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Development Economics a practical case study

Development Economics a practical case study. Kathleen Dunmore Jo Harrison Gary Tucker Paul Brunige. Changing market economics. House prices (outside London and SE) are still lower than in 2007 East Midlands region of contrasts Derbyshire Dales median house price over £200,000

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Development Economics a practical case study

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  1. Development Economics a practical case study Kathleen Dunmore Jo Harrison Gary Tucker Paul Brunige

  2. Changing market economics • House prices (outside London and SE) are still lower than in 2007 • East Midlands region of contrasts • Derbyshire Dales median house price over £200,000 • Bolsover median price under £100,000 • Development is stalling • East Midlands 15,720 units 2007/08 • 9,510 units 2011/12 DCLG table 253

  3. Lessons from previous downturns • It takes several years for recovery to commence. • In the 1990s house prices did not recover to their 1989 peak until 1997. • By 1938 house prices were still below their 1931 peak. • House prices fell in 4 of the 8 years following a downturn

  4. What is a normal market ? • Historic long term house price trend is upwards • Fuelled by household growth and changing patterns of economic activity – spot winner and loser locations • But over a 6 year period price change can range from zero to house prices doubled • Plan for what – and what price localism ? • How often to review the plan

  5. Gross Residual = revenue – costs Nett Residual (RV) = gross residual – (S106 contributions + CIL + affordable housing) CIL Not negotiable On-site S106 essential All other requirements negotiable ?? Residual valuation model and now CIL

  6. Some sites are more equal than others • Land values are highest in the rural areas • And lowest in the market towns • Two 1,000 unit SUEs are proposed on the edge of the market towns. What will their values and costs be?

  7. Negotiating a stalled site • Understand what is viable • Be clear about what you want – and how much it costs • Try not to get into a position where there is only 1 possible site for development • Understand that very big sites have higher costs and lower values than small sites – but location is key • Development is a risky process • There are no “right answers” - only what works for you

  8. Principles of viability appraisal applied to specific schemes 5 Year Land Supply !! • Calculation • Compare revenues and costs • Arrive at a calculated residual value (RV) • Negotiation • Agree between parties what is a reasonable RV • Identify areas of uncertainty and agree how to share risk and reward • Set up appropriate legal mechanisms • Outcome • Improved mutual understanding and trust

  9. Radstone Fields S. Northamptonshire • 1,000 units, greenfield location edge of market town • Essential to 5 year land supply • Target • 40% affordable housing, • CSH level 3 • high design standards - kerb stones, street furniture • New secondary school • £1m+ town centre improvements • Total cost S106 and design £20m, infrastructure £20m (£40,000 per dwelling)

  10. How it worked out The deal Why it worked Willing and informed landowner and developer Political will Officers actively involved in viability appraisal – not a black box The right size of development with no punitive infrastructure requirements In the right place – would it have worked in N Northants? • Agreed 22% AH, • S106 with phased review • All uplift in RV goes to local authority as additional affordable housing on site or as commuted sum • Phased review encourages early start on site

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