Southbourne Allocation DPD Reg 18 - Viability Assessment

Comment

Representation ID: 6870

Received: 12/12/2024

Respondent: Church Commissioners for England

Agent: Lichfields

We act as agent for and on behalf of the Church Commissioners for England and write to you regarding their land holding allocated under Policy A13: 'Southbourne Broad Location for Development, which has been assessed by DixonSearl Partnership within their Local Plan 2021-2039 Stage 1 & 2 Viability Assessment (and associated appendices).

We have undertaken a detailed review of the Viability Assessment with a particular focus on the assumptions set out at 'Appendix 1 - Assumptions framework (Tables 1a-1e) and the Appraisal Summaries set out at 'Appendix 2a'. Following detailed 'site capacity analysis' this representation is centred on: Scenario 1 West - 1050 dwellings, 30% Affordable Housing, VL2 @ £4,750.

Savills supports the findings of the Viability Assessment in concluding that Scenario 1 ('Development focused towards the West of Southbourne) is viable. We have however detailed below the assumptions that we consider to need adjustment and where appropriate we have provided evidence to substantiate our view.

Market and Affordable Housing Unit size

We have reviewed the 'dwelling sizes and mix assumptions' set out at: Appendix 1 Assumptions Summary: Table 1d: Dwelling mixes and revenue assumptions. We recognise that these are low level assumptions given that they reflect the Nationally Described Space Standard October 2015. However, and given these assumptions have a significant bearing on overall viability, these should in fact be more market facing rather than simply reflecting the minimum space standards.

Instead, and assuming the same unit mix (as set out in Appendix 1 Assumption Summary: Table 1D), we suggest a blended Market Housing average unit size of 1,100 SQFT/per unit as opposed to that of 940 SQFT which is currently envisaged under this scenario. In addition to this we suggest that Affordable Housing average unit size of 900 SQFT/per unit as opposed to that of 721 SQFT/per unit.

Benchmark Land Value

The Local Plan submission document titled: The Local Plan 2021-2039 Viability Assessment - Stage 2 (January2023) states the following:

Typically, we would expect to apply an EUV+ based land value benchmark at not more than approximately £250,000/ha (applied to gross site area) for bulk greenfield land release, based on a circa ten times uplift factor (the "plus" element) from the EUV for agricultural land at not exceeding C. £25,000/ha.

It is our view that both the multiplier and the Existing Use Value (EUV) are too low and the EUV rate/ha. should not dramatically decrease as the gross land area increases (as seen in the figure below). Instead, and having consulted with Savills Rural Valuation Team, we consider the EUV (Agricultural Land (assuming no irrigation)) to be £35,000/ha.

Additionally, we believe the applied (10x) multiplier to be too low. Transactional data indicates that a 12.5x multiplier is required to encourage/incentivise landowners to bring sites forward for development. On this basis and assuming a market facing, uprated premium of 12.5x we consider the BLV to instead be in the remit of £437,500/ha.

Figure 11: Range of BLVs ('Viability Tests')

EUV+ £/ha Notes £250,000 Greenfield Enhancement - reflecting larger scale development Greenfield Enhancement (Upper) - reflecting smaller scale £500,000 development £850,000 Low-grade PDL (e.g. former community uses, yards, workshops, £1,500,000 former industrial etc.) £2,000,000 Medium PDL industrial/commercial £3,000,000 Upper PDL Benchmark/residential land values £3,500,000

Developers return

The profit level (17.5% of GDV) applied to Market Housing is both market facing and in line with PPG. However the blended (all tenure) profit level of 15.84% is too low. Guidance from the Ministry of Housing, Communities and Local Government and Department for Levelling Up, Housing and Communities states:

A lower figure [than 15-20% of gross development value (GDV)] may be more appropriate in consideration of delivery of affordable housing in circumstances where this guarantees an end sale at a known value and reduces risk.

However the falling demand for S106 homes is increasingly becoming a barrier for delivery. Registered providers are scaling back their appetite for S106 homes and instead have a renewed emphasis on investment in existing stock meaning that no longer is sale to a registered provider guaranteed. This risk is becoming ever more entrenched and subsequently this should be reflected in applying a higher profit level.

On this basis we propose a blended developers return/profit of 17.50% that is both reflective of declining/unknown affordable revenues and the effect that this may have on overall deliverability of the site. It is our view that this a market facing assumption which closely aligns with the PPG.

Areas of agreement

Externals, Site Works Infrastructure and Road Bridge: These are in line with the work that has been undertaken by CCEs engineers, Pell Frischmann. Whilst these figures will need refining as the scheme progresses, these assumed levels provide sufficient headroom for the delivery of all associated infrastructure.

Construction costs/Build Rate: We consider the adopted £1,440/Sqm to be reasonable, with BCIS indicating a (Lower Quartile) rate of £1,338/Sqm for Estate Housing/Mixed developments in Chichester.

Market Values: We have completed detailed market analysis and consider an average value of £450/psf could be achieve by new build development in Southbourne. Which closely aligns with the rate of £441/psf applied.

Conclusion To conclude Scenario 1 West - 1050 dwellings, 30% Affordable Housing, VL2 @ £4,750 is viable. Whilst we consider alternative assumptions can be applied in regards to the Unit Size, BLV and Developers Return these alterations do not have a material effect (due to the increased GDV offsetting the increased BLV) on the overall viability of the scheme but instead act to make the assumptions more market facing. To conclude we consider this to be a viable and deliverable scheme.