchments, an existing foundation of

extensive artistic activity and a local authority with the means and inclination to pay.

Hostels providing no significant element of care – these are likely to be either charitable

or public sector uses such as probation hostels, half-way houses, refuges, etc., or low

cost visitor accommodation such as Youth Hostels. Our view is that the charitable uses

are dependent upon public subsidy for development and operation, and therefore not

viable in any commercial sense. Youth Hostels are operated on a social enterprise basis

with small financial returns. Neither of these scenarios offers significant commercial

viability.

Scrapyards – there may be new scrapyard/recycling uses in Stratford-on-Avon in the

future, particularly if the prices of metals and other materials rise. Subject to consent

these are likely to occupy the same sorts of premises as many B2 uses and therefore

the viability will be covered by the assessment of the viability of B2 uses.

Petrol filling stations – we are aware that the recent new filling stations have generally

been as part of larger supermarket developments, with independent filling stations

closing. It seems unlikely that there will be significant new stand-alone filling station

development.


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Selling and/or displaying motor vehicles - sales of vehicles are likely to occupy the same

sorts of premises and locations as many B2 uses and therefore the viability will be

covered by the assessment of the viability of B2 uses.

Retail warehouse clubs – these retail uses are likely to be in the same type of premises

as the out of town A1 retail uses and covering the same purchase or rental costs.

Therefore they are covered by this viability assessment.

Nightclubs/Laundrettes/Taxi businesses/Amusement centres – these uses are likely to

be in the same type of premises as A1 town centre retail uses and covering the same

purchase or rental costs. Therefore they are covered by this viability assessment.

Casinos – The Casino Advisory Panel has advised the Government where the one

regional, eight large and eight small casinos should be located and the locations have

not included Stratford-on-Avon District. While an existing hotel may add a small casino

to its existing operation this will be part of the overall hotel viability.


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3 Viability Assumptions

3.1 Reviewing the Existing Viability Evidence (Value and Costs)

3.1.1 Obtaining the data – we use a range of information sources in setting benchmark land values and

getting intelligent inputs to our residual value modelling. The regulations require Charging

Authorities to use “appropriate available evidence” in setting their CIL Charge. The sources we

used are as follows.

Internet sources. In order to keep costs down, we take advantage of free sources such as

Estates Gazette, or Davis Langdon cost levels – which have the great advantage of showing

the typical buildings used for the calculation. We also use management consultants’ studies,

quality press reports (FT.com is an excellent source) and industry sector specialist studies.

We use existing information available to the council, such as SHLAA evidence and the

Employment Land Review. There are good reasons to use this already existing information. It

has great advantages of ensuring that there is no contradiction between different studies that

could be used against the CIL charge at examination.

BCIS and Spons cost sources are available to us.

We source residential revenues and other viability variables from a range of sources, including

generic websites, such as the Right Move, and Zoopla, in addition to the Land Registry,

together with direct research with developers, (including Registered Providers of affordable

housing), and agents operating in the area. Revenues have been checked against market

research in the emerging SHMA 2012 Update, which corroborates our findings that revenues

have increased 5% between 2007 and 2010, and 7.5% over the past year to March 2012.

3.1.2 Information on land and property values has been taken from industry standard sources including

the EGi, CoStar (Focus) and Property Week databases.

3.1.3 To estimate construction costs, as well as standard sources such as BCIS, we use data from cost

consultants Davis Langdon. These figures allow for increasingly stringent Building Regulations,

which add to construction costs. For costs such as external works, fees, finance and developers’

margins, we used high-level approximations. We also make separate estimates for S106 and other

site-specific planning contributions. These represent the average over a range of scheme types.

Where relevant, we also distinguish between different parts of the District, to ensure that we have

the right evidence to inform any proposal for geographic differentials in the levy rate.

3.1.4 Our view on this issue is that a simple Charging Schedule with few variations is preferable for

examination and implementation. We need to distinguish circumstances where particular types of

site are prone to different economic circumstances that affect viability. This includes, for instance,

the additional costs associated with large greenfield urban extensions, where the site specific

infrastructure costs required to open up the site for development are significantly greater than for

smaller, brownfield sites. On the other hand, brownfield sites tend to have a much higher existing

use value, based on commercial values as opposed to agricultural value. This can mean that large

greenfield urban extensions, and in some circumstances, brownfield sites, may be unable to

support the same affordable housing and/or CIL rate as other locations.


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3.2 Consultation with the Development Industry

3.2.1 In our experience, local agents and developers are always happy to explain where the

market is at, what is going on, and why.

3.2.2 The consultation with the development industry has helped to make our assumptions more

robust, and these discussions also help us see where potential objections to the CIL might

come from, so that the council can be better prepared to address objections at examination.

3.2.3 We have also carried out discussions with local registered affordable housing providers

based on their current experience of rent and sale revenues in order to provide a suitable set

of affordable housing values to include in the viability calculations.

3.2.4 The key data includes:

Estimated market values of completed development (per sq m);

Existing use and open market land values;

Basic build cost (per sq m);

External works (% of build cost);

Contingencies;

Professional fees (% of build cost);

Marketing & sales costs (% of development value);

Typical S106 costs;

Finance costs (typical prevailing rates);

Developer’s margin (% of revenue);

The net developable area (site area less land needed for open space or major site

infrastructure); large urban extensions normally have a gross to net ratio of between

50% and 70%, depending on size and physical circumstances, including drainage and

flood constraints; and

The density and mix of development.

3.2.5 To determine benchmark land values, we pull together the evidence gained in the stages

above, use market evidence of actual transactions, and filter these findings through our own

professional judgment and experience. All this information is used to inform the viability

modelling.

3.2.6 We worked with the council to set up a Stakeholder meeting for agents, developers and

affordable housing providers active in the District. All members of the Strategic Housing


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Land Availability Assessment (SHLAA) Panel were invited. The meeting took place on 13th

July 2012, and in addition to the consultants and council officers, it was attended by the

following parties:

Andrew Murphy, Stansgate Planning;

Peter Clarke, Peter Clarke & Co;

Keith Greenall, Greenall Construction;

Mike Hill, Bromford Housing Association;

David Joseph, Bloors;

John Acres, Turleys;

Anne Smith, Taylor Wimpey; and

Simon Gibbs, Bigwoods.

3.2.7 There was a useful discussion on market factors that have fed into the viability assessments.

A number of interviews have taken place subsequently with developers and agents to inform

and corroborate the cost and value information.

3.2.8 At the meeting it was explained that we had agreed with the council that we would run over

20 viability assessment models to cover both residential and non-residential typologies.

These were tested to cover different locations across the district to reflect geographical

differences in revenues and costs. These notional sites are set out at the beginning of

Section 2.

3.2.9 These models have been completed using local values and costs to test what level of CIL

can be achieved without risking viability, as well as testing current affordable housing

requirements contained in the emerging Local Plan. These different applications have also

been used to assess different density and location factors.

3.2.10 We have allowed for a set of residential viability tests to cover notional developments of

different sizes, locations, densities and mixes, greenfield/brownfield as well affordable

housing and sustainable construction requirements. In order to provide a robust evidence

base it was important that we modelled this broad cross section of development types.

3.2.11 We have also allowed for a set of non-residential viability tests to cover different uses and

some different scenarios within some key uses. In particular we have developed a clear

process for considering retail, where large format out of centre convenience retail continues

to be one of the best-performing investment markets. The sector is characterised by strong

yields and high land values. Hence it should be able to support high levels of CIL. In

contrast, high street retail is generally much weaker with less potential to support CIL

charges. If all retail is merged into one category, total CIL receipts may be much less than

they could be. On the other hand, if retail is split into two categories for CIL purposes, we

need to ensure that the split is based on robust evidence; otherwise the split may be set

aside by the examiner, as happened recently in Newark and Sherwood.


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3.2.12 The proportion and type of affordable housing is one of the key determinants of residential

viability. The dual effect of the imposition of both CIL and the affordable housing

requirement can render some models unviable, or if it is on the borderline of viability, we

refer to the concept of marginal viability. This happens when it is unclear as to whether an

owner would accept the uplift amount. In the event of marginal viability, we carry out

sensitivity testing, which tests what reduction in the level of different development

requirements and obligations is required to achieve viability. Typically, this is likely to involve

a reduction in the proportion of affordable housing sought and a consequential increase in

the proportion of private housing. This would have the effect of increasing the overall land

value until ‘viability’ has been reached. Alternatively, reducing the level of CIL may achieve

viability, and, in the event of marginal viability, it is a political decision as to whether to aim

for maximising either CIL or affordable housing.

What is Economic Viability?

3.2.13 Viability, or a lack of viability, is a concept frequently referred to by developers and

landowners in negotiating contributions towards the provision of community facilities. The

argument put forward is that the overall burden of community gain items can reduce the

actual value to the owner below that of its existing or alternative value, or to such a level as

to render it ‘unviable’, or simply not profitable enough to make a sale worthwhile to the

owner, taking account of taxation liability and relocation costs.

3.2.14 Viability has a central role in policy evolution and negotiations but there is little government

guidance as to how viability negotiations are to be conducted or how local authorities are to

make decisions based upon the outcome of a viability appraisal.

3.2.15 The NPPF provides clear guidance on viability, stressing in para. 173 that, in order to ensure

viability and deliverability:

The costs of any requirements likely to be applied to development, such as requirements for

affordable housing, standards, infrastructure contributions or other requirements should,

when taking account of the normal cost of development and mitigation, provide competitive

returns to a willing land owner and willing developer to enable the development to be

deliverable.

3.2.16 Further guidance is provided in ‘Viability Testing Local Plans’ (Local housing Delivery Group,

June 2012), which emphasises that:

An individual development can be said to be viable if, after taking account of all costs,

including central and local government policy and regulatory costs, and the cost and

availability of development finance, the scheme provides a competitive return to the

developer to ensure that development takes place, and generates a land value sufficient to

persuade the land owner to sell the land for the development proposed.

3.2.17 The Government’s established aim through planning is to ensure that enough land is

identified and brought forward for development, but it recognises that in order to do so,

residual land values must be high enough to encourage landowners to sell land. It therefore


21

requires local authorities not to impose a burden of planning gain and affordable housing that

is so great as to depress the land value below that which is sufficient to bring land forward.

3.3 Our Approach

3.3.1 The critical question is what is a ‘viable’ land value? What should be reasonably expected

by landowners as a residual value, once all costs have been deducted? The approach we

have taken to this concept is that it is rational to assume that if a residual value is arrived at

which is in reasonable excess of the current or alternative site value including its current or

potential income, taking account of all sale and related costs, the landowner be pursued by

developers, and the site be delivered through the operation of the market.

3.3.2 What is a ‘reasonable excess’ in practice? It must be a level sufficiently acceptable, given all

the planning circumstances, to persuade the landowner to dispose to a developer. This

must work both ways in a sale; for example, some landowners may be willing to sell at a

given price, but cannot attract a purchaser, in which case the price is too high.

3.3.3 The definition of ‘viability’ for the purposes of this assessment is the attainment of a site

value sufficiently in excess of the current site value that all stakeholders, including the

purchaser and landowner, all acting reasonably and rationally, would accept, thus securing

delivery of the proposed development.

3.3.4 Clearly, not all landowners adhere to the same concept of reasonableness and rationality in

defining viability. Studies of economic viability have taken two broad approaches. One

relates to the acceptability of development land prices to existing/alternative non-residential

use values (‘the economic approach’). The other relates acceptability to expectations based

on residential land prices currently being achieved (‘the psychological approach’).

3.3.5 Residential - We use three benchmarks to assess residential viability. The first is the simple

comparison of relative land values, comparing the value achieved on the assumption of a

planning consent with the existing use value (EUV), (the ‘economic’ approach). If a value

with consent is sufficiently in excess of the current site value, taking account of current and

potential incomes, then the site can be considered to be viable in principle. The difference in

values is measured by an uplift factor.

3.3.6 As an example, a typical small infill site of 0.2 ha suitable for about 8 dwellings, currently

comprising of unused incidental open space, with a nominal open market value (OMV) of

£10,000 without planning permission, might be worth say £250,000 with a residential

consent, having allowed for all development costs and contributions.

3.3.7 The significant increase in value of £240,000 represents an uplift factor of 24, and would

plainly demonstrate viability. The excess varies in different circumstances, reflecting current

use and taxation levels.

3.3.8 At the other end of the scale, the owner of a brownfield site with an existing use value of

£400,000 that could be worth £440,000 with a residential permission would consider that the

increase of £40,000 (or uplift factor of 1.1), insufficient to persuade the owner to sell,

particularly given taxation on capital gains, in addition to sale and possible relocation costs.


22

For most sites, an uplift factor of more than 1.4 will be required to enable viability, depending

on site characteristics and circumstances. An uplift of 1.4 would normally be considered to

be marginally viable.

3.3.9 In addition to achieving an acceptable uplift factor taking account of the existing use value,

all sites must exceed the opportunity cost of income that could be generated by an

alternative use. As an example a 1 ha brownfield site in an appropriate location (eg, close to

a town centre) could theoretically accommodate about 100 cars for parking at £5 per day for

say 40 weeks, or 200 days, which would generate an annual income of £100k.

3.3.10 At 50% capacity taking account of overall and fluctuating demand, as well as voids, 50 cars

would generate £50k per year. The uplift value should take account of potential for such

income, and the potential annual interest that would be generated by the sale which would

be forgone if the site remains a car park. The uplift should significantly exceed the potential

income of the alternative use.

3.3.11 A second benchmark test is against ‘hope value’. This applies to most land adjoining built-up

areas of settlements, and to sites within settlements in alternative lower value uses which

are perceived to have ‘hope’ of a change of use. The hope value of agricultural land is in the

region of £50k/ha, and for brownfield sites this needs to be considered on an individual

basis.

3.3.12 Greenfield urban extensions are often subject to option agreements, where the value is

calculated at the time planning permission is granted, and where there is frequently a

minimum value provision in the agreement. This is the third benchmark comparison, and

currently, the typical minimum land value is about £500k per net developable ha and

greenfield sites that achieve less than this are deemed not to be viable.

3.3.13 There may be occasions where minimum land values are not achieved but the landowner

and promoter are both keen to secure a deal, in which case a land value is negotiated. This

may be slightly above or below the minimum, but the standard used is the best against which

to benchmark achieved residual value (RLV).

3.3.14 Each of the residential generic site typologies is tested against all three benchmarks, where

appropriate, and the viability conclusion is based on these tests.

3.3.15 Non-residential – We take a similar approach to the residential testing in that we compare

the residual value with that of an existing use value plus uplift. As previously described, sites

in town centres will already have a high existing use value in comparison to say an

agricultural field. They are normally generating income and therefore a reasonable approach

needs to be taken in terms of both their existing value as often a going concern and the uplift

required incentivising redevelopment. For town centre sites we look at local market data

when property has exchanged and then apply an uplift factor of at least 1.4 to provide a

realistic incentive. Our view on uplift is also within the context of the type of use proposed,

high value uses such as supermarkets require a greater uplift as the landowner will know the

greater value of these uses and therefore expect a higher price. A similar approach is taken


23

to out of centre and edge or out of town sites, although clearly the existing use values will

change according to location.


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4 Residential Viability Assessments

4.1 Assumptions

4.1.1 A number of assumptions need to be made as part of the viability appraisal process in order to

illustrate site value and its ability to meet community gain, and remain viable. A site can be

developed in a myriad of different ways, and the variables are so numerous that the permutations

are infinite. Each generic site Viability Appraisal considers the variables that affect the site value,

to enable a site’s market and physical characteristics, and costs, to be inputted into each appraisal

to reach viability conclusions.

4.1.2 Each Viability Appraisal in Appendix 1 summarises the development assumptions. This includes

the site area, the total number of dwellings, with details of mix and tenure, in order to arrive at

floorspace assumptions. Sales values and build costs are also summarised. A merged mix of

affordable and open market housing, based on 35% provision of affordable residential floorspace

has been used. Each generic site appraisal is summarised in Appendix 1, and clearly sets out the

development assumptions that underpin each viability appraisal. The principal variable factors are

explored below:

4.2 Dwelling Mix

4.2.1 The dwelling mix for each generic site is derived from information contained in the SHMA on

recommended dwelling mix for both affordable and open market housing.

4.2.2 This is modified to reflect the location and site characteristics of each generic site, and the housing

market in the nominal location. Town centre sites are more likely to accommodate town houses

with some flats, whilst greenfield urban extensions have a much higher proportion of family

dwellings, and reflect the entire range of market demand.

4.2.3 Each generic site appraisal makes reasoned assumptions about the type of dwellings and density

that would be appropriate for the location and size of the site, and sets out a summary, detailing the

assumptions made about the total number of dwellings, the mix of types, and the resultant floor

areas, informed by different dwelling sizes favoured by private developers, and Registered

Providers (RPs) of affordable housing. As a guide, a range of typical floorspaces, for different

dwelling types, applicable to both flats and houses, is set out in table 2.4.10.

Table 4.1: Typical Floorspace by Dwelling Type

Dwelling Type Typical Floorspace Range sq.m

1-bed 2 person 45 - 50





4-bed 6 person 100 - 120

4-bed 8 person 120 - 180

5-bed 8+ persons 185+


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4.3 Coverage, or Saleable Floorspace

4.3.1 In order to establish housing land values, assumptions need to be made about the likely saleable

floorspace of the dwellings, in order to generate an overall sales turnover. Until the onset of the

recession, the vast majority of housing schemes ranged from around 4,000 sq.m/ha for

predominantly 2 - 2.5 storey development, and up to 4,600 - 5,500 sq.m/ha for 2.5 - 4 storey

scheme.

4.3.2 Since the recession, with market resistance to 3+ storey townhouses and flats, developers are

reducing coverage to an average ranging from 3,000-3,700 sq.m/ha. There is a diminishing return

on the third storey in townhouses, since lower sale prices per sq.m are achieved, and there comes

a point where a higher land value can be generated on traditional 2-storey dwellings.

4.3.3 Floorspace is also affected by the loss of land given over to other uses than residential. Housing

needs to be serviced by roads for instance, and, for larger developments, land is required for public

open space, strategic landscaping, community buildings, employment, and possibly schools.

4.3.4 The provision of such non-residential land uses have been taken into account in reaching net

residential areas, and have been considered in the generic site viability appraisals. Evidently, the

proportion of saleable floorspace per site has a major effect on sales turnover, and in turn, on land

value, which is a consequence of the relationship between sales turnover and development costs,

profit, and overhead. Total turnover is dramatically increased by greater coverage.

4.4 Sales Value for Open Market Housing

4.4.1 In order to arrive at a total sales turnover, assumptions need to be made about sales values.

These have been sourced from an assessment of the housing market based on discussions with

local developers and agents about their current experience, and generic websites such as the

Right Move and Zoopla. We use revenues for new properties because it is from these figures that

current and future land values are derived.

4.4.2 As a guide, open market sales prices per sq.m for new homes, allowing for a reduction between

asking price and achieved selling prices, vary from the lowest at around £2,300 in Studley, to

£2,600 - £2,800 in the eastern settlements of Southam, Kineton and Wellesbourne, to £3,000 in

Stratford-upon-Avon, with the highest prices being achieved in some of the Henley-in-Arden

(£3,300) and Welford (£3,800). This represents an increase of about 10% on selling prices in 2009

when the range was about £2,100 - £2,800, which is a commentary on the strength and resilience

of Stratford-on-Avon District’s housing market.

4.4.3 Sales values are also affected by the specification of the development. A high specification

scheme, usually in a high demand location, can lead to premium sale prices. Open market sales

values are also affected by the proportion of affordable housing on a site, as well as the

juxtaposition of open market housing with affordable housing, particularly social rented units.

4.4.4 Values are also affected by the size of the site, reflecting return on capital employed across a

period of time, the cost of financing a purchase compared with the time taken to receive all site

sales value.


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4.4.5 The helpful discussions with the development industry at the meeting on 13th July provided

invaluable information about the various elements of the housing market, particularly about likely

sales revenues.

4.4.6 Sales rates also have a major effect on the overall financing, and most volume housebuilder

projects seek to achieve around 35-40 open market sales per year (down some 20% from 2007) in

order to justify the land economics upon which the land purchase is based. On larger sites (of, say,

4+ developers), and allowing for affordable housing, this would result in some 200+ dwellings per

annum being completed.

4.4.7 In Table 4.2 set out below is a selection of schemes currently, or soon to be, on the market. These

were sourced from the surveys, from discussions with developers, from local newspapers,

developer’s websites, and generic websites such as The Right Move.

Table 4.2: Current Market Schemes

Development& Developer House Type Floor Area (sq.m

Asking Price Achieved Price (asking price- 5%)

Achievable £/sq.m

The Old Bakery, Shipston-on-Stour, Seccombes

2-bed flat 56 155,000 147,250 2,629

The Old Bakery, Shipston-on-Stour, Seccombes

2-bed flat 58 180,000 171,000 2,948

Portia Road, Stratford-upon-Avon, Wigwam

2- bed flat 58 160,000 152,000 2,621

Minstrel Park, Cordelia Close, Stratford-upon-Avon, Barratt

2-bed flat 56 180,000 171,000 3,054


3-bed townhouse

104 249,000 236,550 2,275


3-bed townhouse

104 256,000 243,200 2,338

Poppy Meadow, Kipling Road, Stratford-upon-Avon, Taylor Wimpey

2-bed semi 60 200,000 190,000 3,167


3-bed semi 72 237,000 225,150 3,127


4-bed detached

110 325,000 308,750 2,807


4-bed detached

120 335,000 318,250 2,652


4-bed detached

125 360,000 342,000 2,736

Farriers Cross, Warwick Road, Henley-in-Arden, Taylor Wimpey

2-bed flat 55 200,000 190,000 3,455


3-bed terrace 72 260,000 247,000 3,431


4-bed detached

120 365,000 346,750 2,890


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Development& Developer House Type Floor Area (sq.m

Asking Price Achieved Price (asking price- 5%)

Achievable £/sq.m


5-bed detached

165 435,000 413,250 2,505

The Hathaways, Bishopton Lane, Bishopton, Stratford-upon-Avon, Taylor Wimpey

2-bed semi 60 218,000 207,100 3,452


3-bed terrace 75 250,000 237,500 3,167


4-bed detached

110 310,000 294,500 2,677


3-bed detached

105 320,000 304,000 2,895

Barton Road, Welford-on-Avon, Peter Clarke

4-bed detached

140 700,000 665,000 4,750

4.4.8 A summary of the market in terms of the theoretically achievable land values, sales price per sq. m,

coverage and house types is shown in Table 4.3 below:

Table 4.3: Market Summary

Land Value / net dev ha

Sale Price/sq.m Coverage sq.m / ha Target House Types by Market

£2.5m to £4.2m per ha

£2700 - £3500

3,000 – 3,600 for housing 4,000 - 5,000 for flats/town houses

Preference of developers is firmly for traditional 2-storey 2-4 bed family housing with gardens. Limited up-market flatted schemes can achieve high prices in the best town centre locations.

4.5 Sales Value for Affordable Housing

4.5.1 Registered Providers of Social Housing (RPs) - housing associations and other qualified providers -

have historically had access to funds from the Homes and Communities Agency in the form of

subsidy from public funds, such as Social Housing Grant (SHG) to purchase land, and develop or

purchase affordable housing, including units from developers through the operation of S.106

agreements. The most common delivery of affordable housing is that properties are built by the

developer and transferred to the RP at a price below the full market value through the operation of

S.106 agreements. The formal expectation since 2008 has been that grant will not be available on

developer-led sites that deliver affordable housing through S.106. The gap between the full cost

and the price paid to a developer represents the level of private subsidy (e.g. developer or

landowner subsidy).

4.5.2 In the current economic climate, it is increasingly important to ensure that the most effective use is

made of public funds. The HCA guideline has recently changed, and now RPs should only pay the

capitalised net rental stream on S.106 sites. In addition, the new affordable rent tenure may have

an impact upon revenues. Under this new system brought in by the HCA, RPs be able to charge up

to 80% of gross market rents (inclusive of service charges). In a recent study by DSP Housing and

Development Consultants for Elmbridge Council, it is concluded that the price likely to be received

by a developer for completed units would be no lower with affordable rent than with social rent, and

probably higher, although there is as yet insufficient evidence to quantify the likely increase.


28

4.5.3 The council is currently finalising a Strategic Housing Market Assessment Review (SHMA),

which considers housing market mix for both affordable and open market dwellings.

Consultant GL Hearne has carried out an assessment of typical housing mix of dwelling

types to reflect the needs of the population over the plan period. It considers the following

issues:

An overview of housing market conditions - before 2008 and after 2008;

A market appraisal - analysing house price & sale trends - housing stock and

understanding affordability;

Profiles of spatial variations and trends in house prices, market turnover and new build

sales in Stratford-upon-Avon, main rural centres and rural areas;

Housing market dynamics includes consulting estate agents and letting agents. including

buy to let/investment market, checking supply and demand trends; and

Assessing entry level housing costs between tenures and assessment of income, to

assess social rent, affordable rent, private rent and owner occupation.

4.5.4 Our discussions with developers and agents sought views on the state of the housing

market, land values in different parts of the district, sales vales, the types of development, or

dwelling mix, targeted by developers on different sites, and sales rates. These discussions

reveal the following open market housing mix that is generally sought by developers on new

sites:

1-bed 5%

2-bed 35%

3-bed 40%

4-bed 15%

5-bed 5%

4.5.5 These findings are broadly compatible with the housing mix recommendations of the GL

Hearne SHMA Update of June 2012. Whilst the draft SHMA update has been used to inform

preparation of this report, it has not been adopted as council policy, and its testing should not

be regarded as an endorsement. The SHMA update found the following future blended

dwelling mix requirements for both affordable and open market units in the period to 2028:

1-bed 8%

2-bed 34%

3-bed 40%

4+-bed 14%

4.5.6 In reaching conclusions for site assessment yields, we have used these proportions as a

guideline, but taken account of individual site characteristics, and rounded total proportions

up or down to suit these characteristics.

4.5.7 Following discussions with RPs, the generic viability appraisals use revenues that equate to

the level of capitalised rental and revenues for all affordable housing tenures, based on the


29

tenure split in the SHMA. Local RPs have estimated this to be about 48% to 52% of the

open market sales values, representing a rate that RPs can purchase from developers

without the use of grant subsidy. They also commented that our estimate of open market

sales was on the high side, and that there was no difference in blended affordable revenues

resulting from an alteration from the 75% - 25% social rent-shared ownership, to the 60%-

20%-20% proposed tenure split in the SHMA to include the new affordable rent product.

This is because the reduction in revenue from shared ownership and social rent is

compensated by an increased from affordable rent.

4.5.8 We have erred on the side of caution, and have assumed a 45% blended revenue from

affordable floorspace. It may be that the overall revenue from affordable housing will

consistently return above 45% of open market revenue, as a result of the new affordable rent

tenure, and this should be the subject of future monitoring by the council in discussion with

RPs.

4.5.9 Each site viability appraisal assumes that affordable housing will be provided on site at 35%

of the total residential floor area, and within this policy a tenure profile applies, with a

minimum requirement of 75% Social Rent and a maximum of 25% Shared Ownership. Any

alternative tenure profiles will require consultation and adoption as council policy, as

suggested in the SHMA Update.

4.5.10 There are an infinite number of possible ways to provide affordable accommodation, with or

without grant. We have assumed, in line with the latest HCA Guidance, that no social

housing grant be available to support the transfer and acquisition of affordable housing

through their delivery by S.106 agreements from the private housing developers to housing

associations.

4.6 Build Costs

4.6.1 The overall build costs, including on-site infrastructure, must be deducted from total turnover

to give an interim land value. After research of the BCIS sources and consultation with the

housebuilding industry operating locally, a range of all-in build costs including externals have

been used. The normal range used in the viability appraisals range from £950/sq.m up to

£1,000/sq.m, to include additional Code 3 build costs, discussed below.

4.6.2 Volume and regional housebuilders usually build at an average of about £800 - £950/sq.ft all

in, including normal infrastructure and externals, and the range reflects the ability of the

volume housebuilders to achieve significant economies of scale in the purchase of materials

and the use of labour. Many smaller developers are unable to attain these economies, so

their construction costs be higher; however, this can be compensated for by lower

overheads, and this often enables smaller developers to acquire sites in competition. We

have opted on the side of caution in our assumptions, with the addition of a 5% contingency.

4.6.3 Build costs for conversions are often as high as new build, particularly since they are in the

main carried out in small schemes by individual developers without economies of scale. In

addition, build costs for flats are generally higher than for traditional 2/3 storey

developments, due to higher costs associated with circulation space, multi-storey


30

construction, and extra facilities such as lifts. RPs also tend to specify higher build costs than

the volume housebuilders. This is because they frequently employ a contractor for the

construction of affordable dwellings, as opposed to developers who either employ

construction workers, or engage in direct sub-contracting. In this way, the volume builders

build at cost, whereas the Housing Associations will be paying a profit element on top of

build costs to the contractor.

4.6.4 Typically, a Housing Association might have build costs of about £1,000/sq.m. In order to

compensate for these higher build costs, an RP will not require the profit levels sought by the

private developers, typically 20% of gross turnover, and in addition, part of the building costs

fees may be absorbed in the contractor’s build cost. The generic site appraisals have

reflected the likely build costs of each individual site, depending on its scale and

characteristics. Much of the affordable housing delivered through S.106 agreements is

actually built by the volume developers at their lower rates, and a build profit on affordable

housing provision has been factored into the appraisals.

4.7 The Code for Sustainable Homes

4.7.1 The government has previously committed to ensuring that all new-build homes are zero

carbon from 2016. In the Budget ‘Plan for Growth’ of March 2011 the government has

updated the guidance on costs of implementing the code for sustainable homes in order to

ensure that it remains viable to build new homes in the context of the recession.

4.7.2 From 2016, the revised definition of Zero Carbon now only meets Code for Sustainable

Homes (CSH) Level 5, requiring that 100% of emissions from heating, lighting, and heating

hot water need to be reduced or generated on site. The consequence for construction costs

has yet to be fully assessed, but the new standards result in higher build costs, that could

affect viability. The possible increased costs for implementing the Code have been

estimated in a report by CLG “Code for Sustainable Homes, a Cost Review”, March 2010,

updated in August 2011.

4.7.3 The additional cost estimates for all the Code Levels vary depending on site type, location,

and size. The updated report suggests that Level 3 can be achieved for an average

additional cost of £1,000 per home, and the scenarios modelled for Level 5 show average

cost increases of £19,740. Strategic greenfield sites have higher costs at £1,400/unit for

level 3, and £20,000 for level 5.

4.7.4 It is important to reflect the circumstances applying both today for sites coming up for

development, and for sites that be developed post-2016, to reflect Code 5 requirements. We

have therefore allowed additional costs for the extra CSH costs - Code 3 at an average of

£1,000/unit (£1,400/unit for strategic greenfield sites), which are built into the base cost of

£950/sq.m, with an additional £20,000/unit for Code 5, where construction is anticipated to

be post 2016.

4.7.5 It should also be noted that whilst we have tested at a Level 5 equivalent and that there have

been indications in the past that the building regs would be changed to reflect this position, a

firm commitment has yet to be made regarding changing the building regs to reflect Level 5


31

by 2016. Therefore this is a cautionary approach and when revised building regs are

confirmed the council will need to consider the impact.

4.8 Developer’s Profit and Professional Fees and Financing

4.8.1 All developers have a slightly different approach to levels of profit and overhead. Profits are

derived from turnover across a number of sites, some of which may have been held long-

term in land banks, and others acquired as a result of option agreements where price is

established at a discount to Open Market Value (OMV). The most appropriate profit level is

that which most developers currently assume when appraising sites for purchase for

immediate development. This is an accurate reflection of the operation of the market for

land and new homes for a study that is reflecting conditions in 2011.

4.8.2 Our discussions with developers and agents reveal an acceptable profit margin of between

18% and 22% on turnover. In some cases, higher margins might be justified given the range

of contingencies and higher risks associated with some sites. For the purposes of the

generic viability assessments, we have used 20% as a reasonable mid-range. The views of

those attending the meeting on 13th July 2012 considered a 20% profit margin to be

reasonable.

4.8.3 Fees also need to be taken into account, including architects, engineers, planning, survey,

project manager and insurances, which amount to 12% of the gross construction cost. In

addition, allowances have been made for financing costs of construction, as well as land

purchase, allowing for annual interest costs to be included for large schemes, reflecting

phased purchase, completion rates, and sales revenues.

4.8.4 Allowances have also been made for Stamp Duty Land Tax, and legal costs, which have all

been factored into the generic viability assessments, in addition to allowances for marketing

fees.

4.9 Additional or ‘Abnormal’ Development Costs

4.9.1 The next stage in the consideration of land value and variables is an examination of

development costs, beyond those accounted for in the overall build costs. These include

physical items such as improvements to highway access, off-site highway improvements,

additional drainage requirements, strategic landscaping, tree retention, increased costs

associated with development on excessive gradients. On brownfield site in particular, there

are often increased costs associated with demolition, remediation of contamination, and

abnormal foundations.

4.9.2 There will be different levels of development costs according to the type and characteristics

of each site. The approach taken is to reflect in each generic appraisal an amount that

would typically be expected on the type of site being assessed, taking into account location,

size, character, and whether the site is PDL or greenfield. Abnormal development costs for

large urban extensions tend to be much higher than for small PDL sites. An allowance for

demolition and remediation costs is included where this is evident, such as on generic PDL

sites. The range for abnormal development costs vary from £300k/ha up to £800k/ha for

large urban extensions.


32

4.10 CIL and Community Gain Package

4.10.1 New development has a cumulative impact on infrastructure and often creates a need for

additional or improved community services and facilities without which the development

could have an adverse effect upon amenity, safety, or the environment. Planning

contributions are an important way of providing the physical, economic and social

infrastructure required to facilitate development and support the creation of sustainable

communities.

4.10.2 One of the most significant items of community gain sought from residential development

sites is affordable housing, discussed previously. Other planning obligations, such as

contributions towards education provision, and public open space, are part of the CIL

contribution initially tested at £100/sq.m. This level has been selected because it has been

found to be about the right, achievable, level of CIL elsewhere in the country with similar

revenue profiles. If a generic site is not viable with this level of CIL, the CIL is sensitivity

tested until viability is achieved. Alternatively, other cost elements are adjusted in sensitivity

testing, for example, lowering the proportion of affordable housing.

4.10.3 All of the value variables are addressed in the generic viability appraisals, which are set out

in Appendix 1. All the assumptions and variables that have been used in the generic site

viability testing have been subject to considerable research and testing against prevailing

market conditions, development costs, local and government policy. Accordingly, they are

considered to be achievable, but reasonable.

4.11 Generic Residential Viability Appraisals

4.11.1 Each generic site has been subjected to a detailed appraisal, and these appear in Appendix

1. Every generic site has an individual set of development and market assumptions,

providing floorspace, sales turnover, development and abnormal costs, fees allowance, all of

which lead to a land value. The floorspace assumptions are based from the dwelling mix,

and assumed floorspace. The critical element is the difference between sales revenue and

build cost.

4.11.2 A clear conclusion has been reached for each generic site about viability. In order to inform

these conclusions, a comparison has been made with the estimated current land value to

give a ‘value added’ figure, or uplift factor to justify to the conclusion. As discussed earlier,

an uplift factor of at about 1.4 is required to achieve viability, in particular for brownfield sites.

Viability is often determined in the eyes of the landowner; if (as in generic site 4), the

achieved uplift is only 1.32, with an uplift of £681k, the owner may choose to dispose,

despite the modest uplift, depending on personal circumstances. In cases like this, a site is

considered to be marginally viable. Of course, greenfield sites must achieve a much higher

uplift and be assessed against other benchmarks of deliverability such as ‘hope’ value, and

against the minimum land values typically found in option and promotion agreements.

4.11.3 In viability testing, there are an almost infinite number of variables that could be modelled.

The reduction of a particular cost will evidently increase profitably and viability. CIL has

been tested at £100/sq.m for residential schemes, and where found to be unviable, it has


33

been reduced. However, other variable factors can also be adjusted to accommodate a

selected level of CIL.

4.11.4 The factor that makes the greatest difference to viability is the proportion of affordable

dwellings, and therefore, open market dwellings. Build costs are relatively constant; all sites

have an element of abnormal development costs, whilst profits and overheads are relatively

similar. A lower proportion of affordable units and a correspondingly increased share of

open market dwellings immediately adds turnover that translates directly to the bottom line

land value and improved viability. If a site is unviable with no CIL, we suggest ways in which

viability might be achieved, for instance, by reducing the proportion of affordable housing.

4.11.5 For each generic site appraisal a conclusion is reached based on Level 3 build costs, with

Level 5 in addition if appropriate. The viability conclusion is shown using a graded ‘traffic

light’ warning system, set out as ‘viable’ (green), ‘marginal’ (amber), and ‘unviable’ (red). If

any site is unviable, or marginal, sensitivity testing is carried out, and subsequently modelled

with a reduced level of CIL, with the change in viability illustrated. A summary of the viability

conclusions for each generic site is set out in Table 4.4.

Table 4.4: Residential Viability Findings


Dwelling Capacity

Viability Status CIL @ £100/sq.m

1 Urban extension model

Stratford-upon-Avon

2000

2 Urban extension model

Stratford-upon-Avon

500

3 Urban extension model Southam 200

4 Large PDL model

Stratford-upon-Avon

120

5 Greenfield model Studley 75

6 PDL model Wellesbourne 30

7 Greenfield model Bidford-on-Avon 20

8 Greenfield infill model Alcester 10

9 Small PDL model Shipston 7

10 Greenfield infill model Kineton 5

11 Greenfield infill model Tysoe 5

Viable

Marginal

Unviable

4.12 Sensitivity Testing

4.12.1 On the basis of the approaches set out above viability assessments for residential

development has been undertaken. The detailed viability assessment models are included

in Appendix 1 Viability Assessments - Residential. Table 4.4 above shows the viability

conclusion based on a range of assumptions about the development variables considered in

this report.


34

4.12.2 Seven of the 11 models are viable with CIL at £100/sq.m. For the three urban extension

models, the viability conclusions are that the development would be viable with CIL at

£100/sq.m, and with 35% affordable housing. The same conclusion is reached for the

generic examples at the relatively high value areas at Bidford, Alcester, Kineton, and Tysoe.

4.12.3 However, four of the 10 models are either unviable or marginally viable, and for these there

is a requirement to carry out sensitivity testing until viability can be demonstrated, by a

combination of adjusting the level of CIL, or reducing the proportion of affordable housing.

Table 4.5 shows the effects of firstly, reducing CIL to zero to determine whether this makes

the site viable, and if not, or as an alternative, illustrating the lower proportion of affordable

housing below the 35% normal that will achieve viability.

Table 4.5: Sensitivity Testing to Achieve Viability


Dwelling Capacity

Viability Status CIL @ £100/sq.m& 35% Affordable

CIL Reduced to

CIL Remains at £100/sq.m, Affordable % reduced to

4a Large PDL model Stratford-upon-Avon

120 £67/sq.m 32%

5a Greenfield model Studley 75 £0 23%

6a PDL model Wellesbourne 30 £0 17%

9a Small PDL model Shipston 7 £0 28%

Viable

Marginal

Unviable

4.12.4 As an alternative, on the four models that are either unviable or marginally viable, we have

sensitivity tested the maximum level of affordable housing that could be achieved assuming

no CIL contribution. This is set out in table 4.6 below:

Table 4.6: Sensitivity Testing to maximise % of affordable housing with varying levels of CIL

Generic site Nominal location

Dwelling capacity

CIL @ £100/sq.m, with affordable housing @:

CIL @ £0/sq.m with affordable housing @:

CIL @ £50/sq.m with affordable housing @:

4a Large PDL model Stratford-upon-Avon

120 32% 39% 36%

5a Greenfield model Studley 75 23% 33% 29%

6a PDL model Wellesbourne 30 17% 26% 22%

9a Small PDL model Shipston 7 28% 35% 32%

4.12.5 The sensitivity testing has been carried out on sites that were either unviable or marginally

viable. The reasons for the lack of viability caused by inter-related financial variables, in

particular relatively low sales revenues, and relatively high existing use values (EUV), arising

from being brownfield sites, or valuable garden land. The generic site examples are

discussed below:


35

4a – Large PDL Model – 120 Units

4.12.6 This is a large PDL employment site at Stratford-upon-Avon for 120 dwellings. The average

sales values are £2,900/sq.m, with slightly higher than average build costs of £1000/sq.m to

take account of a proportion of 1 and 2-bed flats as well as an additional £200k/ha costs for

demolition and remediation. The critical reason why the site is found to be only marginally

viable is because the EUV is based on employment use at £750k/ha, so the site value of

£2.8m is only 1.3 times higher than the EUV of £2.14m. In order to achieve viability, either

CIL needs to reduce to £67/sq.m, or with CIL remaining at £100/sq.m, the affordable

proportion needs to reduce to 32%. Alternatively, the council could propose zero CIL, and

increase the affordable housing proportion from 32% to 39%.

5a – Greenfield Model – 75 Dwellings

4.12.7 This model is a large greenfield site at Studley for 75 dwellings. The average sales value is

relatively low at £2,300/sq.m. The main reason why the site is found to be unviable is, whilst

the land value of £463k is significantly higher than EUV (agricultural), this is lower than the

typical minimum land values found in option agreements of about £500k/ha so the site will

not be viable for either promoter or landowner. In order to achieve viability, the affordable

proportion needs to reduce to 23%, because even reducing CIL to zero will not make the site

viable on its own. This is mainly because of the relatively low sales value at £2,300/sq.m.

Alternatively, the council could propose zero CIL, and increase the affordable housing

proportion from 23% to 33%.

6a – Smaller Brownfield Model – 30 Units

4.12.8 This is a smaller PDL site at Wellesbourne for 30 dwellings. The average sales value is

2,600/sq.m. The critical reason why the site is found to be unviable is because the EUV is

based on employment use at £600k/ha, so the site value of £322k is less than the EUV of

£450k. In order to achieve viability, the affordable proportion needs to reduce to 17%,

because even reducing CIL to zero will not make the site viable on its own. This is mainly

because of the relatively high EUV of £450k. Alternatively, the council could propose zero

CIL, and increase the affordable housing proportion from 17% to 26%.

9a – Small PDL Model – 7 Dwellings

4.12.9 This is a small PDL site at Shipston for 7 dwellings. The average sales values is

£2,900/sq.m. The main reason why the site is found to be unviable is because the EUV is

based on employment use at £600k/ha, so the site value of £138k only marginally higher

than the EUV of £120k. In order to achieve viability, the CIL needs to reduce to zero, if

affordable housing is to remain at 35%. The alternative is to retain CIL at £100/sq.m, and

reduce the affordable proportion to 28%. This is mainly because of the relatively high EUV

of £120k.


36

4.13 Summary of Findings from Residential Analyses and Recommended CIL Approaches

4.13.1 As stated in para 4.12.2, seven of the 11 residential models are viable with CIL at £100/sq.m

and affordable housing at 35% of floorspace. These are the three urban extension models

and the examples at the relatively high value areas at Bidford, Alcester, Kineton and Tysoe.

4.13.2 The findings show that the four development examples that are either marginally viable or

unviable become viable through sensitivity testing, by adjusting either the affordable housing

proportion, or the CIL charge. In two cases (4a, large PDL model in Stratford and 9a, PDL

model in Wellesbourne), viability is achieved by reducing CIL to £67/sq.m, and £0

respectively, whilst maintaining affordable housing at 35%. In the two other examples (5a,

Greenfield model Studley and 6a, small PDL model in Shipston), both in lower value areas,

viability is not achieved even with no CIL charge, if affordable is maintained at 35%. In order

to achieve viability on these two sites, the affordable proportion must reduce to 23% and

17% respectively, if CIL remains at £100/sq.m.

4.13.3 An alternative would be to set CIL at £50/sq.m for sites within settlements, targeting

brownfield sites with an inherently higher EUV than greenfield sites, in which case affordable

can increase from 17% to 22% for site 6a at Wellesbourne. The other alternative is to set

zero CIL in some or all parts of the district, and to instead maximise the proportion of

affordable housing, as illustrated in the 4 examples in Table 4.6. This will be a decision for

the council in setting policy imperatives. Since CIL is a statutory requirement, once set, it

has to be levied, and accordingly the council should give very careful consideration to its

objectives and affordable housing targets.

4.13.4 At Studley we would recommend having no CIL because of lower sales values. We have,

however, tested a £50 rate (on a Greenfield site on the edge of Studley) and this would be

viable but would only yield around 29% AH. As shown in Table 4.6, this rises to 33% with

zero CIL.

4.13.5 The critical point to take into account is the spatial circumstances in which CIL becomes

unviable, which is on brownfield sites with a relatively high EUV, as well as in lower value

areas like Studley with a sales value of £2,300/sq.m or less. On that basis we would

recommend one of the following approaches:

4.13.6 Approach 1 – maximise CIL adjacent to Stratford-upon-Avon and Main Rural Centres

(MRCs) except Studley, no CIL within Stratford-upon-Avon or any of the MRCs and maintain

affordable housing at 35% on most sites:


37

Table 4.7: Approach 1

Stratford –upon-Avon and the Main Rural Centres

CIL £/sq.m

Edge of Settlement

Stratford-upon-Avon 100

Southam 100

Bidford-on-Avon 100

Alcester 100

Shipston-on-Stour 100

Henley-in-Arden 100

Kineton 100

Wellesbourne 100

Studley 0

Within settlement 0

Local Service Villages and Rural Areas 100

4.13.7 Approach 2 – maximise CIL at £100/sq.m adjacent to all settlements except Studley, reduce

CIL to £50/sq.m within all settlements except Studley, maintain affordable housing at 35%

where possible, but reduce where necessary by negotiation on PDL sites within settlements

(accepting that lower affordable housing yields will be realised than with Approach 1). It will

be for the council to decide whether to maintain the highest proportion of affordable housing

in all cases, or whether to maximise CIL with the possibility that the proportion of affordable

housing might reduce, particularly on brownfield sites.

Table 4.8: Approach 2

Stratford-upon-Avon and the Main Rural Centres

CIL £/sq.m

Edge of Settlement

Stratford-upon-Avon 100

Southam 100

Bidford-on-Avon 100

Alcester 100

Shipston-on-Stour 100

Henley-in-Arden 100

Kineton 100

Wellesbourne 100

Studley 50

Within settlement 50

Local Service Villages and Rural Areas 100


38

4.14 Affordable Housing

4.14.1 These viability appraisals have tested the Council’s affordable housing target of 35% of

floorspace in the Draft Core Strategy. In the majority of cases this level of provision has

been found to be viable in combination with a CIL charge of 100 /sq.m.

4.14.2 Difficulties have arisen, however, in securing this level of contribution (35% affordable

housing and a CIL of £100 /sq.m) in areas of lower residential values (post development)

and in areas where the existing use value of the land is high (i.e. pre-development). In these

cases the uplift in value brought about by the development is insufficient to support these

levels of contribution. In these areas the Council must therefore decide between the

following:

Charge £100 /sq.m CIL and be prepared to negotiate a figure below the 35% target for

affordable housing;

Reduce the CIL from £100 to £50 or even £0 and achieve 35% affordable housing in

some instances, accepting that in other cases negotiation down from 35% may still be

required; or

Reduce the affordable housing target (either overall or in some areas).

4.14.3 A key difference between the level of CIL and the affordable housing yield is that the former

is a fixed fee, (from which full exemption is permitted but only in exceptional circumstances)

and the latter is a target to be achieved where possible, with acceptance that some sites will

yield less. The developer can present a site development viability appraisal as a basis for

negotiation to a lower level of affordable housing provision that can be supported by the

development. This is usually part of the discussions around the planning application but can

also be done after the grant of planning permission if market conditions have changed and

the negotiated level of affordable housing provision is preventing the development from

being realised. This has been the subject of recent pronouncements by government.

4.14.4 It should not be confused with setting a lower overall target in Local Plans, though the target

should be realistic in most circumstances.

4.14.5 The evidence shows that 35% affordable housing is viable in most circumstances where a

CIL of £100 /sq.m is suggested. It is also shows that within settlements (Stratford-upon-

Avon and the Main Rural Centres) where CIL is recommended to be reduced to £50 (except

Studley) or even £0, an affordable housing yield of 35% is still a realistic target.

4.15 Design Costs

4.15.1 There is uncertainty as to whether all residential development post 2016 will need to reach

CSH Level 5. If in place this is currently estimated to add around £200 /sq.m to the cost of

residential development.

4.15.2 To reflect our cautionary approach this has been tested in one of the hypothetical residential

development scenarios, that of a 2000 dwelling extension to Stratford-upon-Avon. A large


39

development such as this would not be completed prior to 2016 and therefore if new

regulations were brought in much of the development would have to comply with the new

regulation.

4.15.3 The analysis shows that even with these costs post 2016, such a development would be

able to afford a CIL of £100 /sq.m, an affordable housing yield of 35% of floorspace and CSH

Level 5.

4.15.4 Whilst this particular scenario will support policy and CIL aspirations, it is not anticipated that

all scenarios tested would be able to support such additional costs were they to remain at

this level. However, it is apparent that there is uncertainty as to whether the requirements

will be brought in by 2016 and it is expected that over the next few years new technologies

will be introduced to reduce the costs of achieving CSH Level 5. Rather than try to estimate

the implications for development post 2016, the council is advised to re-test the viability of

development and reconsider the CIL charge in 2015 to reflect changes in the market over

the next 3 years, the experience of achieving the affordable housing target under the CIL

regime and the revised cost of achieving CSH Level 5, if new regulations are in place.


40

5 Non-Residential Assessments

5.1 Non-Residential Assumptions

5.1.1 This section sets out the assumptions used for the non-residential viability testing work.

5.2 Approach

5.2.1 The testing has been conducted on a hypothetical typical or notional hectare site basis. Viability

testing on a typical/notional hectare basis has been adopted since it is impossible for this study to

consider viability on a site-specific basis at this stage, given that there is currently insufficient data

on site-specific costs and values, as site details have yet to be established. Such detail will evolve

over the plan period. Site-specific testing would be considering detail on purely

speculative/assumed scenarios, producing results that would be of little use for a study for strategic

consideration.

5.3 Establishing Gross Development Value (GDV)

5.3.1 In establishing the GDV for non-residential uses, a similar approach has been taken to residential,

so we do not repeat the process here. However, given the significant variety in development types,

this report has also considered historic comparable evidence for new values on both a local,

regional and national level.

5.3.2 The following table illustrates the values established for a variety of non-residential uses,

expressed in square metres (sq.m) of net rentable floorspace.

Table 5.1: Non Residential Uses – Rent and Yields

Use Rents Yields

Superstore/supermarket £200 5.5%

Retail warehousing £150 6.7%

Town centre retail £260 7.5%

Local convenience £150 6.0%

B1 office town centre £120 8.7%

B1 office out of centre £120 7.3%

B2 industrial 1,500 sq.m £55 9.0%

B2 Industrial 5,000 sq.m £55 9.0%

B8 warehouse 5,000 sq.m £55 8.7%

Hotels £103 6.6%

Assembly/leisure £149 6.6%

Care homes £128 6.1%

Extra Care Living (not based on Rental and Yield Model)

GDV = £3000 per sq.m

Health & fitness £105 7.0%

Source: PBA research


41

5.4 Costs

5.4.1 Once a GDV has been established, the cost of development (including developer profit) is then

deducted. For the purposes of viability testing, the following costs and variables are some of the

key inputs used within the assessment:

Developer profit;

Build Costs;

Professional Fees and Overheads;

Finance;

Marketing Fees;

Legal Fees; and

Land Stamp Duty Tax.

5.5 Site Coverage

5.5.1 As the viability testing in some circumstances is being undertaken on a ‘per hectare’ basis, it is

important to consider the density of development proposed. The following table sets out the

assumed site coverage ratios for each development type.

Table 5.2: Non Residential Uses – Site Coverage Ratios

Use Coverage Floors

Superstore/supermarket 40% 1

Retail warehousing 40% 1

Town centre retail 80% 1

Local convenience 80% 1

B1 office town centre 80% 3

B1 office out of centre 80% 2

B2 industrial 1,500 sq.m 40% 1

B2 Industrial 5,000 sq.m 40% 1

B8 warehouse 5,000 sq.m 40% 1

Hotels 50% 3

Assembly/leisure 50% 2

Care homes/Extra Care 50% 2

Health & fitness 50% 2

5.6 Developer Profit

5.6.1 The developer’s profit is the expected and reasonable level of return a private developer can

expect to achieve from a development scheme. This figure is based a 20% profit margin of the

total Gross Development Value (GDV) of the development.


42

5.7 Build Costs

5.7.1 Build cost inputs have been established from the RICS Build Cost Information Service

(BCIS) at values set at the time of this study (current build cost values). The build costs are

entered at a pound per square metre rate at the following values shown in the following

table. The build costs adopted are based on the BCIS mean values, indexed separately to

Stratford-on-Avon prices; and then amended following the development industry feedback at

the meeting on 13th July 2012 and subsequent discussion. Also included is an allowance for

external works.

Table 5.3: Non Residential Uses – Build Costs

Use Coverage

Superstore/supermarket £1,100

Retail warehousing £625

Town centre retail £1,200

Local convenience £1,000

B1 office town centre £1,200

B1 office out of centre £1,200

B2 industrial 1,500 sq.m £740

B2 Industrial 5,000 sq.m £560

B8 warehouse 5,000 sq.m £580

Hotels £1,080

Assembly/leisure £1,400

Care homes £1,100

Extra Care Living £1,000

Health & fitness £1,150

Sourced: Spons Architects’ and Builders’ Price Book 2009 and BCIS

5.8 Professional Fees, Overheads

5.8.1 This input incorporates all professional fees associated with the build, including: architect

fees, planner fees, surveyor fees, project manager fees. The professional fees variable is

set at a rate of 12% of build cost.

5.8.2 This variable has been applied to the appraisal as a percentage of the total construction

cost. This figure is established from discussions with both regional and national developers

as well as in house knowledge and experience of industry standards.

5.9 Development Contributions Other than CIL

5.9.1 We have assumed for the purposes of testing that most development will still be expected to

make s106 etc contributions to mitigate direct impacts of the development. These will often

centre on highways improvements but could also relate to design and access. We have used

a combination of looking at past agreements made with the council and utilising our

knowledge of undertaking similar studies elsewhere. Clearly as these types of agreement

are specific to individual developments we have had to take a pragmatic approach in our

generic appraisals. We have basically assumed that higher impact and trip generating uses


43

such as supermarkets will generally be expected to contribute the highest amounts, which is

borne out when analysing past agreements. Smaller amounts have been attributed to the

other uses as impact is often less significant and ability to pay i.e. viability often limits the

level sought.

5.10 Finance

5.10.1 A finance rate has been incorporated into the viability testing to reflect the value of money

and the cost of reasonable developer borrowing for the delivery of development. This is

applied to the appraisal as a percentage of the build cost at the rate of 7.5% of total

development costs (inc build costs, external works, professional fees, sales and marketing)

5.11 Marketing Fees

5.11.1 This variable is based on the average cost of marketing for a major new build development

site, incorporating agent fees, ‘on site’ sales costs and general marketing/advertising costs.

The rate of 4% of GDV is applied to the appraisal as a percentage of the GDV and is

established from discussions with developers and agents.

5.12 Acquisition Fees and Land Tax

5.12.1 This input represents the legal costs to a developer in the acquisition of land and the

development process itself. The input is incorporated into the residual value as a

percentage of the residual land value at the rate of 10% of RLV.

5.12.2 A Stamp Duty Land Tax is payable by a developer when acquiring development land. This

factor has been recognised and applied to the residual value as percentage cost against the

residual land value at a rate of 4% (highest rate applicable is used for testing purposes).

5.13 Land for Non-residential Uses

5.13.1 After systematically removing the various costs and variables detailed above, the result is

the residual land value. In order to ascertain the level of likelihood towards delivery and the

level of risk associated with development viability, the resulting residual land values are

measured against a benchmark value which reflects a value range that a landowner would

reasonably be expected to sell/release their land for development.

5.13.2 Establishing the existing use value (EUV) of land and in setting a benchmark at which a

landowner is prepared to sell to enable a consideration of viability can be a complex process.

There are a wide range of site specific variables which effect land sales (e.g. position of the

landowner – are they requiring a quick sale or is it a long term land investment). However,

for a strategic study, where the land values on future individual sites are unknown, a

pragmatic approach is required.

5.13.3 From discussions with agents active in the commercial sector, we have concluded that there

have been very few sales of commercial or employment land in the district over the past 5

years, largely arising from the moribund state of the commercial market caused by the

recession. Land values established before 2007 provide evidence of a range of land values


44

for employment uses between £400k and £750k/ha. There is planning policy resistance to

changes of use to residential from employment uses where there is a demonstrable

employment demand, and a solid resistance from landowners to sell for lower than the

established pre-2007 value. There is no evidence to suggest therefore that a lower value

should be attributed to brownfield sites as an EUV in the viability appraisals.

5.13.4 We have therefore concluded that a benchmark figure towards the lower end of the range of

£500,000/ha is appropriate as a starting point. The benchmark is then adjusted on the basis

of location and different uplifts applied according to use. So for example a town site will be at

the upper end of the existing use value as it will already have a comparatively high value and

if the potential use is retail then it will also have a higher uplift value as expectation on return

will be higher.

5.14 Non Residential Development Analysis

5.14.1 This section sets out the assessment of non-residential development viability and also

summarises the impact on viability of changes in values and costs, and how this might have

an impact on the level of developer contribution. The tables below summarise the detailed

assessments, and represent the net value per sq.m, the net costs per square metre

(including an allowance for land cost and S106 to deal with site specific issues to make

development acceptable) and the balance between the two.

5.14.2 It is important to note that the analysis considers development that might be built for

subsequent sale or rent to a commercial tenant. However there will also be development

that is undertaken for specific commercial operators either as owners or pre-lets.

5.15 B-class Uses

5.15.1 In line with other areas of the country our analysis suggests that for commercial B-class

development it is not currently viable to charge a CIL. Whilst there is variance for different

types of B-space, essentially none of them generate sufficient value to justify a CIL charge.

5.15.2 As the economy recovers this situation may improve but for the purposes of setting a CIL we

need to consider the current market. Importantly this viability assessment relates to

speculative build for rent – we do expect that there will be development to accommodate

specific users, and this will based on the profitability of the occupier’s core business activities

rather than the market values of the development.

Table 5.4: B-class Development

Use Town Centre Office

Out of Town Office

Industrial 1,500 sq.m

Industrial 5,000 sq.m

B8 Warehouse

Values/sq.m £1,235 £1,472 £547 £547 £566

Development costs/sq.m (inc. EUV + uplift)

£1,975 £2,073 £1,296 £1,062 £1,093

Residual Value/sq.minc. allowance for EUV + uplift)

-£740 -£602 -£749 -£515 -£527


45

5.16 Retail Uses

5.16.1 The viability of retail development will depend primarily on the re-emergence of occupier

demand and the type of retail use being promoted. For this reason we have tested different

types of retail provision.

5.16.2 Superstores, supermarkets and local convenience – large scale and small scale

convenience retail continues to be one of the best performing sectors in the UK, although we

are aware that even this sector is seeing reduced profits at the time of writing. Leases to the

main supermarket operators (often with fixed uplifts) command a premium with investment

institutions. Although there are some small regional variations on yields, they remain

generally strong with investors focussing primarily on the strength of the operator covenant

and security of income. We would therefore suggest the evidence base for large out of town

retail can be approached on a wider region or even national basis when justifying CIL

charging. Following our appraisal on this basis in Stratford-on-Avon we believe there is

scope for a significant CIL charge for out of town centre development without affecting

viability.

5.16.3 Retail warehouse – although this market has been relatively flat in recent times, especially

in terms of new build, there may potentially be more activity in the future. Whilst values have

dropped the relatively low build costs mean that there is still value in these types of

developments when there is occupier demand.

5.16.4 The appraisal summary shown in table 5.5 is for all out of town centre development. Whilst it

can be seen that these different types of out of town centre provision have different levels of

viability it is not possible to set a size threshold for different types of shopping, therefore it is

considered that all types of retail development outside the town centres in Stratford-on-Avon

should attract a charge that will be viable for all identified types of retail development. As the

provision of small scale local convenience retailing is likely to either be under the 100 sqm

CIL threshold or not critical to delivery of the plans objectives it is considered that setting CIL

for all out of centre retail development around that level would not significantly impact on the

delivery of the Plan.

Table 5.5: Out of town centre retail uses

Use Superstore Supermarket Small/Local Convenience Retail

Retail Warehouse

Values/sq.m £3,256 £2,984 £2,238 £2,004


£3,000 £2,791 £2,071 £1,804

Residual Value/sq.minc. allowance for EUV + uplift)

£255 £193 £167 £200

5.16.5 Town centre – we have tested town centre retail in the main centre of Stratford-upon-Avon

as this is the focus for future growth. In terms of what constitutes ‘town centre’, the Local

Plan identifies a town centre area with useful boundaries in functional terms. We also

consider that on a strategic level in Stratford-on-Avon there is little difference between A1-A5

units and whilst convenience units may attract higher values, in practical terms it will be


46

difficult to set different CIL rates for just these types of uses as the evidence is limited to

support such a distinction. The residual analysis shows that town centre retail is not

currently able to support a CIL charge.

Table 5.6: Town Centre Residual Analysis

Use Town Centre

Values/sq.m £3,104

Development costs/sq.m (inc. EUV + uplift) £3,129

Residual Value/sq.m inc. allowance for EUV + uplift) -£25

5.17 Leisure Development

5.17.1 We have tested budget hotels, mixed leisure schemes and health clubs. Our high level

appraisal of both these types of development shows that in the current market values are not

sufficient to justify a CIL charge.

5.17.2 Hotels – the rapid expansion in the sector at the end of the last decade was in part fuelled

by a preference for management contracts or franchise operations over traditional lease

contracts. Outside London (which has shown remarkable resilience to the recession) hotel

development is being strongly driven by the budget operators delivering new projects

through traditional leasehold arrangements with institutional investors.

5.17.3 Our viability model is based on an out of city centre budget hotel scheme and in terms of

Stratford-on-Avon it can be seen that there is not sufficient value realised to contribute to a

levy.

Table 5.7: Hotel Viability Levy

Use Hotels

Values/sq.m £1,397

Development costs/sq.m (inc. EUV + uplift) £1,858

Residual Value/sq.minc. allowance for EUV + uplift) -£461

5.17.4 Mixed Leisure and fitness – a mixed leisure scheme to include facilities such as cinema,

bowling, health and leisure complex, gambling and associated eating and drinking

establishments. Our analysis shows that this sort of scheme is currently unlikely to be viable

enough in Stratford-upon-Avon to support a CIL charge. We have also tested a stand-alone

commercial health and fitness facility and that too is currently unlikely to be viable enough in

Stratford-upon-Avon to support a CIL charge.


47

Table 5.8: Mixed Leisure CIL Charge

Use Assembly/Leisure Health & Fitness

Values/sq.m £1,667 £1,343

Development costs/sq.m(inc. EUV + uplift) £1,944 £1,878

Residual Value/sq.minc. allowance for EUV + uplift) -£277 -£535

5.18 Care Homes and Extra Care Living

5.18.1 In addition to the uses above we have tested the viability of care homes. There has been

significant private sector investment in care homes in the recent past, fuelled by investment

funds seeking new returns. However, there have been concerns about the occupancy rates

and the ability to sustain prices. The high level analysis suggests that care homes are

unlikely to be viable in Stratford-on-Avon.

5.18.2 In terms of extra care living, like care homes, there has been considerable investment in the

past and the market seems to be picking up again. However, whilst these schemes attract

values akin to residential development they are often developed on more challenging harder

to deliver edge of town centre sites with greater construction cost and higher existing use

values. Therefore whilst there is potential to charge a small levy, it will be marginal and it will

not match residential development. It should also be noted that the levy is only viable with

nil affordable housing. We have also tested the viability on greenfield sites as it is

understood that there is potential for these to come forward in the future. The appraisal for

greenfield sites assumes that there will be access to utilities and roads either through a small

urban extension or as part of a wider larger urban extension and therefore there are no

major site opening up costs and again it assumes no affordable housing. The results show

that there is more scope to charge CIL in these circumstances, although it will impact on the

ability to collect on affordable housing. We have also tested the impact of affordable housing

on the ability to collect CIL. It is clear that at the general target rate of 35% affordable

housing it would not be viable to charge any levy.

Table 5.9: Care Homes Viability

Use Care Homes Extra Care Living – in town

Extra Care Living – greenfield

Values/sq.m £1,885 £1,979 £1,979


£2,048 £1,938 £1,907

Residual Value/sq.m (inc. allowance for EUV + uplift)

-£163 £41 £72

5.19 Other Non-residential Development

5.19.1 In addition to the development considered above there are other non-residential uses that

we have considered. PAS guidance suggests that there needs to be evidence that

community uses are not able to support CIL charges. Our view is that it would not be helpful

to set a CIL for the type of facilities that will be paid for by CIL (amongst other sources).


48

5.19.2 Our approach to this issue is that the commercial values for community uses are £0 but

there are build costs of around £1,800/sq.m plus the range of other development costs; with

a net negative residual value. Therefore we recommend a £0 CIL for these uses.

5.20 Summary and Sensitivity Testing on Non-residential Development

5.20.1 The following figure illustrates the levels of value in our tested schemes when all costs have

been subtracted from the values. As can be seen positive values exist for all out of town

centre retail development and for assisted living housing.

5.20.2 This suggests that if the council were minded to set a CIL charge on out of centre retail

development a figure around £170 /sq.m would be appropriate.

5.20.3 As the viability of setting a charge on assisted living/ extra care housing is more marginal the

council will need to decide as to whether to set a zero or low level of say up to £25 /sq.m or if

less risk adverse and if not considered impacting on the plan delivery including that of

affordable housing potential then a higher charge could be set at the top of the scale of

around £50-70 /sq.m. If the council wants to pursue a policy target of 35% affordable

housing from these types of uses then the levy should be set at zero.

5.20.4 It is suggested that a zero charge applies to all the other forms of non residential

development. All other tested uses show negative values, although, it is important to note

that this does not mean that these uses will never come forward in Stratford-on-Avon.

Bespoke schemes with identified end users and land owners willing to sell at lower prices will

enable development to come forward in the future.

Figure 5.1 Scope for CIL


49

5.20.5 To help the council decide as to where they may wish to set there CIL rates we have also

undertaken some sensitivity testing in terms of values rising and falling. This will assist the

council by illustrating how sensitive particular uses are to shifts in the market. The council

will need to decide in setting the rate how much they want to put at risk that particular

development type and what effect non delivery would have on the plan delivery strategy. The

sensitivity analysis will also help the council in thinking about suitable trigger points whereby

a review of the CIL is required – for example if the economy worsens and retail values drop

by 10% then it may be appropriate to lower or drop the charge. Or alternatively if the

economy recovers there may be scope to charge CIL on more uses.

5.20.6 Figure 5.2 shows what will happen if there is depreciation in the values of minus 10%. As

can be seen all but retail warehousing is shown as negative. Therefore if extra care housing

or out of town centre retailing is an important part of the plan’s delivery strategy and the

Council is risk adverse, this sensitivity test would suggest that in the current climate whereby

there is potential for values to drop further, setting a lower charge may be appropriate.

Figure 5.2 Sensitivity analysis – minus 10% on values

5.20.7 However if the council has a more optimistic view of the market and believes that values will

rise, Figure 5.3 indicates that in addition to out of town centre retail, in town centre retail

becomes viable to charge a levy. Also assisted living becomes less marginal in terms of a

charge and there is potential for a small levy on care homes. Employment and leisure uses

continue to be negative.


50

Figure 5.3 Sensitivity analysis – plus 10% on values


51

6 Conclusion

6.1.1 It is possible to set a standard CIL charge for residential development of £100/sq.m on the edge of

Stratford-upon-Avon and all the other settlements except Studley without affecting viability, whilst

maintaining the 35% affordable housing target.

6.1.2 However, if it is intended to maintain the affordable housing share at 35%, it will be necessary to

adopt Approach 1, and treat sites within settlements differently in order to take account of the

impact of higher existing use values have on viability, particularly on brownfield sites. This would

mean zero CIL from all sites within settlements.

6.1.3 The alternative would be to consider Approach 2, which maximises CIL within and adjacent to all

settlements except Studley, whilst maintaining affordable housing at 35% where possible, but being

prepared to reduce the affordable housing proportion where necessary by negotiation on PDL sites

within settlements.

6.1.4 We recognise that the council will need to balance a wide range of priorities. However, maintaining

the proportion of affordable housing in the urban extensions and maintaining the same CIL rate

within the urban areas would have the following benefits:

There be a simple and transparent Charging Schedule - as suggested by the guidance; and

It would help to maximise the amount of un-ring fenced funding available to the council for

infrastructure.

6.1.5 A degree of site by site negotiation on affordable housing will be maintained in a way that the

uniform CIL process does not allow. There is also scope for negotiating on other S106

contributions where appropriate, provided it is supported by development viability.

6.1.6 There is clear evidence to support a charge on out of town centre retail development. Whilst the

evidence suggests that this levy could be varied further to reflect the different types of retail uses, it

is not considered that there is sufficient information on transactions in Stratford-on-Avon to provide

clear evidence at this stage. Therefore a single charge for all out of town centre retail should be

set.

6.1.7 There is some scope to charge a levy for extra care living development. However, this will depend

on the council’s approach to affordable housing requirements from this type of development. If the

council pursues a target of 35% affordable housing from these types of use then the levy should be

set at zero.

6.1.8 For all other types of non-residential development we recommended that a zero charge is applied.

6.1.9 Finally it is important to note that this is a strategic study based on generic and typical sites that

could potentially come forward in Stratford-on-Avon District over the plan period. This study should

not be used as a basis for Section 106 or other such agreements as these should be negotiated on

a site by site basis, reflecting the mitigation of any direct planning impacts that the development

would incur if implemented. Therefore whilst our analysis may show that in broad strategic terms it

is not advised that CIL be charged for certain types of development this does not mean that the


52

council should not negotiate on site specific planning contributions, as each site will have unique

individual circumstances and requirements that may require a more detailed appraisal.


Appendix 1: Residential Viability Appraisals

% Model No. 1SCHEME LOCATION Stratford-upon-Avon

Local Authority Area

Nr of Beds Nr of Dwgs Flsp per Dwg (sqm)Flsp per Dwg (sq.ft)

8 1 160 50 538

34 2 680 63 677.88

40 3 800 85 914.6

14 4 280 130 1398.8

4 5 80 190 2044.4

100 Total Dwgs 2000 170,440 1,833,934

site area ha & acres 52.6 130

Dwellings per Hectare 38 15

Floorspace coverage sq.m/ha & sq.ft/acre 3240 14110

Net Site Area (Ha) 52.60

Type of Site Greenfield urban extension

Housing Market Share (%) GDV/sqm

Open Market 65% £3,000

Affordable Housing 35% 45%

Code For Sustainable Homes (Cfsh) Level: 3

RESIDUAL LAND VALUATION

Open Market Development Value

Floorspace 110,786 GFA sqm

OM Gross Development Value £3,000 GDV/sqm + 0.0% £332,358,000

Less buyers' sales costs £332,358,000 GDV @ -3.0% -£9,970,740

OM Net Turnover £322,387,260

Affordable Housing Development Value


AH Net Receipts £1,350 GDV/sqm + 0.0% £80,532,900

1. Total Development Value £402,920,160

Development Costs

Building costs + externals @ Cfsh level 3 170,440 sqm + £950 per sqm £161,918,000

Contingency £161,918,000 Build cost 5% % £8,095,900

Extra-over CfSH costs 5 CfSH level @ £200 per sqm £34,088,000

Developers' profit (% of OM TO) £322,387,260 OM NR @ 20.0% £64,477,452

Developers' profit on AH Dwgs (8% of AH build cost) £56,671,300 OM NR @ 8.0% £4,533,704

Total Build Cost & Developers Profit £273,113,056

Development costs finance (1 year) £204,101,900 Build Cost @ 8.0% per year £16,328,152

Project/design team fees (% of all construction) £204,101,900 Build Cost @ 12.0% £24,492,228

Total Build Cost, Fees & Developers Profit £313,933,436

CIL on OM floorspace 110,786 sqm @ £100 per sqm £11,078,600

Developer contributions (non-CIL site-based strategic infrastructure - @ £800k/net ha, including S.106 costs - local highway improvements, PoS, etc)

52.60 ha @ £800,000 per ha £42,080,000

Extra over demolition/remediation

Total Additional Development Costs £53,158,600

2. Total Development Costs £367,092,036

Land Value

Interim land value realised at sale £402,920,160 TDV - £367,092,036 TDC £35,828,124

Estimated Purchase costs finance £35,828,124

Actual Purchase costs finance (avoiding circular calc) £30,880,000 Land Value @ 7.0% £2,161,600

Less acquisition fees £30,880,000 Land Value @ 2.0% £617,600

Less Stamp Duty land tax £30,880,000 @ 7.0% £2,161,600

3. Residual Land Value for Site £30,887,324

Residual Land Value per Hectare £587,211

Existing use value (EUV) for agric land £30,000 ha £1,578,000

Value added by consent £30,887,324 EUV - £1,578,000 £29,309,324

Uplift factor 19.57

Minimum Land Value 500,000 26,300,000

Viability Summary

Viability Conclusion

Land value of £30.8m (£587k/net ha), including CSH5 @ £200/sq.m. Viability test against 1) uplift of £29.3m, x 19 from agric value and 11.7 x hope value of £50k/ha. Against Option Agreement Minimum Land Values 52.6 ha x £500k/net ha = £26.3m. Achieved LV = £30.8m or £587k/net ha, therefore passes all 3 Viability Tests. Conclusion - viable, on the basis that site-based infrastructure is set at £800k/net ha, and with CIL at £100/sq.m.

Strategic site at Stratford. Proposal is for 2000 dwellings on 52.6 net ha (38 dph); Affordable 35% of total (700 units), new affordable rent product 20%, 20% intermediate, 60% social rent. Likely market mix to reflect both market for OM & AH (from SHMA) adjusted to tak account of location/type of site: 8% 1-bed, 34% 2-bed, 40% 3-bed, 14% 4-bed, 4% 5-bed. The market appraisal indicates that this mix produces a total of 170,440 sq.m of floorspace. Average sales values based on housing market analysis estimated at £3,000/sq.m. New Build all-in costs estimated at £950/sq.m all in, with additional 5% contingency, on-site infrastructure, plus Code 5 costs at £200/sq.m

% Model No. 2SCHEME LOCATION Stratford-upon-Avon



5 1 25 50 538

30 2 150 63 677.88

44 3 220 85 914.6

16 4 80 130 1398.8

5 5 25 190 2044.4

100 Total Dwgs 500 44,550 479,358




Net Site Area (Ha) 13.88 34.30










Less buyers' sales costs 3% £86,872,500 GDV @ -3.0% -£2,606,175






Development Costs


Contingency £42,322,500 Build cost 5% % £2,116,125

Extra-over CfSH costs 5 CfSH level @ per sqm £0


Developers' profit on AH Dwgs (8% of AH build cost) £14,812,875 OM NR @ 8.0% £1,185,030





CIL on OM floorspace 28,958 sqm @ £100 per sqm £2,895,750Developer contributions (non-CIL site-based strategic infrastructure - @ £800k/net ha, including S.106 costs - local highway improvements, PoS, etc)

13.88 ha @ £800,000 per ha £11,104,000




Land Value



Actual Purchase costs finance (avoiding circular calc) £17,000,000 @ 8.0% per year £1,360,000


Less Stamp Duty land tax £17,000,000 @ 7.0% £1,190,000


Residual Land Value per Hectare £1,224,983

Existing use value (EUV) for agric land £30,000 ha £416,400

Value added by consent £17,002,769 EUV - £416,400 £16,586,369

Uplift factor 40.83

Minimum Land Value 500,000 6,940,000

Viability Summary


Strategic site at Stratford. Proposal is for 500 dwellings on 13.88 net ha (36 dph); Affordable 35% of total (700 units), new affordable rent product 20%, 20% intermediate, 60% social rent. Likely market mix to reflect both market for OM & AH (from SHMA) adjusted to tak account of location/type of site: 5% 1-bed, 30% 2-bed, 44% 3-bed, 16% 4-bed, 5% 5-bed. The market appraisal indicates that this mix produces a total of 44,550 sq.m of floorspace. Average sales values based on housing market analysis estimated at £3,000/sq.m. New Build all-in costs estimated at £950/sq.m all in, with additional 5% contingency, on-site infrastructure, no Code 5 costs saving £8.9m build costs

Land value of £17m (£1.2m/net ha), with no CSH5 costs. Viability test against 1) uplift of £16.9m, x 41 from agric value and 25 x hope value of £50k/ha. Against Option Agreement Minimum Land Values 13.88 ha x £500k/net ha = £6.94m. Achieved LV = £17m or £1.2m/net ha, therefore passes all 3 Viability Tests. Conclusion - viable, on the basis that site-based infrastructure is set at £800k/net ha, and with CIL at £100/sq.m.

% Model No. 3SCHEME LOCATION Southam



5 1 10 50 538

25 2 50 63 677.88

45 3 90 85 914.6

20 4 40 130 1398.8

5 5 10 190 2044.4

100 Total Dwgs & Floorspace 200 18,400 197,984




Net Site Area (Ha/acres) 5.70 14.08










Less buyers' sales costs 3% £33,488,000 GDV @ -3.0% -£1,004,640






Development Costs


Contingency £17,480,000 Build cost 5% % £874,000



Developers' profit on AH Dwgs (8% of AH build cost) £6,118,000 OM NR @ 8.0% £489,440





CIL on OM floorspace 11,960 sqm @ £100 per sqm £1,196,000Developer contributions (non-CIL site-based strategic infrastructure - @ £800k/net ha, including S.106 costs - local highway improvements, PoS, etc)

5.70 ha @ £800,000 per ha £4,560,000




Land Value



Actual Purchase costs finance (avoiding circular calc) £4,970,000 @ 8.0% per year £397,600


Less Stamp Duty land tax £4,970,000 @ 7.0% £347,900



Existing use value (EUV) for agric land £30,000 ha £171,000

Value added by consent £4,968,731 EUV - £171,000 £4,797,731

Uplift factor 29.06

Minimum Land Value/ha 500,000 2,850,000

Viability Summary


Strategic site at Southam. Proposal is for 200 dwellings on 5.7 net ha (35dph); Affordable 35% of total (70 units), new affordable rent product 20%, 20% intermediate, 60% social rent. Likely market mix to reflect both market for OM & AH adjusted to tak account of location/type of site: 5% 1-bed, 25% 2-bed, 40% 3-bed, 20% 4-bed, 5% 5-bed. The market appraisal indicates that this mix produces a total of 18,400 sq.m of floorspace. Average sales values based on housing market analysis estimated at £2,800/sq.m. New Build all-in costs estimated at £950/sq.m all in, with additional 5% contingency, on-site infrastructure, no Code 5 build costs

Land value of £4.96m (£0.87m/net ha), with no CSH5 costs. Viability test against 1) uplift of £4.8m, x 29 from agric value and 17 x hope value of £50k/ha. Against Option Agreement Minimum Land Values @ £500k/ha = £2.85m. Achieved LV = £4.96m or £0.87m/net ha, therefore passes all 3 Viability Tests. Conclusion - viable, on the basis that site-based infrastructure is set at £800k/net ha, and with CIL at £100/sq.m.

% Model No. 4SCHEME LOCATION Stratford



10 1 12 50 538

40 2 48 63 677.88

40 3 48 85 914.6

10 4 12 130 1398.8

0 5 0 190 2044.4






Type of Site PDL near town centre









Less buyers' sales costs 3% £17,462,640 GDV @ -3.0% -£523,879






Development Costs

Building costs + externals @ Cfsh level 3 9,264 sqm + £1,000 per sqm £9,264,000






Development costs finance (1 year) £9,727,200 Build Cost @ 8.0% per year £778,176



CIL on OM floorspace 6,022 sqm @ £100 per sqm £602,160Developer contributions (non-CIL site-based strategic infrastructure - @ £500k/net ha, including S.106 costs - local highway improvements, PoS, etc)

2.86 ha @ £500,000 per ha £1,428,500

Extra over demolition/remediation 2.86 ha £200,000 £571,400



Land Value








Existing use value (EUV) £750,000 ha £2,142,750

Value added by consent £2,777,689 EUV - £2,142,750 £634,939

Uplift factor 1.30


Viability Summary


Large PDL site at Stratford. Proposal is for 120 dwellings on 2.857 net ha (42dph); Affordable 35% of total (42 units), new affordable rent product 20%, 20% intermediate, 60% social rent. Likely market mix to reflect both market for OM & AH adjusted to tak account of location/type of site: 10% 1-bed, 40% 2-bed, 40% 3-bed, 10% 4-bed, 0% 5-bed. The market appraisal indicates that this mix produces a total of 9,264 sq.m of floorspace. Average sales values based on housing market analysis estimated at £2,900/sq.m. New Build all-in costs estimated at £1000/sq.m all in, with additional 5% contingency, on-site infrastructure, no Code 5 build costs, additional £200k/ha additional costs for demolition/remediation

Land value of £2.77m (£0.972m/net ha), with no CSH5 costs. Viability test against 1) uplift of £634k, x 1.3 from EUV, (need at least 1.4 uplift to be viable) Against Option Agreement Minimum Land Values £1.4m. Achieved LV = £2.77m or £0.972m/net ha, therefore passes 1 of the 2 Viability Tests. Conclusion - marginally viable, depending on individual circumstances of landowner, on the basis that EUV is £750k/ha, site-based infrastructure is set at £500k/net ha, with £571k demolition/remediation costs, and with CIL at £100/sq.m.

% Model No. 5SCHEME LOCATION Studley



5 1 4 50 538

40 2 30 63 677.88

40 3 30 85 914.6

15 4 11 130 1398.8

0 5 0 190 2044.4


site area ha & acres 1.8 4.45




Type of Site large greenfield site















Development Costs








Project/design team fees (% of all construction) £6,074,775 Build Cost @ 12.0% £728,973



1.80 ha @ £500,000 per ha £900,000

Extra over demolition/remediation ha £200,000 £0



Land Value

Interim land value realised at sale £11,037,516 TDV - £10,513,857 TDC £523,659

Estimated Purchase costs finance £523,659

Actual Purchase costs finance (avoiding circular calc) £463,000 @ 8.0% per year £37,040

Less acquisition fees £463,000 Land Value @ 2.0% £9,260

Less Stamp Duty land tax £463,000 @ 3.0% £13,890

3. Residual Land Value for Site £463,469


Existing use value (EUV) £30,000 ha £54,000

Value added by consent £463,469 EUV - £54,000 £409,469

Uplift factor 8.58

Minimum Land Value/ha 500,000 900,000

Viability Summary


Large greenfield site at Studley. Proposal is for 75 dwellings on 1.8 net ha (41.6dph); Affordable 35% of total (26 units), new affordable rent product 20%, 20% intermediate, 60% social rent. Likely market mix to reflect both market for OM & AH adjusted to tak account of location/type of site: 5% 1-bed, 40% 2-bed, 40% 3-bed, 20% 4-bed, 0% 5-bed. The market appraisal indicates that this mix produces a total of 6090 sq.m of floorspace. Average sales values based on housing market analysis estimated at £2,300/sq.m. New Build all-in costs estimated at £950/sq.m all in, with additional 5% contingency, on-site infrastructure, no Code 5 build costs.

Land value of £463k (£257k/net ha), with no CSH5 costs. Viability test against 1) uplift of £409k, x 8.5 from EUV, 2) x 5 hope value of £50k/ha, 3) Against Option Agreement Minimum Land Value of £500k/ha = £900k. Achieved LV = £462k or £257/net ha, therefore fails Viability Test 3. Conclusion - not viable, on the basis that site-based infrastructure is set at £500k/net ha, and with CIL at £100/sq.m. Need to reduce costs to achieve viability, either CIL or affordable %.

% Model No. 6SCHEME LOCATION Wellsbourne



8 1 2 50 538

36 2 11 63 677.88

42 3 13 85 914.6

14 4 4 130 1398.8

0 5 0 190 2044.4






Type of Site PDL












Floorspace 846 GFA sqm

AH Net Receipts £1,170 GDV/sqm + 0.0% £989,925


Development Costs




Developers' profit (% of OM TO) £3,962,844 OM NR @ 20.0% £792,569

Developers' profit on AH Dwgs (8% of AH build cost) £846,090 OM NR @ 8.0% £67,687






0.75 ha @ £500,000 per ha £375,000


Total Additional Development Costs £682,131


Land Value









Value added by consent £322,598 EUV - £450,000 -£127,402

Uplift factor 0.72


Viability Summary


Small PDL site at Wellsbourne. Proposal is for 30 dwellings on 0.75 net ha (40dph); Affordable 35% of total (10 units), new affordable rent product 20%, 20% intermediate, 60% social rent. Likely market mix to reflect both market for OM & AH adjusted to tak account of location/type of site: 8% 1-bed, 36% 2-bed, 42% 3-bed, 14% 4-bed, 0% 5-bed. The market appraisal indicates that this mix produces a total of 6090 sq.m of floorspace. Average sales values based on housing market analysis estimated at £2,600/sq.m. New Build all-in costs estimated at £950/sq.m all in, with additional 5% contingency, on-site infrastructure, no Code 5 build costs.

Land value of £322k (£430k/net ha), with no CSH5 costs. Viability test against 1) EUV of £450k = negative uplift of £127k, therefore fails Viability Test. Conclusion - not viable, on the basis that EUV is £600k/ha, site-based infrastructure is set at £500k/net ha, and with CIL at £100/sq.m. Need to reduce costs to achieve viability, either CIL or affordable %.

% Model No. 7SCHEME LOCATION Bidford



1 0 50 538

20 2 4 63 677.88

40 3 8 85 914.6

35 4 7 130 1398.8

5 5 1 190 2044.4






Type of Site small greenfield















Development Costs











0.60 ha @ £500,000 per ha £300,000




Land Value










Uplift factor 35.46


Viability Summary


Small grenfield site at Bidford. Proposal is for 20 dwellings on 0.6 net ha (33 dph); Affordable 35% of total (7 units), new affordable rent product 20%, 20% intermediate, 60% social rent. Likely market mix to reflect both market for OM & AH, adjusted to tak account of location/type of site: 0% 1-bed, 20% 2-bed, 40% 3-bed, 35% 4-bed, 5% 5-bed. The market appraisal indicates that this mix produces a total of 2032 sq.m of floorspace. Average sales values based on housing market analysis estimated at £2,800/sq.m. New Build all-in costs estimated at £950/sq.m all in, with additional 5% contingency, on-site infrastructure, no Code 5 build costs.

Land value of £638k (£1.06m/net ha), with no CSH5 costs. Viability test against 1) uplift of £620k, x 35 from agric value and 20 x hope value of £50k/ha. Against Option Agreement Minimum Land Value of £500k/ha = £300k. Achieved LV = £620kor £1.063m/net ha, therefore passes all 3 Viability Tests. Conclusion - viable, on the basis that site-based infrastructure is set at £500k/net ha, and with CIL at £100/sq.m

% Model No. 8SCHEME LOCATION Alcester



0 1 0 50 538

0 2 0 63 677.88

40 3 4 80 860.8

60 4 6 120 1291.2

0 5 0 190 2044.4






Type of Site small Village greenfield















Development Costs

Building costs + externals @ Cfsh level 3 1,040 sqm + £950 per sqm £988,000

Contingency £988,000 Build cost 5% % £49,400








CIL on OM floorspace 676 sqm @ £100 per sqm £67,600Developer contributions (non-CIL site-based strategic infrastructure - @ £500k/net ha, including S.106 costs - local highway improvements, PoS, etc)

0.33 ha @ £500,000 per ha £165,000




Land Value










Uplift factor 38.01


Viability Summary


Small grenfield site at Alcester. Proposal is for 10 dwellings on 0.33 net ha (30 dph); Affordable 35% of total (3 units), new affordable rent product 20%, 20% intermediate, 60% social rent. Likely market mix to reflect both market for OM & AH, adjusted to tak account of location/type of site: 0% 1-bed, 0% 2-bed,40% 3-bed, 60% 4-bed, 0% 5-bed. The market appraisal indicates that this mix produces a total of 1040 sq.m of floorspace. Average sales values based on housing market analysis estimated at £2,900/sq.m. New Build all-in costs estimated at £950/sq.m all in, with additional 5% contingency, on-site infrastructure, no Code 5 build costs.

Land value of £376k (£1.14m/net ha), with no CSH5 costs. Viability test against 1) uplift of £366k, x 38 from agric value and 23 x hope value of £50k/ha. Against Option Agreement Minimum Land Value of £500k/ha = £165k. Achieved LV = £376k or £1.14m/net ha, therefore passes all 3 Viability Tests. Conclusion - viable, on the basis that site-based infrastructure is set at £500k/net ha, and with CIL at £100/sq.m

% Model No. 9SCHEME LOCATION Shipston



0 1 0 50 538

50 2 4 63 677.88

50 3 4 85 914.6

0 4 0 130 1398.8

0 5 0 190 2044.4

100 Total Dwgs & Floorspace 7 518 5,574





Type of Site PDL








OM Gross Development Value £2,900 GDV/sqm + 0.0% £976,430

Less buyers' sales costs 3% £976,430 GDV @ -3.0% -£29,293

OM Net Turnover £947,137





Development Costs

Building costs + externals @ Cfsh level 3 518 sqm + £1,000 per sqm £518,000



Developers' profit (% of OM TO) £947,137 OM NR @ 20.0% £189,427


Total Build Cost & Developers Profit £747,831

Development costs finance (1 year) £543,900 Build Cost @ 8.0% per year £43,512

Project/design team fees (% of all construction) £543,900 Build Cost @ 12.0% £65,268

Total Build Cost, Fees & Developers Profit £856,611


0.20 ha @ £500,000 per ha £100,000




Land Value










Uplift factor 1.15


Viability Summary

Viability ConclusionLand value of £138k (£690k/net ha), with no CSH5 costs. Viability test against 1) EUV of £120k = uplift of £18k, x 1.15 therefore fails Viability Test. Conclusion - not viable, on the basis that site-based infrastructure is set at £500k/net ha, and with CIL at £100/sq.m. Need to reduce costs to achieve viability, either CIL or affordable %.

Small PDL site at Shipston. Proposal is for 7 dwellings on 0.2 net ha (35dph); Affordable 35% of total units, new affordable rent product 20%, 20% intermediate, 60% social rent. Likely market mix to reflect both market for OM & AH adjusted to tak account of location/type of site: 0% 1-bed, 50% 2-bed, 50% 3-bed, 0% 4-bed, 0% 5-bed. The market appraisal indicates that this mix produces a total of 6090 sq.m of floorspace. Average sales values based on housing market analysis estimated at £2,900/sq.m. New Build all-in costs estimated at £950/sq.m all in, with additional 5% contingency, on-site infrastructure, no Code 5 build costs.

% Model No. 10SCHEME LOCATION Kineton



0 1 0 50 538

0 2 0 63 677.88

70 3 4 80 860.8

30 4 2 120 1291.2

0 5 0 190 2044.4




















1. Total Development Value £978,696

Development Costs

Building costs + externals @ Cfsh level 3 460 sqm + £950 per sqm £437,000










0.16 ha @ £500,000 per ha £80,000



2. Total Development Costs £861,372

Land Value

Interim land value realised at sale £978,696 TDV - £861,372 TDC £117,324









Uplift factor 2.64


Viability Summary


Small infill site at Kineton. Proposal is for 5 dwellings on 0.16 net ha (30 dph); Affordable 35% of total, new affordable rent product 20%, 20% intermediate, 60% social rent. Likely market mix to reflect both market for OM & AH, adjusted to take account of location/type of site: 0% 1-bed, 0% 2-bed,70% 3-bed, 30% 4-bed, 0% 5-bed. The market appraisal indicates that this mix produces a total of 460 sq.m of floorspace. Average sales values based on housing market analysis estimated at £2,700/sq.m. New Build all-in costs estimated at £950/sq.m all in, with additional 5% contingency, on-site infrastructure, no Code 5 build costs.

Land value of £105k (£660k/net ha), with no CSH5 costs. Viability test against 1) uplift of £65k, x 2.64 from EUV. Against Option Agreement Minimum Land Value of £500k/ha = £80k. Achieved LV = £105k or £660k/net ha, therefore passes Viability Tests. Conclusion - viable, on the basis that site-based infrastructure is set at £500k/net ha, and with CIL at £100/sq.m

% Model No. 11SCHEME LOCATION



0 1 0 50 538

0 2 0 63 677.88

70 3 4 80 860.8

30 4 2 120 1291.2

0 5 0 190 2044.4





















Development Costs

Building costs + externals @ Cfsh level 3 460 sqm + £950 per sqm £437,000










0.16 ha @ £500,000 per ha £80,000



2. Total Development Costs £878,774

Land Value

Interim land value realised at sale £1,087,440 TDV - £878,774 TDC £208,666









Uplift factor 4.70


Viability Summary


Local Service Village - Tysoe

Small infill site at a Local service village - Tysoe. Proposal is for 5 dwellings on 0.16 net ha (30 dph); Affordable 35% of total, new affordable rent product 20%, 20% intermediate, 60% social rent. Likely market mix to reflect both market for OM & AH, adjusted to take account of location/type of site: 0% 1-bed, 0% 2-bed,70% 3-bed, 30% 4-bed, 0% 5-bed. The market appraisal indicates that this mix produces a total of 460 sq.m of floorspace. Average sales values based on housing market analysis estimated at £3,000/sq.m. New Build all-in costs estimated at £950/sq.m all in, with additional 5% contingency, on-site infrastructure, no Code 5 build costs.

Land value of £188k (£1174k/net ha), with no CSH5 costs. Viability test against 1) uplift of £148k, x 4.7 from EUV. Against Option Agreement Minimum Land Value of £500k/ha = £80k. Achieved LV = £188k or £1174k/net ha, therefore passes Viability Tests. Conclusion - viable, on the basis that site-based infrastructure is set at £500k/net ha, and with CIL at £100/sq.m

% Model No. 4aSCHEME LOCATION Stratford



10 1 12 50 538

40 2 48 63 677.88

40 3 48 85 914.6

10 4 12 130 1398.8

0 5 0 190 2044.4






Type of Site PDL near town centre















Development Costs











2.86 ha @ £500,000 per ha £1,428,500




Land Value








Existing use value (EUV) £750,000 ha £2,142,750

Value added by consent £2,997,411 EUV - £2,142,750 £854,661

Uplift factor 1.40


Viability Summary


Large PDL site at Stratford. Proposal is for 120 dwellings on 2.857 net ha (42dph); Affordable 35% of total (42 units), new affordable rent product 20%, 20% intermediate, 60% social rent. Likely market mix to reflect both market for OM & AH adjusted to tak account of location/type of site: 10% 1-bed, 40% 2-bed, 40% 3-bed, 10% 4-bed, 0% 5-bed. The market appraisal indicates that this mix produces a total of 9,264 sq.m of floorspace. Average sales values based on housing market analysis estimated at £2,900/sq.m. New Build all-in costs estimated at £1000/sq.m all in, with additional 5% contingency, on-site infrastructure, no Code 5 build costs, additional £200k/ha additional costs for demolition/remediation

Land value of £2.99m (£1m/net ha), with no CSH5 costs. Viability test against 1) uplift of £854k, x 1.4 from EUV, (need at least 1.4 uplift to be viable) Against Option Agreement Minimum Land Values £1.4m. Achieved LV = £2.99m or £1.04m/net ha, therefore passes the 2 Viability Tests. Conclusion - viable, on the basis that site-based infrastructure is set at £500k/net ha, with £571k demolition/remediation costs, and with CIL at £67/sq.m.

% Model No. 5aSCHEME LOCATION Studley



5 1 4 50 538

40 2 30 63 677.88

40 3 30 85 914.6

15 4 11 130 1398.8

0 5 0 190 2044.4






Type of Site large greenfield site















Development Costs











1.80 ha @ £500,000 per ha £900,000

Extra over demolition/remediation ha £200,000 £0



Land Value










Uplift factor 17.27


Viability Summary


Land value of £932k (£518k/net ha), with CIL at £100/sq.m anf affordable reduced to 23%, no CSH5 costs. Viability test against 1) uplift of £878k, x17 from EUV, 2) x 10 hope value of £50k/ha, 3) Against Option Agreement Minimum Land Value of £500k/ha = £900k. Achieved LV = £932k or £518/net ha, thereforepasses Viability Tests. Conclusion - viable, on the basis that site-based infrastructure is set at £500k/net ha, and with CIL at £100/sq.m, and affordable reduced to 23 %.

Large greenfield site at Studley. Proposal is for 75 dwellings on 1.8 net ha (41.6dph); Affordable 35% of total (26 units), new affordable rent product 20%, 20% intermediate, 60% social rent. Likely market mix to reflect both market for OM & AH adjusted to tak account of location/type of site: 5% 1-bed, 40% 2-bed, 40% 3-bed, 20% 4-bed, 0% 5-bed. The market appraisal indicates that this mix produces a total of 6090 sq.m of floorspace. Average sales values based on housing market analysis estimated at £2,300/sq.m. New Build all-in costs estimated at £950/sq.m all in, with additional 5% contingency, on-site infrastructure, no Code 5 build costs.

% Model No. 6aSCHEME LOCATION Wellsbourne



8 1 2 50 538

36 2 11 63 677.88

42 3 13 85 914.6

14 4 4 130 1398.8

0 5 0 190 2044.4






Type of Site PDL















Development Costs











0.75 ha @ £500,000 per ha £375,000




Land Value










Uplift factor 1.43


Viability Summary


Small PDL site at Wellsbourne. Proposal is for 30 dwellings on 0.75 net ha (40dph); Affordable 35% of total (10 units), new affordable rent product 20%, 20% intermediate, 60% social rent. Likely market mix to reflect both market for OM & AH adjusted to tak account of location/type of site: 8% 1-bed, 36% 2-bed, 42% 3-bed, 14% 4-bed, 0% 5-bed. The market appraisal indicates that this mix produces a total of 6090 sq.m of floorspace. Average sales values based on housing market analysis estimated at £2,600/sq.m. New Build all-in costs estimated at £950/sq.m all in, with additional 5% contingency, on-site infrastructure, no Code 5 build costs.

Land value of £641k (£855k/net ha), with no CSH5 costs. Viability test against 1) EUV of £450k = uplift of £191k, 2) Against Option Agreement Minimum Land Value of £500k/ha = £375k. Achieved LV = £641k or £855/net ha, therefore passes Viability Tests. Conclusion - viable, on the basis that site-based infrastructure is set at £500k/net ha, and with CIL at £100/sq.m.

% Model No. 9aSCHEME LOCATION Shipston



0 1 0 50 538

50 2 4 63 677.88

50 3 4 85 914.6

0 4 0 130 1398.8

0 5 0 190 2044.4






Type of Site PDL















Development Costs

Building costs + externals @ Cfsh level 3 518 sqm + £1,000 per sqm £518,000










0.20 ha @ £500,000 per ha £100,000




Land Value










Uplift factor 1.40


Viability Summary


Small PDL site at Shipston. Proposal is for 7 dwellings on 0.2 net ha (35dph); Affordable 28% of total units, new affordable rent product 20%, 20% intermediate, 60% social rent. Likely market mix to reflect both market for OM & AH adjusted to tak account of location/type of site: 0% 1-bed, 50% 2-bed, 50% 3-bed, 0% 4-bed, 0% 5-bed. The market appraisal indicates that this mix produces a total of 6090 sq.m of floorspace. Average sales values based on housing market analysis estimated at £2,900/sq.m. New Build all-in costs estimated at £950/sq.m all in, with additional 5% contingency, on-site infrastructure, no Code 5 build costs.

Land value of £168k (£842k/net ha), with no CSH5 costs. Viability test against 1) EUV of £120k = uplift of £48k, x 1.4 therefore passes Viability Test. Conclusion - viable, on the basis that site-based infrastructure is set at £500k/net ha, and with CIL at £100/sq.m.


Appendix 2: Non-Residential Viability Appraisals

Stratford on Avon - Residual Land Valuation

Retail - 3,500 sq. m SuperstoreQuantum/Value Unit Rate Unit Total

1. Development Value

Floorspace 3,500 GFA sqm @ 95.0%

Rental value 3,325 GIFA sqm @ £200 per sqm

Investment yield £665,000 p.a. @ 5.5%

Gross Development Value £12,090,909

Expresssed as GDV/sqm £3,455

Less buyers' costs £12,090,909 @ -5.8% -£696,436

Net Receipts £11,394,473

Expresssed as net receipts/sqm £3,256

2. Development Costs

Building costs estimate (including contractors' prelims, OHs & profit) 3,500 sqm @ £1,100 per sqm £3,850,000

External works (% of build cost) £3,850,000 @ 10.0% £385,000

Project/design team fees (% of all construction) £4,235,000 @ 12.0% £508,200

BREEAM costs £3,850,000 @ 2.0% £77,000

Developer contributions (non-CIL) 3,500 sqm @ £250 per sqm £875,000

CIL contributions 3,500 sqm @ £0 £0

Marketing & sales (% of GDV) £12,090,909 @ 4.0% £483,636

Development costs finance (on half build costs) 1.00 years @ 7.5% £231,706

Void finance (on total development costs) 0.00 years @ 8.5% £0

Developers' profit (% of GDV) £12,090,909 @ 20.0% £2,418,182

Development Costs £8,828,725

Land value realised at sale £2,565,748

Less acquisition fees @ 10.0% £256,575

Less land tax £2,565,748 @ 4.0% £102,630

Total Costs £9,187,929

Expresssed as total cost/sqm £2,625

Residual Land Value for Site £2,206,543

Number of floors 1

Building footprint 3,500

Development site coverage 40%

Balance of site without direct development value 60%

Expressed as site area without direct development value 5,250 sqm

Total site land take 8,750 sqm 0.88 ha


Assumed existing use value plus uplift per hectare £1,500,000

Site cost 0.88 ha £1,312,500

Total development cost and site costs £10,500,429

Expresssed as total cost and site costs/sqm £3,000

Net residual value of development £894,043

Net residual value per sqm of development £255


Supermarket 1,100 sqmQuantum Unit Rate Unit Total

1. Development ValueFloorspace 1,100 GFA sqm @ 95.0%








2. Development CostsBuilding costs estimate (including contractors' prelims, OHs & profit) 1,100 sqm @ £1,100 per sqm £1,210,000



BREEAM costs £1,210,000 @ 2.0% £24,200






Developers' profit (% of GDV) £3,483,333 @ 20.0% £696,667


Land value realised at sale £727,083


Less land tax £727,083 @ 4.0% £29,083



Residual Land Value for Site £625,291Number of floors 1






Residual Land Value per Hectare £2,273,786Assumed existing use value plus uplift per hectare £1,500,000

Site cost 0.28 ha £412,500






Local Convenience Retail - 280 sq. m Quantum Unit Rate Unit Total

1. Development ValueFloorspace 280 GFA sqm @ 95.0%

Rental value 266 GIFA sqm @ £150 per sqm


Gross Development Value £665,000


Less buyers' costs £665,000 @ -5.8% -£38,304

Net Receipts £626,696


2. Development CostsBuilding costs estimate (including contractors' prelims, OHs & profit) 280 sqm @ £1,000 per sqm £280,000

External works (% of build cost) £280,000 @ 10.0% £28,000

Project/design team fees (% of all construction) £308,000 @ 12.0% £36,960

BREEAM costs £280,000 @ 2.0% £5,600

Developer contributions (non-CIL) 280 sqm @ £25 per sqm £7,000

CIL contributions 280 sqm @ £0 £0

Marketing & sales (% of GDV) £665,000 @ 4.0% £26,600



Developers' profit (% of GDV) £665,000 @ 20.0% £133,000

Development Costs £531,566



Less land tax £95,130 @ 4.0% £3,805

Total Costs £544,884



Building footprint 280



Expressed as site area without direct development value 70 sqm

Total site land take 350 sqm 0.04 ha


Site cost 0.04 ha £35,000

Total development cost and site costs £579,884





Retail - 10,000 sq. m Retail Warehouses - Scheme of 6 UnitsQuantum Unit Rate Unit Total



Investment yield £1,425,000 p.a. @ 6.7%



Less buyers' costs £21,268,657 @ -5.8% -£1,225,075



2. Development CostsBuilding costs estimate (including contractors' prelims, OHs & profit) 10,000 sqm @ £625 per sqm £6,250,000



BREEAM costs £6,250,000 @ 2.0% £125,000

Developer contributions (non-CIL) 10,000 sqm @ £150 per sqm £1,500,000







Land value realised at sale £5,232,514


Less land tax £5,232,514 @ 4.0% £209,301



Residual Land Value for Site £4,499,962

Number of floors 1







Assumed existing use value plus uplift per hectare £1,000,000

Site cost 2.50 ha £2,500,000



Net residual value of development £1,999,962



Retail - 1000 sq. m Stratford Town CentreQuantum Unit Rate Unit Total












BREEAM costs £1,200,000 @ 2.0% £24,000










Less land tax £697,682 @ 4.0% £27,907










Site cost 0.13 ha £625,000



Net residual value of development -£24,993

Net residual value per sqm of development -£25


Office - 800 sqm Town Centre B1Quantum Unit Rate Unit Total

1. Development ValueFloorspace 800 GFA sqm @ 95.0%








2. Development CostsBuilding costs estimate (including contractors' prelims, OHs & profit) 800 sqm @ £1,200 per sqm £960,000

External works (% of build cost) £960,000 @ 10.0% £96,000


BREEAM costs £960,000 @ 2.0% £19,200

Developer contributions (non-CIL) 800 sqm @ £50 per sqm £40,000

CIL contributions 800 sqm @ £0 £0






Land value realised at sale -£553,755


Less land tax -£553,755 @ 4.0% £1,333



Residual Land Value for Site -£558,422Number of floors 3





Total site land take 333 sqm 0.03 ha

Residual Land Value per Hectare -£16,752,663Assumed existing use value plus uplift per hectare £1,000,000







Office - 2000 sq. m Business Park B1Quantum Unit Rate Unit Total












BREEAM costs £2,400,000 @ 2.0% £48,000








Land value realised at sale -£1,032,118


Less land tax -£1,032,118 @ 4.0% £6,000



Residual Land Value for Site -£1,053,118Number of floors 2






Residual Land Value per Hectare -£4,212,471Assumed existing use value plus uplift per hectare £600,000

Site cost 0.25 ha £150,000



Net residual value of development -£1,203,118



Industrial - 1500 sq. m B2 - Edge of TownQuantum Unit Rate Unit Total




Gross Development Value £870,833

Expresssed as GDV/sqm £581

Less buyers' costs £870,833 @ -5.8% -£50,160


Expresssed as net receipts/sqm £547




BREEAM costs £1,110,000 @ 2.0% £22,200



Marketing & sales (% of GDV) £870,833 @ 4.0% £34,833



Developers' profit (% of GDV) £870,833 @ 20.0% £174,167




Less land tax -£909,280 @ 4.0% £7,500










Site cost 0.38 ha £187,500






Industrial - 5,000 sq. m B2 - Edge of TownQuantum Unit Rate Unit Total












BREEAM costs £2,800,000 @ 2.0% £56,000










Less land tax -£1,861,878 @ 4.0% £25,000


Expresssed as total cost/sqm £937








Site cost 1.25 ha £625,000






Industrial - 5,000 sq. m B8 Storage/Distribution - Edge of TownQuantum Unit Rate Unit Total












BREEAM costs £2,900,000 @ 2.0% £58,000










Less land tax -£1,921,616 @ 4.0% £25,000


Expresssed as total cost/sqm £968








Site cost 1.25 ha £625,000






Budget Hotel - 2000 sqm (60 bedrooms) - Edge of townQuantum Unit Rate Unit Total












BREEAM costs £2,160,000 @ 2.0% £43,200










Less land tax -£831,207 @ 4.0% £3,200
















Mixed Leisure Scheme 8,000 sqm - cinema/bowlingQuantum Unit Rate Unit Total



Investment yield £1,132,400 p.a. @ 6.6%







External works (% of build cost) £11,200,000 @ 10.0% £1,120,000

Project/design team fees (% of all construction) £12,320,000 @ 12.0% £1,478,400

BREEAM costs £11,200,000 @ 2.0% £224,000










Less land tax -£2,937,495 @ 4.0% £19,200










Site cost 0.80 ha £480,000






Residential Care Homes - 1,900 sqm (40 bedrooms) - Edge of townQuantum Unit Rate Unit Total








Expresssed as net receipts/sqm £1,884.80




BREEAM costs £2,090,000 @ 0.0% £0










Less land tax -£106,581 @ 4.0% £7,125









Residual Land Value per Hectare -£1,107,520Assumed existing use value plus uplift per hectare £1,500,000

Site cost 0.12 ha £178,125






Assisted Living with no affordable housing - 4500 sqm (50 units) - Edge of town centreQuantum Unit Rate Unit Total


GDV 3,150 GIFA sqm @ £3,000 per sqm









BREEAM costs £4,500,000 @ 0.0% £0










Less land tax £540,124 @ 4.0% £21,605










Site cost 0.28 ha £281,250






Assisted Living with no affordable housing - 4500 sqm (50 units) - GreenfieldQuantum Unit Rate Unit Total


GDV 3,150 GIFA sqm @ £3,000 per sqm









BREEAM costs @ 0.0% £0










Less land tax £540,124 @ 4.0% £21,605









Residual Land Value per Hectare £1,651,578Assumed existing use value plus uplift per hectare £500,000

Site cost 0.28 ha £140,625






Assisted Living with affordable housing - 4500 sqm (50 units) - GreenfieldQuantum Unit Rate Unit Total


GDV 3,150 GIFA sqm per sqm

Open Market 65% 100%OMV @ £3,000 £6,142,500

Affordable Housing 35% 45% OMV @ £1,350 £1,488,375









BREEAM costs @ 0.0% £0










Less land tax -£716,028 @ 4.0% £5,625










Site cost 0.28 ha £140,625






Health & Fitness - 4,000 sqm edge of townQuantum Unit Rate Unit Total












BREEAM costs £4,600,000 @ 2.0% £92,000










Less land tax -£2,187,540 @ 4.0% £12,000










Site cost 0.50 ha £300,000






Appendix 3: Glossary


Affordable Housing

Housing provided for sale, rent or shared equity at prices in perpetuity below the current market rate,

which people in housing need are able to afford

Affordable Rent

Affordable rented housing is let by local authorities or private registered providers of social housing to

households who are eligible for social rented housing. Affordable Rent is subject to rent controls that

require a rent of no more than 80 per cent of the local market rent (including service charges, where

applicable).

Allocated

Land which has been identified for a specific use in the current Development Plan

Asset Management Plans

The means by which Service Providers such as water, energy and health authorities plan for future

investment

Brownfield Land, Brownfield Site

Land or site that has been subject to previous development

Charging Authority

The charging authority is the local planning authority, although it may distribute the received levy to

other infrastructure providers such as the county council in two tier authorities

Charging Schedule

The Charging Schedule sets out the charges the Charging Authority proposes to adopt for new

development

Code for Sustainable Homes

The Code for Sustainable Homes is an environmental assessment method for rating and certifying the

performance of new homes. It is a national standard for use in the design and construction of new

homes with a view to encouraging continuous improvement in sustainable home building

Convenience Goods

Widely distributed and relatively inexpensive goods which are purchased frequently and with minimum

of effort, such as newspapers and food items.


Comparison Goods

Household or personal items which are more expensive and are usually purchased after comparing

alternative models/types/styles and price of the item (e.g. clothes, furniture, electrical appliances).

Such goods generally are used for some time

Development

Defined in planning law as ‘the carrying out of building, engineering, mining or other operations in, on,

over, or under land, or the making of a material change of use of any building or land’

Development Brief

A document describing and leading the form and layout of development in a prescribed area

Green Infrastructure

Green spaces and interconnecting green corridors in urban areas, the countryside in and around

towns and rural settlements, and in the wider countryside. It includes natural green spaces colonised

by plants and animals and dominated by natural processes and man-made managed green spaces

such as areas used for outdoor sport and recreation including public and private open space,

allotments, urban parks and designed historic landscapes as well as their many interconnections like

footpaths, cycleways, green corridors and waterways

Infrastructure

The network of services to which it is usual for most buildings or activities to be connected. It includes

physical services serving the particular development (e.g. gas, electricity and water supply;

telephones, sewerage) and also includes networks of roads, public transport routes, footpaths etc. as

well as community facilities and green infrastructure

Intermediate Housing

Intermediate housing is homes for sale and rent provided at a cost above social rent, but below market

levels subject to the criteria in the Affordable Housing definition above. These can include shared

equity (shared ownership and equity loans), other low cost homes for sale and intermediate rent, but

not affordable rented housing. Homes that do not meet the above definition of affordable housing,

such as "low cost market" housing, may not be considered as affordable housing for planning

purposes.

Local Transport Plan (LTP)

A five-year integrated transport strategy, prepared by local authorities in partnership with the

community, seeking funding to help provide local transport projects. The plan sets out the resources

predicted for delivery of the targets identified in the strategy


Low Carbon

To minimise carbon dioxide emissions from a human activity

New Homes Bonus

The New Homes Bonus is a government funding scheme to ensure that the economic benefits of

growth are returned to the local area. It commenced in April 2011, and will match fund the additional

council tax raised for new homes and properties brought back into use, with an additional amount for

affordable homes, for the following six years

Planning Obligations

Legal agreements between a planning authority and a developer, or undertakings offered unilaterally

by a developer to ensure that specific works are carried out, payments made or other actions

undertaken which would otherwise be outside the scope of the planning permission. Often called

Section 106 (S106) obligations or contributions. The term legal agreements may embrace S106.

Regional Growth Fund

The Regional Growth Fund (RGF) is a £1.4bn fund operating across England from 2011 to 2014. It

supports projects and programmes that lever private sector investment creating economic growth and

sustainable employment

Renewable Energy

Energy generated from sources which are non-finite or can be replenished. Includes solar power, wind

energy, power generated from waste, biomass etc.

Section 106 (S106) Contributions

See Planning Obligations

Social Rent

Social rented housing is owned by local authorities and private registered providers (as defined in

section 80 of the Housing and Regeneration Act 2008), for which guideline target rents are determined

through the national rent regime. It may also be owned by other persons and provided under

equivalent rental arrangements to the above, as agreed with the local authority or with the Homes and

Communities Agency.

Use Classes and ‘Use’

The Town and Country Planning (Use Classes) Order, 1987, a statutory order made under planning

legislation, which groups land uses into different categories (called use classes). Change of within a

use class and some changes between classes do not require planning permission. Please note that

the definition of ‘use’ within the CIL regulations is meant in its wider sense and not in terms of the use

classes e.g. whilst a supermarket and a shop selling clothes are the same use in terms of the use


class system i.e. A1 – they are clearly a different use in terms of the CIL regulations as a store selling

only clothes is different from a store selling predominantly food.

community infrastructure levy economic viability...

Documents