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Testing Viability Jayne Lomas 16 th October 2012

Testing Viability Jayne Lomas 16 th October 2012. Today’s presentation…. Context - Planning and viability in 2012 HCA – Our business Area wide testing Site specific testing HCA support and advice. . NPPF launch – Plans should be deliverable. X.

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Testing Viability Jayne Lomas 16 th October 2012

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  1. Testing Viability Jayne Lomas 16th October 2012

  2. Today’s presentation…. • Context - Planning and viability in 2012 • HCA – Our business • Area wide testing • Site specific testing • HCA support and advice.

  3. NPPF launch – Plans should be deliverable X Harman - Advice on viability testing of Local Plans. X X Further planning reform

  4. The Balancing Act • Local expectation • Economic reality • Political change • Local plan viability • Site specific • Larger phased sites • DELIVERY

  5. HCA : Our business Delivering our programmes Improving quality and standards Meeting housing needs Places that work Housing Delivery Effective use of public sector land Increasing housing supply

  6. HCA: As an investor • Affordable Housing Programme 2011-15 • £4.5bn (£2.3bn existing commitments) • Meeting locally identified needs • FirstBuy support for c.10,000 FTBs access affordable home ownership “Helping deliver the Government’s ambition to build up to 170,000 new high quality affordable homes by 2015”

  7. HCA : As a land owner/agent HCA Land • Existing P&R commitments • Accelerated disposal of land Other government land • Technical support to government departments Economic Assets Programme • Over 300 sites transferred – value of £300m • Nationally important sites – Enterprise Zones • Local stewardship arrangements

  8. HCA : Why viability test? • To make sure we can deliver our land disposal plan • To ensure we get the best value for our land • To see that our investment goes where it is needed most • To make sure that our investment works as hard as it can – maximise recovery • To select delivery partners (DPP)

  9. Think like a developer ….. • What is the total amount I could be paid for this development when completed? Gross development value. • What will it cost me to construct the development including site set up?Overall build cost. • Any additional construction costs? Infrastructure/site abnormals? • What additional obligations will I have to meet? S106/CIL/Affordable housing • How will I pay for this development work? Finance costs and cashflow impact • What costs will I have to pay to sell the units? Marketing and legal costs • How can I satisfy my shareholders? Developer’s return or overheads and profit. • What can I afford to pay for the land? Residual land value

  10. The secret of viability testing • Assumptions, assumptions, assumptions • Comparators • Benchmarks • Do ( as much as you can) yourself !

  11. Income assumptions • The overall price at which the developer calculates he can sell on the land and new buildings. • Ultimately the ‘fixed cake’ from which everything has to be paid. • For sales values look at local market evidence. Hometrack. • Sales values used should be forecast to the proposed sales period – could be several years • Look at sales rates and the impact this has on cashflow. .

  12. Expenditure assumptions 1 Unit Build costs • The total cost of constructing the units • Building Cost Information Service (BCIS) from RICS • Definition • ‘substructure & superstructure but not infrastructure’ • ‘back to the pavement but no further’ • Limitations • sample size, • Build scale • Volume house building • Cost efficiencies of a standard product ? • Supply chain benefits • Quality standards - Code for Sustainable Homes (CSH) & Zero Carbon, Life time homes • Contingency????

  13. Expenditure assumptions 2 • Prelims and site set up – depends on length of contract • External works • Infrastructure • Abnormals (for the type of scheme….) • Design fees • Finance fees • Marketing costs and incentives • Overheads and profit

  14. Expenditure assumptions 3 Regulatory burden? • S106 • CIL • Affordable Housing – tenure mix, numbers

  15. HCA : Our Viability tools • Designed to be neutral, open and transparent • Available free from our website • No ongoing license fees • Guidance online • Specific support available via email helpdesk www.homesandcommunities.co.uk/ourwork/viability-planning-tools

  16. HCA : Area wide viability model • A transparent, independent tool • The AWVM is simple and can be used for consultation events • Can be used for plan making purposes over many years • Can be used throughout changes in teams/consultants • Land value is calculated as one of the outputs and is not an input derived by the land owner or others. • It will ‘goalseek’ to find the viable level of Affordable Housing given the assumptions made

  17. HCA : Development appraisal tool • Site specific viability tool (DAT) • Residual value model • Based on assumptions • Advice on sourcing robust input data • Allows benchmarking between bids and sites. • Derivations for deferred receipt – Build Now Pay later

  18. HCA : ATLAS • Specialist support on larger sites (ATLAS) • Usually at the request of the LPA • Housing led development sites +500 units • Mixed use complex schemes • Any stage of delivery • Linked to a site or delivery proposal • Non – project support

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