1 of 21

1. Development Appraisal: Residual Land Valuation Estimates;

and

2. Developer Contributions [S106 & CIL]

16^th March 2024

Professor Stephen Walker

1

12/03/2024

Professor Stephen Walker

E: swalker@brookes.ac.uk

E: Stephen9.walker@yahoo.com

Tel: 07983383544

2 of 21

Professor Stephen Walker

2

12/03/2024

Recap on previous session [24^th February 2024]……

3 of 21

The Development Appraisal Formulae…

Professor Stephen Walker

3

12/03/2024

GDV* = Land Price + Build Costs + Profit

Identifies the “COST” Items of development

PROFIT = GDV* – (Land Price + Build Costs)

Developer has Bought the Land

LAND VALUE = GDV* – (Build Costs + Profit)

Developer Wants to know the maximum it could pay for Land.

* = Gross Development Value

1

2

3

4 of 21

Professor Stephen Walker

4

12/03/2024

Gross Development Value

Build

Costs

Fees

Interest Charges

Profit

Gross

Residual Land Value

“Cost” Elements of the Gross Development Value

Net Land Budget

S106/CIL

AH

5 of 21

Professor Stephen Walker

5

12/03/2024

Gross Development Value [100]

Build Costs, Preliminaries, External Works [50]

Professional Fees [4]

Finance [3]

Profit [20]

Gross Land Bid Budget [23]

Finance + Fees

SDL Tax

AH

S106

CIL

Net Land Bid Budget [15]

RLV Appraisal Methodology:

Stripping out “costs” to reveal the land bid budget

6 of 21

Professor Stephen Walker

6

12/03/2024

Gross

Development

Value

Gross Land Bid Budget

Finance and Fees

Profit

Build Costs

Net Land Bid Budget

Land Service Costs

Other S106 Costs & CIL

Affordable Housing

BMLV

Development Appraisal Summary: Key Components

7 of 21

TOP UK Developers’ Gross Profit Margin [2001-2021]

Professor Stephen Walker

7

12/03/2024

8 of 21

Professor Stephen Walker

8

12/03/2024

Gross Profit Margin:

This rate of profit is the equivalent sum in site-based viability appraisals.

As expected it reveals the property cycle, especially the impact of the financial crash which affected some house-builders much more than others.

The slide reveals the blended profit rate that is typically accepted for site-based viability appraisals at c. 16.5% of GDV. On this basis, a good number of the largest housebuilders have been booking higher rates prior to and after the financial crash [2001-2008; 2014-2021] than this threshold; and some significantly higher!!!

How is this possible?

How to read the chart on Slide 7…

9 of 21

What are Developer Contributions?

Planning tools that can be used to secure financial and non-financial contributions to provide infrastructure to support new development and mitigate the impact of development locally.
Related to new housing development and its impact locally. For example, the need to improve the scope, capacity or accessibility of local provision in response to local population growth and changes.
Two types: Section 106 legal agreements (S106) and Community Infrastructure Levy (CIL)

9

12/03/2024

10 of 21

Getting started: Who is responsible for planning?

Unitary authorities: local planning separate legal entity
Two-tier council area: Local planning is delivered by District Councils in line with their adopted Local Plan and local priorities.
Combined authorities: in some areas have developed cross-border plans.
National Parks: are planning authorities in their own right.
Parish/Town Councils: If new housing growth occurs within their local areas, and if planning authority adopted CIL, these councils will receive a prescribed % of the CIL receipts.

10

12/03/2024

11 of 21

11

12/03/2024

ALL COUNCILS IN ENGLAND [333]*

County Councils [24]	UNITARY AUTHORITIES [128]
	London Boroughs [32]	Metropolitan Boroughs [36]	Unitary Councils [58]	Sui Generis [2]

District Councils [181]

Parish and Town Councils [c.10,000]

* Additionally there are ten National Parks Boards and a number of Combined Authorities

Organisation of Local Government in England

12 of 21

12

12/03/2024

National Planning Policy Context

Local Planning authorities governed by National Planning Policy Guidance.

A Local Planning Authorities adopted Local Plan is a statutory/legal document. It dictates how planning applications are judged and determined locally against its strategic goals and planning policy requirements.

You must understand it to navigate it. All LPA’s are required to have an up to date adopted Local Plan but only c. 40% of authorities in England currently have one. LPA’s are mandated to review and up-date plans every 5 years. This work is carried out by the plan- makers (not officers dealing with planning applications). Typically, LPA’s put out a call for evidence and therefore those responsible for libraries and archives need to understand the location and scale of new housing growth in their council area(s) so they can assess how such plans affect their service provision.

A regular and early engagement in the plan-making process is desirable since it cannot be assumed that all plan-makers attach the same priority to all infrastructure needs.

13 of 21

Differences between S106 and CIL

S106 funding

Bespoke: tailored to the local circumstance in each LPA
Legal agreements which are site specific and development dependent
Designed to mitigate the specific impacts arising from individual new developments
Cannot make a ‘bad application’ good
Cannot be used to resolve existing deficiencies.
Not flexible.
Can be subject of appeal.
Emulation is the by-word of their use.

CIL funding

Mandatory, non-negotiable payment on qualifying land uses. Fixed rate charge.
Non site specific & can be pooled
Can be used to address cumulative impacts arising from new developments
More flexible than S106 offering councils more discretion on how it is applied and allocated
Addresses local priorities
In qualifying areas, set proportions devolved. 25% in areas with Neighbourhood Plans & 15% in parish or town councils in localities where new development occurs
Presents opportunities for museums and arts to make their case for CIL funding.

13

12/03/2024

14 of 21

What is the key message?

Recognise the central role of the adopted Local Plan and specific planning policy stance of your LPA with regard to community, library, archive provision triggered by new housing growth. And the specific planning tools adopted by it to deliver such planning goals.
Find out what is happening in your local area. Has your planning authority adopted CIL?
Find out if your library/archive authority has engaged with respective Local Planning Departments to secure funding for Library and Archive service?
Search online for your local Infrastructure Funding Statement (IFS) to understand what funding is available, local priorities and the types of projects that are being funded in your local area.

14

12/03/2024

15 of 21

Libraries and developer contributions

Some library authorities have arrangements to collect S106 towards library provision from all of the districts in their area e.g., Oxfordshire CC.
Some districts regularly collect CIL for libraries in their area e.g., Suffolk CC.
But not all districts seek to secure S106 funding or allocate CIL fee income to libraries even if they have locally based services
Some CIL charging authorities allocate a % of CIL receipts to libraries. For Example:

South Oxfordshire DC allocates 50% of its CIL receipts to OCC for spending on libraries and education;
Bradford Metropolitan BC allocates 10% of the balance of CIL receipts, after Strategic CIL deposit, to libraries

Many authorities apply a ‘standard charge’ formula; while some use CIL to support projects on a one-off and case-by-case basis.

15

12/03/2024

Suffolk County Council for example is not a CIL charging authority but regularly collects CIL funding from local districts eg CIL funding for Mildenhall Library from West Suffolk.

Many library authorities using the original MLA standard charge formula of 30m2 per 1,000 population but with the cost of new provision based on local costs. And sometimes with the addition of stock costs and IT. For example Hants Library and Information Services. They also recognize new build and extensions may not be the best option and reserve the right to use monies for re use of space, IT and other adjustments. The model is designed to calculate the contributions required for each individual development, taking into account resulting population changes, whether it falls within a library catchment, and the current provision at that library. Therefore each contribution required will be different. Policy includes list of libraries and improvements required. Policy applies from 1 dwelling and up to 3000. For 3000+ the LIS needs to be involved in discussions with Developer and local planning authority.

16 of 21

16

12/03/2024

English Regions	Number of Councils [& other bodies if relevant]	Number of CIL Charging Authorities	% of Councils Adopted CIL
North East	12	3	25.00%
North West	39	9	23.08%
Yorkshire and The Humber	21	10	47.62%
East Midlands	37	10	27.03%
East of England	58	19	32.76%
West Midlands	34	12	35.29%
South East [excl. Greater London]	69	48	69.57%
South West	37	25	67.57%
Greater London [incl. City of London Corp]	33	31	93.94%
England	340	167	49.12%

Source: Survey of English Councils carried out in 2023 as part of this research supported by ACE & TNA.

Not all Local Councils have adopted a CIL regime….

17 of 21

Challenge for libraries and archives

Additional capacity can be created by extending or converting existing space. Including reconfiguring services and spaces, for example:

Allow different types of customers to use different times of day.
Enable greater use by community groups / different users.
Increase use of ICT to enable more flexible space use.
Changes to spaces to accommodate changing needs.
Installation of new technology to extend opening hours and greater virtual access.
New or moveable shelving – creating flexibility in space use.

All of the above options qualify as local infrastructure as they are focused on tailoring service capacity to current and emerging needs of the local resident population arising from new housing development.

17

12/03/2024

As with other local public sector service provision (e.g., Primary and Secondary Schools; local health centres such as Doctors’ Surgeries), the scale of local provision is largely driven by current demand arising from changes in the growth and age-profile of a council’s local resident population. A standard of provision is prescribed by national guidance but these must always be tailored to local circumstances

The capacity of provision is a critical metric that councils and other public bodies must manage, especially where changes to revenue and capital spending decisions have to be made as part of regular annual reviews and assessments of their local infrastructure requirements. These are typically set out in a council’s Infrastructure Delivery Plan that must be prepared to inform a local council’s adopted Local Plan and its updating.

A council’s library and archive provision may need to be updated and improved to cope with additional demand brought about by increasing numbers of users resulting from new housing growth. This additional capacity is typically accommodated to allow more public access by expanding (or replacing) floorspace, or converting existing space from an office, workroom or used as storage. However, where there is no possibility to extend or increase space, libraries may reconfigure their service offer to

18 of 21

Making the case

Engage in and develop a clear working relationship with your local plan-making officials.
Familiarise yourself with your adopted Local Plan and priorities, and read the latest Infrastructure Funding Statements.
Find out if there is specific guidance for prospective applicants for CIL funding (with declared criteria, process and local priorities).
Set out your goals and objectives and how these relate to service needs arising from new housing development, and address local priorities.
Identify the information and evidence needed to support your case.
Identify what infrastructure you need to develop to meet local emerging needs
Specify any additional gains from delivering additional infrastructure.
Establish cost and funding options (deliverability).

18

12/03/2024

19 of 21

Calculating standards and charges

ACE and TNA endorse the existing standards of provision:

30m2 per 1,000 for libraries;
6m2 per 1,000 for archives.

Reasonable contribution to local services based on adopted floor space standards and cost per square metre (£/m2) and the additional population arising from the proposed residential development.
Costs need to be regularly updated in line with BCIS data.
Linked to needs of library or archive service assessed in context and regularly updated.

19

12/03/2024

Many councils have adopted standards that relate library service provision to population numbers (see ACE (2010) Public Libraries, Archives and New Development: A Standard Charge Approach, MLA report). This approach emulates other planning policy areas, especially in the provision of new school places or additional capacity to accommodate new housing growth in local primary health centres and doctors’ surgeries.

Less so for archives, despite a similar standard metric being used.

Where a library or an archive is unable to meet these standards due to new residential development, a reasonable contribution will be requested towards the service based on the adopted floorspace standards, the archive and library building cost per square metre (£/m²) and the additional population arising from the proposed residential development.

Costs need to be regularly updated in line with BCIS data - note regional variation

20 of 21

Cost multipliers for Public Libraries and Archives (assumes 2.4 persons per new dwelling)

20

12/03/2024

21 of 21

Some reading….?

Cane, A. (2017). What’s the difference between Section 106 agreements and the Community Infrastructure Levy (CIL)? [online] www.teeslaw.com. Available at: https://www.teeslaw.com/insights/whats-the-difference-between-section-106-agreement-andcommunity-infrastructure-levy-CIL/#:~:text=CIL%20is%20different%20to%20S106.
Grimwood, G. G., and Barton, C. [2019] PLANNING OBLIGATIONS [S106 AGREEMENTS] IN ENGLAND, House of Commons Library [www.parliament.uk/commons-library].
Grimwood, G. (2019) Community Infrastructure Levy (England and Wales).
Available at: https://researchbriefings.files.parliament.uk/documents/SN03890/SN03890.pdf.
Local Government Association (updated 2023) Archived- S106 Obligations overview. Available at: https://www.local.gov.uk/pas/topics/delivery/delivery-archive/developer-contributions-cil-s106- archived-pages/archived-s106
Lockerbie, J. (2021) How to make an infrastructure levy and planning obligations work in harmony, Pinsent Masons, [online]. Available at: https://www.pinsentmasons.com/out-law/analysis/how-to-make-an-infrastructure-levy-and-planning-obligations-work-in-harmony
Mirchandani, S., Norgrove, K, & Walker, S. (2023) Guidance on seeking and securing developer contributions for Libraries and Archives provision in England”, Arts Council England and The National Archives, September 2023.
Mirchandani, S., Norgrove, K, & Walker, S. (2023) Guidance on seeking and securing developer contributions for Museums and Arts provision in England”, Arts Council England and The National Archives, September 2023.
Planning and Advisory Service (no date) Improving the Governance of Developer Contributions - full guidance handbook | Local Government Association, www.local.gov.uk. Available at: https://www.local.gov.uk/pas/topics/developer-contributions/improving-governance-developer-contributions-full-guidance.
RTPI (2023) Infrastructure levy consultation Q&A: the proposed changes explained. Available at: https://www.rtpi.org.uk/blog/2023/april/infrastructure-levy-consultation-qa-the-proposed-changes- explained/.

Professor Stephen Walker

21

12/03/2024