An interesting case demonstrating the difficulties with viability of s106 contributions and affordable housing delivery on complex brownfield sites where costs are high and an alternative use value fallback is present.
The existing site accommodated three vacant commercial buildings in Wandsworth with total GIA 1136 m2 and an existing flat. The site benefited from an existing consent for demolition and replacement with a 9 residential units and 643 m2 of commercial space.
The proposed development was for a different comprehensive redevelopment of the site into 22 flats, creating 1,296 m2 of residential space but no commercial.
Local policy suggested an 8 unit contribution as the new application was over 10 units (and therefore classed as ‘major development’ under NPPD Para 63).
However, the costs of demolishing and building out this complex site were considerably above average when fully assessed by quantity surveyors, the CIL bill was substantial as the building had not been in use for some time, and the existing use value, comprising three substantial commercial buildings and an existing flat, was significant.
Our initial report demonstrated significant viability issues. This was contested primarily on the basis of the value of the existing site – as often occurs on complex brownfield developments.
Extensive discussions took place with the council’s viability consultant as further information came to light throughout the planning process.
Substantial additional structural and sustainability construction features were required after consultation with the council and structural engineers, adding to the higher than average costs.
In addition, the council’s consultants contested the Red Book valuation of the existing site’s value on several bases. Further they were originally not aware of the existing permission providing a substantial fallback in terms of the value of the existing consent for residential conversion.
With further discussion and collaboration between ourselves and the council’s consultants we achieved agreement on the complex issue of the benchmark land value based on the existing consent’s ‘alternative use value’, circumnavigating differences of opinion over the Red Book valuation’s methodology. It was also agreed to include the additional costs which had been fully evidenced through collaboration with the council and structural engineers.
Ultimately this resulted in the council’s initial position of a £1 million surplus (translating to 5 affordable units and £100,000 in financial contributions being sought) being further reduced to a £115,000 surplus (2 affordable units) based on full examination of the site’s history, constraints and characteristics.
This reduction was agreed on the basis of an appropriate viability review mechanism, and agreement that the 2 units could be commuted to a £100,000 financial contribution if there was no interest in the 2 units from any of the council’s 10 registered providers. This provided maximum flexibility at the application stage, while ensuring that any improvement in viability would translate into additional contributions for the community at a later date.
The application was approved at planning committee as balancing the viability and deliverability of the site against the council’s aims, achieving a reasonable compromise that allowed all interests to be advanced.
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