| Archive for Downsizer For an ethical approach to consumption |
| orangepippin |
Who wins and who loses from a new housing developmentI'm looking for some information on the winners and losers (in financial terms) from a new housing development. There's a new 325-house development proposal in a nearby town (if it goes ahead the town's population will increase by 10%).Does anyone know how much additional income a local authority might get from central government per head of new population? I believe there is some kind of "rate support grant"? I am assuming the local authority will get about £1K new council tax income per house. Also, what is the typical costs which developers will face per new house, building on greenfield land? Is there a financial benefit to central government from a new house ... presumably the new owners will become tax payers. There certainly seems to be tremendous pressure from central government to build new houses, so there must be a reason and hence a "benefit" to central government for doing this. I should say that I am not opposed to this development per se, it will probably go ahead, and people do need homes to live in. I just want to understand where the costs and benefits arise. My hypothesis is that the existing local community may not be getting a fair share of the financial benefits. I also suspect that the "evil developers" may not actually make the excessive profits we tend to think they do - hence the fairly poor share prices of the major house-builders. A further concern is that if the developers are asked, say, to contribute to a new roundabout on the local A-road in turn for getting planning consent - they will simply pass that cost on to the new house owners, who, in effect, will be paying a sort of "newcomers tax", which does not seem right. Thanks. |
||||
| Cho-ku-ri |
Up here developers have to pay towards schooling. As a general rule, for every three houses a builder builds, he will make a net profit of one house.
Our local council Perth & Kinross has just started a feud with its neighbour Dundee. They have given the go-ahead for a new village of 260 houses right on the border. There are no jobs in the immediate area, but P&K's plan is to steal ratepayers over the border to live in P&K, but who work in Dundee. They will probably want their children schooled in the same town as they work, so will save P&K even paying for extra schooling. |
||||
| Nick |
How? Is it a tax that goes to the LEA? |
||||
| Cho-ku-ri |
I'm not sure what you mean by LEA? (oops worked it out) 
I have a client ,who is developing a farm steading into 8 houses. He has been informed he will have to pay the council £75k for that size of development to go towards schooling provision. |
||||
| Nick |
Local Education Authority. In England, at least, the bit of the council that pay for and run schools. | ||||
| MarkS |
Start reading up on 'Commuted Sums' and S.106 Agreements.
Need to start thinkning about this BEFORE specific planning is given. But I'm assuming that you are working on a site allocation from the LDF? Planning Aid http://www.planningaid.rtpi.org.uk/ have been running day courses on this sort of thing recently - I saw the details for a course in Leeds, but I think there will be other sessions in the area. |
||||
| JB |
I would have thought that most people would want their children in school where they live rather than where they work?
"Feud"? I have visions of Perth & Kinross councillors charging over the hills, claymores at the ready, to steal cattle 
|
||||
| orangepippin |
The general view seems to be that developers should pay then, even where the local authority is also a beneficiary?
So as a rule of thumb you reckon 3 houses built = 1 house profit? So if the average price is £250K per house, that means on 300 houses the total value is £75m and the developers profit is therefore £25m? That is certainly a healthy profit margin. Thanks for the link to the Planning Aid people. I may be missing something but there is an obvious problem of objectivity if both the developer and the local authority are gaining from a development – surely planning approvals should not be granted by an interested party? |
||||
| MarkS |
The entire country is in the process of making its development plans for the next 15-20 years.
Government have dictated the number of new homes to be built. The regional authority has then spread that out around the district councils. The councils are currently producing their Local Development Frameworks, which will set out their strategic approach to meeting the housing need/targets. Also they are working on allocating specific sites for housing/business. You dont say who your local authority are, I'm in Harrogate area and the docs are all available at the web site www.harrogate.gov.uk/ldf Or go to the site -> planning -> ldf. I'd expect the same sort of thing for your area. The idea behind commuted sums/S.106 is to get the developers to put something into the local communities. We have to categorise facilities in our area (playing fields, village hall, etc, etc) which then get a share of commuted sums. S.106 seems more open ended and useful. I'm not so sure of the details but I keep intending to read up properly - we'd like more play areas (ie somewhere teenagers can go without getting on everyones nerves) edit: should also say that the point isnt to benefit the authority but to mitigate the costs and impact of the development - things like roads open space etc. Scotland may well work to different rules of course. |
||||
| Cho-ku-ri |
Sorry I didn't mention that P&K's nearest High School is 16 miles away where as the nearest Dundee school is 9 miles away from the development, and where most of the residents will work. |
||||
| orangepippin |
Thanks MarkS. This is East Riding Council. I have indeed looked at their LDF from time to time, but the general impression I get is that they are simply responding to pressure from central government.
The S106 looks to me like a convenient dodge by the local authority to shift responsibility for infrastructure costs on to the developer. For example, there is talk of the developer being asked to fund a new roundabout - £1.5m. However the main York to Hull road which goes past the town is already operating at its maximum capacity, and what it needs is not a roundabout but a strategic upgrade - for argument's sake that might be a dualling of a substantial part of the current single-carriageway road. S106 is not going to pay for that. So before these houses are built someone needs to pay a heck a lot of money for the road to be upgraded. (And there are no doubt other strategic investments needed in other things like health and education, but I know very little about those areas). It is not clear to me how the planning process ensures that the quality of life of the existing community is protected (bearing in mind that the road at this point is classified as the 7th most dangerous road in the entire country, so the risk of being involved in an accident is high and will get higher). As someone else remarked here a while ago, it is government policy that we cannot build our way out of road congestion - but it is also government policy that we *can* build our way out of the housing crisis. Clearly these 2 policies are mutually exclusive. |
||||
| snozzer |
35% gross profit before contribution is about right for this sector, probably works out at 15-18% net. |
||||
| orangepippin |
I have spoken to Planning Aid. They are potentially very useful, albeit slightly "politically correct". Ultimately it is government funded, so it helps to be "deprived" etc. etc. | ||||
| Bebo |
Pretty much all new development is required to sign up to a S106 Agreement (that's S106 of the Planning Act). This sets out agreed contributions to mitigate for the impacts of the development on local infrastructure. The contributions are generally tied to specific items / uses and have to be 'reasonable and related' to the development proposals. The contributions can cover various things but the list normally extends to:
-affordable housing (either provided as part of the development or as a financial contribution to provision on another site) -transport improvements (highway infrastructure improvements, pump priming subsidy for increase bus frequency, new bus stops, cycle lanes and footway improvements, car clubs etc) - education (usually based on a cost per child that is likely to occupy the development) - open space / playspace (again provided on site or financial contribution for off site) - community facilities (health centres, community centres, village halls etc) Generally these are negotiated on a case by case basis, but some local authorities are starting to use a 'toolbox' for calculating the contributions. In Milton Keynes for the future residential expansion planned they are proposing to charge a flat rate per residential unit. Can't remember how much they had agreed on but I think it was somewhere in the region of 25k per house. Acceptable developers profit is generally about 15% (I think this is the assumption that they use in the Three Dragons affordable housing toolkit calculations). If there are lots of abnormal costs associated with developing a particular site its generally the land value that takes the hit rather than the developers profit. |
||||
| orangepippin |
The problem with S106 is that it does not cover strategic investment, only tactical investment. It might pay for a roundabout on the main road, but it will not pay for a dual-carriageway. Worse, it allows the local authority to take the moral high-ground by being seen to be forcing the greedy developer to give something back to the local community, when in fact the local authority may also be a beneficiary.
What I really want to do now is somehow quantify the value of the development to the local authority and central government ... what are they getting out of it? It is pretty obvious that the local community gets no benefit, and probably pays in the form of reduced quality of life. I want to see if it is possible for the local community to gain a share of the total benefits of the project, not just the S106 benefits. |
||||
| Bebo |
Wrong. In Milton Keynes they have worked out the whole infrastructure needs of the town - including improvements to motorway junctions and dualling of part of the A412. The 'roof tax' contribution from each new house goes into the pot towards these improvements. Obviously development is phased but so are the impacts and the improvements. I was involved in a scheme in Aylesbury where two new residential developments that have planning permission have to construct a new link road between the A41 and the A413 before they can complete a certain number of residential units. Development of a large enough scale can and does fund strategic improvement. It just needs a local authority that does a bit of joined up thinking and unfortunately there aren't many of those about. |
||||
| orangepippin |
OK, well that sounds like good news.
What I don't like about S106 though is the implication that the developer (and thus indirectly the future owners of the new houses) are paying for infrastructure that really should have been paid for by the local authority or central government. As you say, if the local authority is not good and joining the dots then S106 will inevitably result in piecemeal infrastructure. |
||||
| Helen_A |
Sadly living here it is pretty obvious that a lot of the above has been shoved into the junk bin of history. English partnerships have handed back vast tracts of land to the LA, but not handed back responsibility for roads etc. which has just disapeared into the ether and court cases are underway left, right and centre. The most recent bleurgh has been a whole load of housing that has been flooded due to a lack of maintanence on a waterway that EP has the 'responsibility' of, but the LA the financial responsibility of without the access rights to do the work being assigned to either. The waterways peeps are definately *not* responsible, but they have the central govt funding and the legal needs to clear the canal alongside the issue..... The grid system here is also being mucked around with. Oh - and a huge chunk of the new development is actually just over the border into the next counties over... but the schools are going to be MK controlled as they are just in MK.... but the new residents will pay their council tax to the other counties, and the developers the roof tax ditto.... leaving one heck of shortfall.... |