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Frequently Asked Questions about Section 106 affordable housing viability reports

 

When should I obtain a Section 106 viability report?

The earlier the better (although it is never too late). All planning policies requiring Section 106 Affordable Housing are subject to viability, so it’s best to raise viability concerns at the first opportunity. Viability information can be used to justify higher densities where the economics of the scheme are challenging. We recommend including a Section 106 viability report with your planning application; however, a Section 106 viability report can be submitted at any time.

What do I need to tell you?

We need to know the address of your scheme, the name of the Local Planning Authority, how much you paid for the site, and the gross and net areas of the proposed development. Armed with that information we can quickly discover the extent of the policy requirement for affordable housing and give you a scoping opinion on Section 106 scheme viability.

I am being asked for an Affordable Housing Statement in order to validate my planning application. Can you help?

Many LPAs now ask for an Affordable Housing Statement to be submitted with a planning application. This is not the same as a Viability Report. It is simply a calculation of the greatest contribution towards affordable housing that can be required by adopted planning policies. We can prepare a Statement at low cost, whilst at the same time advising if it’s worth preparing a Viability Report to reduce or eliminate the amount of affordable housing you have to provide.

I already have planning permission, can you help?

Yes, we can produce a Section 106 viability report and ask the Planning Department to reconsider the obligations.

Have a look at our S106 Renegotiation page for more detailed information.

Are the Thresholds for providing Affordable Housing the same everywhere?

Each Local Planning Authority has its own Affordable Housing Threshold.

HOWEVER following the Government’s success in the Appeal Court case Secretary of State for Communities and Government v West Berkshire District Council and Reading Borough Council: [2016] EWCA Civ 441, new planning guidance has been issued which reintroduces the 10 unit threshold below which developer contributions (including affordable housing and tariff style contributions) should not be sought. See para 31 on this link for the detail:

http://planningguidance.communities.gov.uk

The present position is that this guidance is to be balanced against the provisions of each Local Plan, initially by the decision making Local Planning Authority (LPA), and then on appeal by the Planning Inspectorate.

The current picture is mixed; with some LPAs choosing to follow the new Guidance, yet others resisting, and following the conflicting provisions of their own Local Plan.

The run of planning appeal cases provides a mixed picture with the WMS being upheld in the majority of cases. LPAs often succeed when their justification for departing from the 10-unit threshold goes unchallenged by the appellant.

S106 Management have accomplished a number of planning appeal successes by adopting a twin track approach, demonstrating both non-viability and challenging the evidence relied upon by the LPA to justify departure from the threshold.

Given the present mixed picture, we would be happy to discuss your project with you, clarify the Affordable Housing threshold adopted by your LPA, and advise whether a viability report will be necessary and helpful.

Whatever your LPAs Affordable Housing Threshold, we will be pleased to help by sharing our expertise and producing a Viability Report to support your planning application or appeal.

Can you help with the Community Infrastructure Levy?

There are a number of reliefs and abatements that can be used to mitigate the cost of CIL.

The most important relief being for existing buildings. This relief is conditional upon the existing building having been in use for at least 6 months in the 3 years prior to the date of the planning approval.

There are further reliefs for self-builders, charities, and social housing.

It is important to complete the CIL forms correctly and to inform the Planning Authority 14 days before any type of work is commenced on site, in order to avoid losing rights to pay by instalments, and or pay penalty interest.

S106 Managment offer a fixed fee service for completing your CIL forms; please telephone to discuss our service in this regard.

The cost of CIL is treated as an allowable expense in the overall viability of the project and so its impact may reduce the extent of your Affordable Housing obligations.

Will a Section 106 viability report regarding Affordable Housing adversely affect my relationship with the Local Planning Department?

There is no reason to think this; all Affordable Housing policies are dependent on viability, so submitting a Section 106 viability report is expected and often compulsory. It is no different from submitting an ecological or archaeological report; it’s just ticking another box.

Is it sensible to apply for permission at a density that is one dwelling below my LPA’s Affordable Housing Threshold?

Not unless the net profit after interest, fees and all other costs is above 17.5%. If it is below 17.5% then you should work with us to tailor the scheme to profit rather than a specific number of units.

Can I complete a Section 106 viability report myself?

The common perception is to see this as an accountancy based exercise; many people make this mistake, and prejudice their case by doing so.

The creation of the report is only one part of the negotiation process.

It is essential to also understand the legislative and non-statutory framework within which viability negotiations are conducted by LPAs. Whilst some LPAs ‘vet’ Viability Studies in-house, most refer viability reporting to external consultants at the applicant’s expense.

S106 Management have successfully concluded viability negotiations with all the major consultants who the LPAs employ to vet Viability Studies. You can therefore take advantage of our unique experience in this area, and avoid a steep learning curve.

The structure of our Viability Reports includes many costs that are omitted from a simplistic examination, accordingly our reports give a more realistic (lower) view of profitability.

Our Section 106 Viability Reports are welcomed by Planning Departments because they are independent and properly documented.

A useful analogy might be: ‘would I fix my own car?’

I have already submitted a viability report but now I’m stuck, what can I do now?

We quite often help clients who find themselves in this position; give us a ring and we’ll see how we can assist.

Is it correct that my Architect / Planning Consultant can carry out the Section 106 viability report?

This may be the case , but always check they have the necessary experience and track record. We are always happy to work with your existing team.

How long does it take to produce a Section 106 Affordable Housing report?

We can give you a scoping opinion (for free) over the phone. We aim to turn full Section 106 viability reports around in 10 working days.

Will the Section 106 viability report delay the issue of a planning consent?

Not if you submit the Section 106 viability report with the planning application, if you are midway through the planning process it may delay proceedings by a further 3 to 4 weeks.

Who at the Local Authority decides whether to agree the Section 106 viability report?

The practice varies rather; some LPAs refer our Viability Reports to their Affordable Housing Department for a decision, and others use the District Valuer or Third Party Consultants. Our service includes negotiation with those advising the LPA.

Our wealth of experience is invaluable in these negotiations.

What is a Section 106 agreement?

This is an agreement with the local planning authority in which you agree to pay money or provide affordable housing in order to secure the grant of planning permission. Agreements commonly also cover contributions to education, open space and wider community benefits. All these requests have to comply with the CIL (Community Infrastructure Levy) regulations, and we are experienced in auditing compliance. If you are unsure if these requests are legally due, please contact us.

What is Affordable Housing?

There are three types of Section 106 affordable housing:

• Social Rent; usually based on 25% of average earnings. This has a sub construction cost value.

• Intermediate Housing; -which often takes the form of ‘shared ownership’ lease (more valuable).

• Affordable Rent;- which is a rent equal to 80% of open market rent (but limited to the Local Area Housing Allowance which is the maximum rent level for Housing Benefit).

Although the issue is rather more complex, these points will give you the basic idea.

I am being asked for a unilateral undertaking. What can be done about this?

Unilateral Undertakings are almost identical to Section 106 Agreements, so our the answers apply to both.

We can help you review the obligations and agree the wording of the S106 agreement or Unilateral Undertaking, even if you don’t need a viability report.

What if the planners don’t agree with the submitted Section 106 viability report?

There is always the opportunity to negotiate with planners; by offering to provide different types, blends and quantities of Affordable Housing and/ or  Commuted Payments  in order to both create the most value for you, and satisfy the LPA.

If your LPA are being unreasonableyou can always accept take the best Section 106 agreement you can negotiate, and later submit a duplicate application and appeal if need be.

What is a Commuted payment?

This is where you pay a cash sum, calculated by planning policy, to pay for Section 106 Affordable Housing away from your own site.

Can I use a Section 106 viability report to reduce other Section 106 obligations such as Education, Recreation etc.

Yes, these can be resisted on the grounds of viability and may be demonstrated to be unnecessary, by reference to CIL Regulations 122 and 123. These rules require that the contributions must be necessary, directly related and proportionate to the development. No more than 5 contributions can be paid towards any single infrastructure project. We will be pleased to assist if you are in doubt regarding the legitimacy of the requests made by your LPA.

How much does a Section 106 Viability Report cost?

Every job is different, but the majority of our Section 106 Affordable Housing Viability Reports cost £2,500–£7,500. We only adopt cases where we believe we can save you more than our fee. A free preliminary chat will normally establish if we can help you, so why not give us a call?