“Knowle developer will only pay for affordable housing if profits exceed expectations” – yeah, right!

Over 100 flats selling at around £400,000 or more with massive service charges. Will they make a profit? Of course not – developers never do in these circumstances!

“PegasusLife had argued its proposals should be classed under ‘residential institutions’ – branded ‘C2’ in planning terms – meaning it would not need to make a contribution.

Landowner East Devon District Council (EDDC) had contested it should be classed as C3 for housing, meaning there would normally be a payment towards off-site affordable housing.

An agreement between the parties, revealed last week, shows there is an ‘overage’ clause, so PegasusLife would only pay out if the scheme exceeds its forecasts.

An EDDC spokeswoman said: “PegasusLife has submitted viability evidence to demonstrate that the scheme would not be viable if it were to provide affordable housing, which the council has accepted.

“The council has had this information independently assessed by specialists in development viability who have confirmed that the development cannot afford to meet the council’s policy requirements for affordable housing.

“Accordingly, the council has required an overage clause to be included within the section 106 agreement, which will seek to obtain a contribution towards affordable housing in the event that the scheme is more profitable than currently envisaged.

“This approach has been used before and supported by planning inspectors at appeal. If the development is found to be C2 by the inspector then there would be no affordable housing required to be provided.

“However, the Knowle inquiry is still ongoing and is timetabled to conclude today (Tuesday).

“We anticipate receiving a final decision from the inspector in January.”

The section 106 agreement shows that the land is valued at £5.8million.

The deal with PegasusLife is worth £7.5million to EDDC, which will put the cash towards its £10million relocation to Exmouth and Honiton.

The dispute about whether the development should be classed as C2 or C3, as well as concerns about overdevelopment and the impact on the site’s listed summerhouse, led councillors to refuse planning permission last December.

The developer took its appeal to the Planning Inspectorate.

The inspector, Michael Boniface, is set to make a site visit this afternoon to inform his decision.”

http://www.sidmouthherald.co.uk/news/knowle-developer-will-only-pay-for-affordable-housing-if-profits-exceed-expectations-1-5308352

Developers, magic money trees and (un)affordable housing

Government thinks 20% profit is acceptable for developers.

We all know that, as developers make their case to cut affordable homes on a development by development basis, and not on aggregate figures, they can make numbers tell any story.

Seems weird that, with this system, as so many developments don’t make enough money to fund affordable homes, their profits soar, their directors get bigger and bigger bonuses and their shareholders get higher and higher dividends.

It’s a magic money tree!

“The countryside is facing a shortfall of 33,000 affordable homes over the next five years despite builders making record profits at a time of rising rural homelessness.

Profits at Britain’s three biggest builders have quadrupled since 2012 to £2.2 billion, yet they regularly cite financial constraints when cutting affordable homes in developments. Builders miss targets for affordable homes in the countryside by 18 houses a day, research by the Campaign to Protect Rural England (CPRE) shows.

Profits at Barratt Developments, Britain’s biggest developer, increased almost sevenfold from £100 million in 2012 to £682 million last year. Meanwhile, the number of affordable homes fell from 23 per cent of the total built in 2012 to 17 per cent last year.

Developers use “viability studies” under planning laws to pressure local authorities into cutting the requirement for affordable homes. The reports are kept confidential, on commercial grounds, but documents seen by The Times show that officials from the Department for Communities and Local Government (DCLG) ruled that 20 per cent profit was a “reasonable” margin for a developer. They backed a builder’s attempt to cut the number of affordable homes at a development in Gloucestershire to safeguard that return.

Sajid Javid, the communities secretary, has said that failing to fix Britain’s “broken housing market . . . would be nothing less than an act of intergenerational betrayal”.

Research by the CPRE found that the government overruled councils fighting house builders in 17 out of 23 appeals since 2013. Matt Thomson, the CPRE’s head of planning, said developers had councils “over a barrel”. “The developers will say, ‘Either you give us the 20 per cent profit we need, otherwise we won’t build the houses’,” he said. “It’s just extortion at the end of the day.”

The charity analysed more than 60 local plans, which are council blueprints for new housing, and found that the average rural authority needed 68 per cent of new homes to be affordable. Affordable housing includes shared ownership schemes, council houses and properties owned by housing associations which are rented at no more than 80 per cent of the market rate.

In practice, the councils cut the official requirement to just 29 per cent affordable, on the ground that developers would never agree to 68 per cent. Even that has proven unachievable. Just 26 per cent of new homes in the countryside were classed as affordable over the past three years. The average rural authority is short of 46 affordable homes a year. Across 145 rural authorities in England that is a shortfall of 6,670 homes a year.

A separate report by the Institute for Public Policy Research found that 6,270 rural households became homeless in 2016, part of a 40 per cent rise in rough sleeping since 2010. The centre-left think thank partly blamed “shortages in affordable homes”.

Polly Neate, the head of Shelter, a charity for the homeless, said the crisis would only get worse “if we keep letting developers off the hook”.

The Home Builders Federation, which represents developers, said local authorities “should be realistic”. “Making projects unviable reduces overall housing supply, including the supply of more affordable housing,” Andrew Whitaker, its planning director, said.

Georgina Butler, head of affordable housing at Barratt, said the company was “absolutely committed to delivering the homes of all types that the country needs”.

A spokesman for the DCLG said almost 333,000 affordable homes had been built since 2010, more than 102,000 in rural local authorities.

A funding crisis in social housing will continue unless the government “breaks with the past” to provide financial backing for new affordable homes, the head of an influential housing sector body will say today.

Billions of pounds of taxpayers’ money could be saved by building social housing instead of channelling housing benefit to private landlords, David Orr, chief executive of the National Housing Federation, will tell the organisation’s annual conference.

The government decided in 2010 that no further public money would be made available to finance social housing, which provides accommodation at below-market rents to those on low incomes.

Britain needs to build about 250,000 new homes a year to cope with an existing shortage and a growing population, but only 141,000 homes were built last year.

About a million families are on the housing waiting list, said the NHF, which represents housing associations and social landlords.

In a report published today, the NHF says that the government is now spending “more than ever” on housing benefit to accommodate people in private rentals instead of cheaper social homes, which cost £21 a week less per person.

The amount of housing benefit channelled to private landlords almost doubled in the last decade to £9.1 billion.

“This is poor value for the taxpayer and has a knock-on effect on everyone struggling to rent or buy,” the NHF said.”

Source: Times (pay wall)

Developer Bovis too poor to finish Axminster estate – and “steep slopes” came as a surprise (and Owl says ‘I told you’!)

Owl predicted problems with this development LONG ago:
https://eastdevonwatch.org/2016/04/04/axminster-regeneration/

Recall the site was acquired below market value when Axminster Carpets got into difficulty.

And it seems that Bovis has its own troubles:
https://eastdevonwatch.org/2017/04/30/bovis-slow-down-will-hit-east-devon-hard/

Although again Owl drew attention to another problem affecting house sales on the site:
https://eastdevonwatch.org/2016/12/23/axminster-and-cranbrook-slums-of-the-future-says-councillor-hull-whilst-councillor-moulding-says-nothing/

So, it’s hardly surprising we find that Bovis blames everyone but themselves for their so- called plight – though its directors are probably not too worried about their bonuses:
http://www.constructionenquirer.com/2017/06/21/new-bovis-homes-boss-buys-extra-2m-shares/

“HOUSE building on the Bovis Homes Cloakham Lawn estate could cease unless planning conditions are removed or eased.

Bovis Homes says the scheme is in the process of stalling and, unless it can be brought back into viability, the company will have “no option but to cease work and mothball the development”.

But Axminster Town Council feels it is an attempt by the developer “to wriggle out of its commitments”, with district councillor Ian Hall saying: “‘Trying it on’ comes to mind.”

Bovis Homes has submitted a planning application to East Devon District Council (EDDC) to vary the Section 106 agreement (a set level of affordable housing and contributions towards the local infrastructure and facilities).

The development includes permission for up to 400 dwellings, and the company celebrated the second anniversary of its on-site sales office in September last year.

But a summary of an independent viability assessment, produced by chartered surveyor Belvedere Vantage Ltd, says: “The local market in Axminster has proved very difficult, with interest in the first phase of the development having slowed significantly, resulting in a large number of completed unsold ‘standing units’.”

The summary also referred to a number of physical constraints at the site, and “potential abnormal costs” associated with the constraints, which started to become clear during detailed site investigations after outline planning permission had been given.

Constraints include areas with very steep slopes, a flood plain boundary, two distinct drainage catchments, a watercourse running through the site, the need to maintain access to existing leisure facilities.

The negative impacts, including an inability to plan the scheme effectively, of a tree preservation order are also mentioned.

Axminster Rural district councillor Ian Hall, having declared an interest as he is the chairman of Cloakham Lawn Sports Centre (a Bovis Homes tenant), said in a formal response: “I have absolutely no sympathy.

“This land was purchased by Bovis for £2.9m cheaper than the market price when the failing Axminster Carpets Ltd was winding up.

“Bovis representatives (who were the strong arm of Bovis during the purchase of the land) were very aware of the agreements and were more than happy to proceed with the bargain of the decade.

“I am not one to make unnecessary fuss, although, on this issue, I will not compromise.

“ ‘Trying it on’ comes to mind.”

The independent viability assessment is confidential because it contains commercially sensible information, which is not included in the publicly available summary.

Axminster Town Council has requested more detailed confidential information and, in its formal response to EDDC, said: “The town council objects to this application, which appears to be an attempt by the developer to wriggle out of its commitments.

“There is insufficient information on which to make a well-reasoned response.”

The town council requested a meeting with EDDC and the developer so that it would be able to “respond in the light of more detailed, commercially confidential information”.

The town council also requested a site meeting in the company of a planning officer.

Town clerk Hilary Kirkcaldie said EDDC replied it could not share confidential information, but had appointed an independent viability consultant.

EDDC also expressed a willingness to host a site visit, which is yet to be arranged.

In her formal response to the application, EDDC housing strategy officer Melissa Wall said: “We are disappointed that the applicants have not approached the council before submitting their application to vary the S106 contributions to discuss their viability concerns.

“We are open to suggestions regarding changing the tenure and numbers of affordable units in order to assist viability.

“We are hopeful that agreement can be reached between the council and the applicant to ensure that the development can support some form of affordable housing.”

Bovis Homes would not say how many houses have been built and how many are under construction – nor would the company comment on Councillor Hall’s claims.

A spokesperson said: “We cannot comment on live viability applications but we will continue to work closely with the local authorities to deliver the new development at Axm- inster, which is providing much-needed new homes as well as an economic boost and jobs for the area.”

https://www.viewnews.co.uk/housing-development-axminster-stop/

Corruption, absolute corruption, developers and councils

BUT THIS BLOG AND OTHERS HAVE BEEN SAYING THIS FOR YEARS AND YEARS AND YEARS AND YEARS!

HEAD … BRICK WALL … HEAD … BRICK WALL

Here are just a few recent East Devon Watch articles:

https://eastdevonwatch.org/2016/12/16/tell-eddc-what-you-want-section-106-money-spent-on-so-they-can-ignore-you-and-spend-it-on-what-they-want/

https://eastdevonwatch.org/2016/11/24/section-106-scandal-new-controls-and-a-surprising-revelation-from-ceo-mark-williams/

https://eastdevonwatch.org/2016/11/14/the-great-eddc-section-106-scandal-of-2016-and-probably-earlier-years/

https://eastdevonwatch.org/2014/11/28/another-loophole-to-avoid-section-106-payments/

https://eastdevonwatch.org/2014/10/23/developers-councils-and-section-106-the-shocking-truth/

and the BBC has only just discovered it!

“The council that ran the Grenfell Tower block struck deals worth nearly £50m last year to allow developers to avoid having to build affordable homes, research for BBC News shows.

Kensington and Chelsea’s own analysis shows it has built a fraction of the social housing the borough needs.

Developers can pay a fee if they can convince the council that affordable homes would make their plans unviable.

The council said it struggled to build affordable homes in a crowded area.
Kensington and Chelsea has been severely criticised for its failures over Grenfell Tower, including allegations that the regeneration of the tower was done on the cheap and that survivors of the blaze were not properly cared for.

At least 80 people died in the fire.

The disaster, in one of the richest areas in the country, has also thrown a spotlight on the council’s attitude towards its poorest residents.

Huge shortfall

The council’s policy is for half of homes in large housing schemes to be available for rent or sale at below market rates.

The official target is to build 200 affordable units – flats or houses – each year between 2011 and 2021.

But the council’s own figures show that since 2011-12, just 336 units have been built; in 2012-13, just four were completed.

At the same time, Kensington and Chelsea struck deals with developers to pay it nearly £60m.

Since 2011, the council has agreed payments worth £59.7m, in what are known as Section 106 agreements.

The council is allowed to charge developers a fee if their scheme would ordinarily be liable to include social housing but its backers can convince officials that to do so would make the proposal unviable.

That headline figure includes £47.3m in 2016 alone.

The figures have been calculated for BBC News by EG, a property consultancy firm, whose work includes researching planning committee reports for Section 106 payments.

Senior analyst Graham Shone said payment to the council had undergone a “step change” on previous years.

“Maybe the council is a bit more receptive to those kinds of agreements going through as a way to encourage development across the borough,” he said.

The council will gain £12.1m instead of affordable housing at Knightsbridge station

K1 development, Knightsbridge

Developers Chelsfield plan to “reinvigorate, restore and celebrate” the block above Knightsbridge Tube station.

The design includes retail outlets at street level, new offices, 35 residential apartments, an underground car park and a rooftop garden and restaurant.

Given the size of the development, to comply with the council’s own policy, the scheme should include affordable housing.

However, in their planning application, the architects say: “The size of units [flats] are larger than what would normally be associated with affordable housing based on the London Housing Design Guide.”

They also argue the service charge on the flats “would far exceed what would be a sustainable level for affordable housing”.

And while they had considered creating another lift to accommodate affordable housing, this would “compromise” the retail units on the ground floor.

A mix of private and affordable homes, they say, is therefore “not viable”.
The council accepted the arguments, passed the scheme, and will receive £12.1m in lieu of affordable housing at the development.

The payments are meant to help the council provide affordable housing in other parts of the borough or to renovate existing stock.

A paper prepared for the council’s cabinet last year shows that of the nearly £21m the council has received since 2009-10 for affordable homes, £9.2m remains unspent.

Developers can also pay fees to off-set other impacts of their schemes. And the same paper shows that of the total £57.3m that Kensington and Chelsea has received since 2009-10, £36.7m has still not been spent.

None of the developers’ contributions has been used to improve air quality, libraries, sports facilities or healthcare, and very little has been spent on employment initiatives or children’s playgrounds.

The leader of Kensington’s Labour group says he is shocked by the lack of new affordable homes

Robert Atkinson, head of the Labour group at Kensington and Chelsea, said he was shocked by the amount of money the council was receiving and how few affordable homes were being built.

“One of the beauties of living in London is you have a balanced population, and I do think we have a duty not to produce the prettiest ghost town in Western Europe.

“Our first loyalty should be to maintaining and strengthening our communities, and we have fallen down on that job terribly.”

The need for affordable housing in Kensington and Chelsea is acute.

A Freedom of Information request submitted by the BBC last year showed the council had spent £28m providing temporary accommodation to homeless residents in 2015-16, a figure that has doubled in five years.

Almost three-quarters of those people are being housed outside the borough – the highest proportion in London.

The council said that “as the smallest London borough”, with the second highest population density in England and Wales and 4,000 listed buildings, “the borough only has a limited capacity to deliver housing”.

A spokesman said its policy of allowing developers to negotiate on affordable housing “stems from government policy”.

“The council scrutinises any viability information provided by the applicants in detail and in some cases is able to secure higher proportions than those proposed by applicants,” he added.”

http://www.bbc.co.uk/news/uk-40643072

“Inspector to decide if developer should pay more Sidmouth community cash”

Recall that PegasusLife is calling it’s plans for the Knowle “assisted living accommodation”. Why? Because it doesn’t then have to contribute to affordable housing.

Does anyone recall EDDC making a fuss about that? No – they left it to local objectors to point it out!

“A government planning inspector will decide whether a developer will have to pay a share of its profits from 36 proposed sheltered apartments to the public coffers.

The matter was the subject of an inquiry this week after Churchill Retirement Living and East Devon District Council (EDDC) could not agree terms for an ‘overage’ clause.

Churchill hopes to demolish the former Green Close care home in Drakes Avenue to make way for the development. The firm launched an appeal due to non-determination of its application.

The delay in EDDC deciding the fate of the scheme was due to officers trying to apply an ‘overage’ clause that would require Churchill to pay up if its profits exceed current expectations.

EDDC documents argue plans to create the apartments for the elderly should be worth nearly £1million to the Sidmouth community – but the developer has shown it is ‘unviable’ to pay more than £41,000.

Churchill’s five-figure offer towards off-site ‘affordable’ housing was last year slammed as an ‘insult to Sidmouth’ by town councillors, who suggested the developer should pay at least £360,000.

Papers submitted to the appeal process from EDDC say there is a policy expectation that half of the site should be provided as ‘affordable’ housing and that there is a ‘substantial’ need for one- and two-bedroom units in Sidmouth.

If 18 ‘affordable’ homes cannot be provided on-site, a payment of £935,201 would be expected so the properties can be built elsewhere.

Churchill said a viability assessment showed building ‘affordable’ homes on the site was ‘impractical’ and ‘unrealistic’.

It added: “It has been demonstrated that the application development is not sufficiently viable to permit the imposition of any affordable housing or planning gain contributions above £41,208.”

An EDDC spokeswoman said: “Unfortunately, the development is not sufficiently viable to pay this [£935,201] sum and, following an independent assessment of the viability of the scheme, it was reluctantly accepted that the scheme could only afford to pay £41,208 towards affordable housing.

“Under government guidance, we are required to reduce our requirements where a development is unviable and so we have no real choice but to accept this position.”

EDDC also expected Churchill to pay £22,536 for habitat mitigation, plus an £18,400 public open space contribution. The total is nearly £1million.

At the hearing on Wednesday, a representative for the developer said a viability report showed it could not offer more than £41,208 if it wanted a competitive return of 20 per cent.

He argued such developments, both locally and nationally, did not have an ‘overage’ clause like the one proposed and added that it was not in line with national guidelines.

“We need to ensure there are competitive returns for the developer and the landowner,” said the representative.

“If the developer, through his own skill or from fortuitous circumstances, makes a larger profit than intended, then the council wants to have a proportion of it and, if they are not so fortunate and make less than 20 per cent, the entire downside is to be borne by the developer.”

Town councillor Ian Barlow argued that the £41,208 contribution was only agreed to because councillors were told it was subject to an ‘overage’ clause. He added: “If they make an obscene amount of money from our community, then they should put it back into the community. They are now saying it is not plausible.

“We only deal with common sense.

“Theoretically, if someone builds a £5million-ish place and they are only giving around £41,000 back, at the end of the day, that does not seem right.”

Cllr Barlow argued that he found it hard to believe such a successful company would make an investment which was not financially viable.”

http://www.sidmouthherald.co.uk/news/inspector-to-decide-if-developer-should-pay-more-sidmouth-community-cash-1-5100503

Oh, those poor, poor developers with their begging bowls

“Documents show plans to create 36 sheltered apartments for the elderly should be worth nearly £1million to the Sidmouth community – but the developer has shown it is ‘unviable’ to pay more than £41,000.

Churchill Retirement Living hopes to demolish the former Green Close care home in Drakes Avenue to make way for the development.

Its five-figure offer towards off-site ‘affordable’ housing was slammed as an ‘insult to Sidmouth’ by town councillors, who suggested the developer should pay at least £360,000.

After failing to reach an agreement with East Devon District Council (EDDC), Churchill launched an appeal due to non-determination of its application.

Papers submitted to the appeal process from EDDC say there is a policy expectation that half of the site should be provided as ‘affordable’ housing and that there is a ‘substantial’ need for one- and two-bedroom units in Sidmouth.

If 18 ‘affordable’ homes cannot be provided on-site, a payment of £935,201 would be expected so the properties can be built elsewhere.

Churchill said a viability assessment showed building ‘affordable’ homes on the site was ‘impractical’ and ‘unrealistic’.

It added: “It has been demonstrated that the application development is not sufficiently viable to permit the imposition of any affordable housing or planning gain contributions above £41,208.”

An EDDC spokeswoman said: “Unfortunately, the development is not sufficiently viable to pay this [£935,201] sum and, following an independent assessment of the viability of the scheme, it was reluctantly accepted that the scheme could only afford to pay £41,208 towards affordable housing.

“Under government guidance, we are required to reduce our requirements where a development is unviable and so we have no real choice but to accept this position.”

EDDC also expected Churchill to pay £22,536 for habitat mitigation, plus an £18,400 public open space contribution. The total is nearly £1million.

The delay in EDDC deciding the fate of the application was due to officers trying to apply an ‘overage’ clause that would require Churchill to pay up if its profits exceed current expectations.

A Planning Inspectorate spokesman confirmed that the appeal had been validated and it is in discussion with both parties.”

http://www.sidmouthherald.co.uk/news/eddc-wants-1million-in-community-cash-developer-offers-40-000-1-5084604