Affordable Housing Policies into Practice Louise Dwelly Housing

Affordable Housing: Policies into Practice Louise Dwelly Housing Strategy & Enabling Manager October 2004

Why Training Now? • Policy in place for a year • Need for better understanding of how officers are using and developing the policy in practice • An understanding of how we look at scheme viability and how the negotiation process works is becoming more critical

Training Objectives • Understand the policy context for negotiating community benefits • Review the policy provisions • Achieve a better understanding of how the negotiation procedure works in practice • Understand the importance of development economics

We are losing homes. . • • • Gabbons Nursery 50 -75 affordable Block A maritime centre 4 Stary Dom 4 Poltair Road Penryn 15 Sandy Cove Porthtowan 10 Total 83 -108 affordable homes not approved

National Policy Context • Main mechanism is section 106 of the Town & Country Planning Act 1990 (section 106 agreements) • Rules about what benefits can be negotiated (reasonable and directly related) • Circular 6/98 deals with affordable housing. Must “seek to negotiate” and must have regard to financial viability • Fundamental review of policy guidance taking place

Carrick Policy (recap) • Thresholds (15 urban and 2 rural) • Targets – 35% Truro (20% rent, 15% intermediate) – 40% Falmouth-Penryn (20% rent and intermediate) – 50% rural (20% rent and 30% intermediate) • Intermediate includes low cost for sale, shared equity and key worker housing

BUT there is more flexibility than you think. . . • Provision can also be off site or a financial contribution in some circumstances • The targets can be varied if more than 50% is affordable • Provisions will most often be affected by whethere is any public subsidy

The Money Question • Affordable housing without grant • The local context • Grant free but not everywhere all of the time • Public subsidy is needed to deliver the Council’s 60 homes target and to deliver all the s 106 opportunities • Subsidy must come from somewhere (Gvnmt, Carrick, developer)

Sources of Funding • Housing Corporation (£ 2 -3 million over 2 years) 50 homes • Carrick £ 500, 000 (CTSH) 8 -10 annually • Commuted sums £ 1. 6 million negotiated (26 homes but no money yet) • Subsidy of £ 60, 000 -75, 000 each

Options • Seek additional developer subsidy • Seek commuted sums on some developments to increase funding • Only target grant at strategic sites • RSLs can pay something towards homes where there is no grant but it means fewer homes. . .

What is Grant Free? • The payment reflects what a housing association can pay by way of a mortgage secured against future rental income • Rents are restricted by Gvnmt so. .

Grant Free Values 1 bed 2 person flat 46 m ££ 27, 358 2 bed 3 person flat 62 m £ 33, 302 2 bed 4 person house 76 m £ 34, 557 3 bed 5 person house 86 m £ 37, 437 4 bed 6 person house 101 m £ 41, 397

How we work • Pre-application contact • DC involve relevant officers for community benefits • Joint discussions, full policy requirement is starting point • Agree a final negotiating postion • Affordable housing unit gives formal response and works with legal services to draft / modify any s 106 obligation

What can affect what we ask for? • Economic viability • Abnormal costs (infrastructure, contamination) • Not a strategic site and limited grant • Area not suitable or already a concentration of affordable homes • High density flatted scheme which does not meet need • Other costly community benefits • Limited evidence of need

Understanding the cost of development (development economics) We can use a range of tools: • Developers’ financial appraisals • Secondary data (house prices/land values) • External technical expertise • The Development Economics Toolkit

The Development Economics Toolkit • Developed by 3 Dragons and Nottingham Trent University for GLA • Carrick (supported by Cornwall partners) developing first rural version • Under development for a year and now in use • Consultation with developers and housing associations complete

Purpose of Toolkit • Provides information about the economics of residential development proposals • Shows impact of affordable housing requirement • Site area/number of dwellings is the only ‘MUST HAVE’ information • Aid to decision making - does not make decisions!

Basis of Toolkit • Residual value approach • Residual is value less costs • Takes account of availability of public subsidy • Land value is not an ‘input’

Revenue and costs REVENUE COSTS • Market units X market value • Affordable element TCI (less on costs) for social rent and shared ownership % of value for Equity Share and Low Cost Sale Capitalised rental value for sub-market rent • • Build costs Infrastructure costs Professional fees Overheads/finance costs • Marketing costs • Contribution to developer

What ifs……. . . Can test for…. . . • % different types and tenures affordable housing • +/- Density • +/- Market value • Alternative planning obligations

More what ifs……. . . Can test for • Exceptional development costs • Alternative %TCI and with/without grant (and different % share for SO) • Alternatives for Equity Share, Low Cost Sale and Sub-Market Rent • Range of assumptions about costs

Lessons Learnt • Community benefits is a process of negotiation • Robust policies help but there is always that rogue appeal decision • Flexibility is most often needed around difficult sites and grant availability • The involvement of members and the community in understanding specific sites is crucial to develop consensus and support