affordable housing financial contributions – small …...affordable housing financial...

North Hertfordshire District Council &

Stevenage Borough Council

Affordable Housing Financial Contributions – Small Sites

August - September 2008

Report for the consideration of North Hertfordshire District Council & Stevenage Borough Council

This does not constitute Council Policy.

Prepared by

55 West Street Chichester

West Sussex PO19 1RU

01243 771304 www.adamsintegra.co.uk

http://www.adamsintegra.co.uk/

North Hertfordshire & Stevenage Councils – Financial Contributions Study

CONTENTS Executive Summary ii

1. Introduction 1 2. Methodology 4 3. Financial Contributions Methodology and Results 13 4. Conclusions and Recommendations 23 FIGURES Figure 1: Summary of Value Points and Property Types 5

Figure 2: Indicative Financial Contributions in lieu of Affordable Housing 17 APPENDICES Appendix I - Financial Contributions in lieu of on-site provision Appendix Ia - Average Residual Land Value as Percentage of GDV on Sites

of 0% Affordable Housing Appendix II - Planning Obligation Assumptions

Appendix III - Supplementary Property Values Report - North Hertfordshire

District & Stevenage Borough

Adams Integra – August 2008 (Ref: 08704) i


EXECUTIVE SUMMARY

Background

• North Hertfordshire District and Stevenage Borough Councils are progressing their Local Development Framework Core Strategies and associated Development Plan Documents. Those will set out their planning policy framework for the plan period – including on planning-led affordable housing.

• At present, the Councils’ policy proposals seek to deal with affordable housing through a requirement for its provision on-site above a site size threshold of 5 new dwellings.

• The Councils have asked Adams Integra to investigate the potential (in terms

of development viability) for all sites to contribute towards meeting affordable housing needs through the use of a financial contribution mechanism in-lieu of on-site affordable housing from the smallest sites.

• This study builds on a development viability overview study conducted by Adams Integra for the Council in 2007. It uses the same methodology as that previous study, but with updated assumptions where those have been considered appropriate.

The Exercise

• Developer-type appraisals were again carried out - this time across notional

sites of 1 to 4 units at 6 Value Points that reflect the range of new build values seen across North Hertfordshire District and Stevenage Borough. Development viability was tested by fixing assumptions and then comparing the outcomes on a relative basis at 0%, 10%, 20%, 30% and 40% affordable housing equivalent (via a financial contribution rather than on-site provision).

• A methodology has been suggested for calculating financial contributions in

lieu of on-site affordable housing on sites of 4 units or fewer and appraisals carried out to test the viability of such proposals. The methodology is formula based, and the same approach could apply to larger sites in exceptional cases where a financial contribution in lieu of on-site affordable housing is appropriate and robustly justified.

• The property values information has been updated from the 2007 study

through further desktop research during July and August 2008.

• We reiterate that key considerations taken into account in the assessment of viability are developer’s profit and landowner’s sale price. If profit levels fall below a certain point then developers may be unwilling to take the risk of developing a site or unable to secure funding. Equally, if the price offered by a

Adams Integra – August 2008 (Ref: 08704) ii


developer to a landowner for a site is too low, the landowner may decide not to sell and instead continue with, or pursue, an existing or higher value land use.

• An increase in the percentage of affordable housing on a site will inevitably

reduce the overall sales revenue a developer can expect to receive (compared to a site with a lower percentage of affordable housing). This is because the revenue received from affordable homes is significantly lower than from market sale units. Therefore, much like wider planning infrastructure requirements, a financial contribution towards affordable housing provision will be viewed as a cost to development schemes. This cost is generally passed on to the landowner by way of reduced land value, since particular development profit levels need to be maintained. This is why the consideration of development viability is a key aspect of affordable housing policy development, to ensure that site supply is not unduly affected.

The Key Outcomes and Conclusions

• Increasing the proportion of affordable housing sought impacts on residential development viability. The reduction in Residual Land Values (RLVs) across the notional sites tested ranged from 9% to 64% depending on Value Point and proportion of affordable housing sought (the greatest impacts seen at the lowest Value Points with the highest (40%) proportion of affordable housing requirement considered).

• The results of the appraisals carried out for collecting financial contributions in

lieu of on-site provision suggest that a 10% to 20% affordable housing equivalent could be workable in viability terms on sites producing fewer than 5 new dwellings. There is no reason why smaller sites should not make a carefully judged contribution. There are, however, factors to be considered which suggest the benefit of seeking a reduced equivalent proportion on such sites – on the basis of an extension of the sliding scale approach which Adams Integra put forward in the 2007 study.

• Purely in viability terms we are therefore able to support a policy whereby the

Councils seek financial contributions equivalent to:

o between 10 - 20% proportion of affordable housing on sites of between 1 and 4 units

applied as a target and clear basis for the early stages review of sites by landowners and developers, and thus a target basis for negotiations to seek to deliver.

• All policy positions would need to be kept under review in light of delivery experiences, as a part of the Council’s ongoing monitoring of a range of inter-

Adams Integra – August 2008 (Ref: 08704) iii


related factors such as site supply, housing market trends, needs and local affordability. That process should be linked with contingency planning – in the event that the monitoring work points to adjustments being made to the approach. Viability will also need to be considered relative to wider planning obligations if those increase in the future.

• The Councils will need to consider the detail of application. This would include

whether the approach would be relevant to all new dwellings, or to net numbers of new dwellings. Our assumption is that the approach would not apply to replacement dwellings. Clarity on all such aspects would be needed.

Adams Integra – August 2008 (Ref: 08704) iv


1 INTRODUCTION 1.1 Background 1.1.1 Both North Hertfordshire District Council and Stevenage Borough Council are

producing their Local Development Frameworks (LDFs), in line with the requirements of the Planning and Compulsory Purchase Act 2004. Through a number of key policies, the LDF will guide and control the future use and development of land over the plan (LDF) period.

1.1.2 The Councils are currently progressing with their Core Strategies and Development Plan Documents (DPDs), the Preferred Options papers for which have been through a period of consultation from September 2007. The strategies include the Councils’ approach to the provision of affordable housing through the planning system, by the established route of requiring suitable private developments to include a proportion of integrated affordable homes. The Councils are now preparing for the submission (to Government) stage of their Core Strategies.

1.1.3 The proposed policies are as follows:

(North Hertfordshire District Council) will secure the provision of affordable housing on sites in accordance with the criteria below and at the following levels1: Size of site (gross dwellings) Minimum % of dwellings which

must be affordable

5 – 9 dwellings 10 – 14 dwellings 15 – 24 dwellings 25 or more dwellings

20% 30% 35% 40%

North Hertfordshire District Council require an affordable housing tenure split of 65% social rented and 35% other forms. (Stevenage Borough Council’s) preferred option is to deliver a full range of homes and address existing imbalances2: 40% of new homes to be affordable with provision split 80% social rented and 20% other forms. Stevenage Borough expects to introduce the same sliding scale as detailed for North Hertfordshire above. 50% of new homes will be market homes.

1 North Hertfordshire District Council – Core Strategy Preferred Options Paper (September 2007) 2 Stevenage Borough Council - Core Strategy Generic Development Control Policies (September 2007)

Adams Integra – August 2008 (Ref: 08704) 1


10% will be more expensive homes defined broadly (and not yet formally agreed) as a detached home in a suburban location with at least 3-4 bedrooms, 2 bathrooms and 2-3 reception rooms.

1.1.4 To help inform the proposed affordable housing policies within the Core Strategy, the Councils commissioned Adams Integra to carry out an affordable housing development viability overview study3 to examine how the development viability of market housing sites is affected by policy options for affordable homes. The Councils’ policy proposals require affordable housing from sites of 5 or more dwellings but as drafted at present require no contribution to affordable housing below this point.

1.1.5 In Stevenage Borough small sites (sites of 1-4 units) represent approximately 10% of completions (both gross and net) which equates to 131 completions out of 1,364 completions between 2001 and 2008 (this excludes replacement dwellings).

1.1.6 In North Hertfordshire between 2001 and 2008 there have been 638 gross

completions on small sites (1-4 units) out of a total of 4,483 equating to approximately 14% of the supply (Note: North Hertfordshire figures include all replacement dwellings and so figures are not directly comparable with Stevenage Borough Council figures discussed above).

1.1.7 The supply of housing from these small sites is an important component towards the overall delivery of housing in the District and Borough. As such, Adams Integra has been asked to look at the likely financial viability of all sites contributing to the provision of affordable housing. Rather than providing the housing on-site, the Councils propose to collect a financial contribution from sites below the on-site affordable housing threshold.

1.1.8 The North Hertfordshire and Stevenage Strategic Housing Market

Assessment (August 2008)4 identified an annual need shortfall of 642 homes in North Hertfordshire District and 606 homes in Stevenage Borough.

1.1.9 Adams Integra’s report investigates and assesses the impact on land values

and therefore viability of potentially removing affordable housing thresholds altogether and requiring a financial contribution towards affordable housing sought from all private (market sale) residential sites across North Hertfordshire District and Stevenage Borough.

1.1.10 The study examines the variations in approximate development and therefore

land values within both Local Authority areas and the implications of these are included in the assessment of site viability and delivery. The context for this is

3 Adams Integra – Affordable Housing Development Viability Study (2007) 4 David Couttie Associates - North Hertfordshire and Stevenage Strategic Housing Market Assessment (August 2008)



that (gross) development value (GDV) is determined by the potential and constraints a particular site has, which in turn drives the resulting land value.

1.1.11 We have again used our assessments of the impact of varying affordable

housing requirements on residual land value as our measure in putting forward to the Councils our judgements and guidelines. This means that, as with the wider study, we have compared the impact of possible alternative policy approaches with the current policy position. So we have reviewed the impact on approximate land values of increasing the percentage of affordable housing sought from zero to a range of potential future affordable housing equivalent proportions on sites of between 1 and 4 units.

1.1.12 This study is set in the context of the original development viability study

carried out in 2007 and should be read with that study in mind. The methodology for that study is not repeated in detail here.



2 METHODOLOGY

2.1 Introduction 2.1.1 This study builds on the report produced in 2007 by Adams Integra in relation

to North Hertfordshire District and Stevenage Borough’s Local Development Framework Core Strategy affordable housing policies. This study investigates the impact of reducing the affordable housing threshold below the currently proposed level of 5 units, by collecting a financial contribution from all smaller developments towards the provision of affordable housing.

2.1.2 The methodology used to investigate development viability is as set out in the 2007 Adams Integra Study and will not be repeated again here. The key difference is that for this study, we are testing the impact of collecting financial contributions from notional sites of fewer than 5 units rather than looking at on-site affordable housing provision.

2.1.3 The schemes are not actual developments but for the purposes of this study concentrate on notional housing development reflecting scenarios that best match how the policy requirements of the Council would operate. However, research into local property prices across North Hertfordshire and Stevenage was reviewed to produce realistic sales and therefore development values for the appraisal modelling. This reflects the process carried out for the 2007 study too.

2.1.4 So, this study uses the same methodology as the 2007 study but instead of assuming affordable housing on-site within the development appraisals, an allowance is made as a financial contribution (cost to the scheme) only. The indicative financial contribution levels are calculated based on the methodology used within the 2007 study and as set out again below.

2.2 Property Values

2.2.1 As with the original study, research into residential property prices across the two Council areas, on a detailed localised basis, was undertaken to determine realistic residential development (property sales) values for each appraisal model (see Appendix III – Supplementary Property Values Report). Rather than divide the District and Borough into settlement areas, it was decided to keep to a range of Value Points which represented the variety of typical new build values across both Local Authority areas. The results of our property values research informed our checking of these Value Point judgements against our previous work. The Value Points methodology allows the results of this study to be used independently of location and, more usefully, by approximate development (sales) value. The range of new build Value Points which were determined through this research is the same as for the original study; shown in Figure 1: “Summary of Value Points and Property Types” below.



2.2.2 Here we will only summarise the key elements of the review process

undertaken during July and August 2008. Appendix III sets out this important aspect of the work in detail. In essence, for this update study we have carried out a fresh desktop review of the pricing of new build schemes currently underway and being marketed within North Hertfordshire and Stevenage. We have also reviewed the marketing prices and “subject to contract sale” prices of all properties on the market at the time of carrying out the research. That information has been compared with its equivalent from our 2007 research. To further inform the values overview, we have considered and refer to market reporting from the Land Registry, Royal Institution of Chartered Surveyors (RICS) and CLG.

Figure 1: Summary of Value Points and Property Types

<<<<<<<<<< Typical Value Range >>>>>>>>>>>>>> Unit Type

Value Point

Value Point 1

Value Point 2

Value Point 3

Value Point 4

Value Point 5

Value Point 6

1-Bed Flat £132,600 £142,800 £158,100 £173,400 £188,700 £204,000 2-Bed Flat £171,600 £184,800 £204,600 £224,400 £244,200 £264,000 2-Bed House £197,600 £212,800 £235,600 £258,400 £281,200 £304,000 3-Bed House £223,600 £240,800 £266,600 £292,400 £318,200 £344,000 4-Bed House £262,600 £282,800 £313,100 £343,400 £373,700 £404,000 £ /sq m £2,600 £2,800 £3,100 £3,400 £3,700 £4,000

2.2.3 The range of values set out in Figure 1 above is still thought to be reasonably

representative of the range of new build values seen within the North Hertfordshire District and Stevenage Borough areas.

2.2.4 A comparison of the re-sale and new build data within Stevenage continues to suggest a dual property market. In Stevenage, new build values appear to be relatively strong compared to the resale market (when like-for-like property type comparisons are made). In North Hertfordshire, relative to the overall market, new build values are not so strong – there is more blurring of values. Overall, however, the values across North Hertfordshire still appear generally strong.

2.2.5 The overall market (predominantly re-sale) data appears to indicate that, when compared to the data collected for the 2007 study (collated early summer 2007), there has been little change in asking prices overall for either Stevenage Borough or North Hertfordshire (see Appendix III). This trend is also reflected in the new build asking prices. The Land Registry data for Hertfordshire as a whole confirms this trend with average house prices marginally higher in July 2008 than May 2007 (the date of the research for this update compared to the previous study – see Appendix III).



2.2.6 We must acknowledge, however, the impact of current market conditions not only on sales values but also sales volumes which are down sharply from the same period 12 months ago. During the study period, there was extensive reporting at all levels of a weaker and uncertain property market. These conditions have certainly become more established with many market commentators expressing views that the market downturn may be longer lasting than first thought. There are still wide ranging views on how deep the downturn may get, but nonetheless current characteristic features of the downturn to be noted in the context of this study include:

• Some house builders reporting reduced margins overall. • A slow-down in the rate of construction of new homes.

• Incentives being offered more often - such as stamp duty/5% deposit

paid/mortgage payments contributions/fixtures and furnishings/part buy or pay part later deals, and perhaps others – dependent on prospective purchaser’s position together with marketing experience and sale potential of particular plots, etc.

• Some use of guide pricing alone, or even no advertised pricing, but

widespread/open pricing reductions are not being advertised on a regular basis to our knowledge. Some schemes still selling well, with slower sales/most difficulties perhaps typically being experienced with larger flatted schemes. This is linked to a commonly expressed feeling, more widely, that too many flats have been built in many places in recent years.

• Some developers considering offers from RSLs for expanded affordable

housing quotas on sites, or even entire schemes for affordable.

• Some reports of some developers pulling out of schemes, and delaying starts or slowing scheme progress.

• Thus, extended development periods in some cases, with a knock-on

effect of impacted sales progress because there is less for purchasers to see. Purchasers are far less likely to purchase off plan given uncertainty over values movements.

• Fewer investment buyers active in some instances.

• Towards the end of the study period, reports of some house builders and

others involved in the industry reducing staff numbers very significantly. 2.2.7 In terms of study methodology, the current uncertainties are very difficult to

reflect. In our view, however, it would be impractical for a Local Authority to move affordable housing and perhaps other viability-related planning



obligations targets in response to what could be short-term market conditions and adjustments. It would also fail to create clarity or an equitable situation. The use of a range of Value Points enables us to see how residual land values (and thus likely scheme viability) change as the market values of properties vary.

2.2.8 As the property prices report at Appendix III indicates, one of the principal

concerns with the market currently is the volume of sales being achieved rather than simply with sales values. Sales volume is difficult to reflect in financial viability terms. It may affect developers’ views on risk levels, and it may affect development and finance periods. These will, in any event, be site- specific factors. The trend, which has become quite established now, may ultimately have more bearing on prices, and we may see this as the very recent figures filter through to the Land Registry.

2.2.9 In our view the key messages for Local Authorities in this situation are the

need to monitor the market and housing delivery outcomes and trends locally, and respond to those through contingency measures and reviewing policy longer term. This is also about adopting what should be the established practical and flexible approach to secure delivery of all housing types, with an emphasis on adaptability particularly in the very short term. We are aware that both North Hertfordshire District and Stevenage Borough Councils undertake monitoring of house prices through internet searches and estate agent liaison.

2.2.10 Given the current downturn in market conditions, the property market and its next direction is particularly difficult to assess at the moment - both in a wider sense and more locally. By looking at a range of values to drive our appraisals, however, this study can be used in a way which enables the review of varying viability outcomes in response to value levels as those vary. As such the property pricing research has led us to the conclusion that the value points range used for the original study should be maintained, but that under current market conditions it is likely that greater numbers of scheme instances will more frequently fall into the lower parts of the overall Value Points range.

2.2.11 For the original study it was determined that the majority of new build values were seen between Value Points 2 and 4 within both Local Authority areas, with low occurrences of Value Point 1 levels.

2.2.12 For this study, although the research shows values similar to those 12 months ago, it is likely that values at the lower end of the range will be seen more often (especially in the short term) with fewer examples of the higher end values. The following is necessarily highly indicative but gives an idea of the values relationships between the settlements (new build only) – the Property Values Report in Appendix III goes into more detail:



o Stevenage – most new build values lie between Value Points 2-3 but with more occurrences of Value Point 2 levels than previously seen.

o Old Town in Stevenage is likely to be the main exception where values

seem to range between Value Points 2-4.

o In North Hertfordshire, Hitchin and Letchworth appear to have the highest new build values in the range between Value Points 3-5, again with more occurrences of Value Point 3 levels than seen before.

o Baldock and Royston in North Hertfordshire appear, typically, to have

lower values in the range between Value Points 1-2 with values more often being seen at Value Point 1 than observed previously.

2.2.13 For rural North Hertfordshire we have no new build values data but bearing in

mind the strength of the re-sale values in the rural areas we consider that it can be assumed those new build values again would at least be in line with Hitchin/Letchworth levels, but again with lower values (relatively) seen more often than previously.

2.2.14 As with the 2007 study, this has not been a statistical exercise, but has involved the making of judgements based on the range of information reviewed.

2.3 Model Scenarios and Site Size 2.3.1 To test the impact on development viability of collecting a financial

contribution towards affordable housing on small sites below the on-site affordable housing threshold we have appraised sites from 1 to 4 units in size, across all Value Points.

2.3.2 Each appraisal assumes that all housing built on the site will be for private (market) sale and that there will be a cost to the developer via a calculated financial contribution in-lieu of providing on-site affordable housing.

2.3.3 For this study each site comprised 3-bed houses only (assuming 86sq m gross internal area) to allow us to compare the impact of the financial contribution whilst all other assumptions remained static: 1 x 3-bed houses 2 x 3-bed houses 3 x 3-bed houses 4 x 3-bed houses All tested at all Value Points at 10%, 20%, 30% and 40% affordable housing equivalent.



A similar exercise could be carried out in relation to other property types but, from our wider experience including the previous study, we would expect it to show the same results trends and lead to the same findings.

2.3.4 To calculate the financial contribution for the affordable housing we followed the same methodology as that set out in the 2007 study. At each point we appraised a range of affordable housing proportions of 10%, 20%, 30% and 40% so that we could see how results varied over this scale, and then consider with the Councils the potential to align this thinking to an extension of a sliding scale approach. Such an approach could also reduce the abrupt step in requirements once the on-site affordable housing threshold takes effect. This would help optimise overall contributions towards meeting affordable housing needs by seeking some level of provision from the numerous small windfall sites which in the past have made up a large proportion of the Local Authorities’ housing delivery pattern (See Chapter 1).

2.3.5 There is no particular reason why smaller sites should not contribute appropriately, when larger sites are doing so and are not necessarily any more viable. In essence, in all of our calculations for such studies we find no reason for stating that smaller sites are more or less financially viable than larger ones. Hence there is no viability reason why smaller sites should not make a carefully judged level of contribution towards meeting affordable housing needs as an extended policy approach.

2.3.6 This approach, if implemented, would effectively mean a further lowering of thresholds but with financial payments being made in lieu of an on-site requirement on sites within the relevant size range.

2.4 Other Key Assumptions

• Dwelling Sizes 3-bedroom Houses at 86 square metres (gross internal area).

• Base Build Costs

Houses: £1,100/m² (applied to the gross internal area of the accommodation).

Build cost figures have been taken as an indicative base level, supported by our discussions with developers and others, whilst also taking account of a range of information from the RICS’ BCIS (Building Cost Information Service) data.

There will always be a range of opinions on, and methods of, describing build costs. In our view we have taken a reasonable view which lies within the range of figures generally discussed for typical new build schemes rather than high spec or complex schemes which might require particular construction techniques. As with many aspects there is no single



appropriate figure in reality, so a judgement on some form of benchmark is necessary.

We are aware that the developer’s base build costs can be lower than our above base cost figures, and also that the BCIS tends to indicate lower figures. In contrast however, there is much said about costs being higher than this, often in the context of RSLs procuring new housing through contractors and developers. So a view needs to be taken, and then monitored, tested and updated as informed by the experience of site specifics, negotiations and (from the affordable housing perspective) in light of funding availability and affordability for occupants.

There is no land cost element at all allowed for within this particular assumption, as will be clear from the wider text.

The areas of sustainable development, environmental standards (such as the Code for Sustainable Homes) and renewable energy aspirations are also developing quickly. The Councils will need to consider this as policy and site-specific proposals advance, in the context of reviewing viability periodically, and the overall negotiated approach.

These have been updated since the original study to take into account potential increased costs and an element of increased environmental performance (e.g. Code for Sustainable Homes requirements). For example, achieving Code Level 3 has been approximated to cost an extra £50 per sq m (based on CLG - July 20085 report and assumes medium case scenario for flats and terraced houses).

• Developer’s Profit 15% of GDV (i.e. of Gross - or total - Sales Value). It must be acknowledged that this can vary. Our modelling assumes this level because, in our experience, this is around the industry normal minimum level and is a reasonable point at which a “default” view/initial negotiating stance might be taken by a Local Authority, particularly for the type of schemes indicated in this study. It coincides with the default position within the Housing Corporation’s Economic Appraisal Tool. Note that Gross Development Value means total development value – the value of the scheme when completed (receipt level to the developer).

• Architect’s Fees

3.5% of build costs

• Consultants’ Fees (e.g. engineer, planning supervisor, project manager) 3.0% of build costs

5 DCLG – Cost Analysis of the Code for Sustainable Homes (July 2008)



• Contingencies 3.0% of build costs

• Insurances

2.5% of build costs

• Marketing and Sales Fees 1.5% of Estimated Gross Development Value.

• Legal Fees on Sale

£400 per property

• Finance (build) 7.5% on above costs effectively applied for half the build period (usual convention as the whole build cost is not financed for the whole build period). This is an increase of 0.5% from the 2007 study due to the uncertainty over finance in the current market. At the time of writing, after a series of minor movements, the Bank of England Base Rate has been kept at 5% following the most recent committee meeting outcomes. On fixing our assumptions in the early study stages we decided to increase our finance rate assumptions in response to the daily “credit crunch” reporting (on the reduced availability and associated likely terms of finance) as the study progressed, we considered this approach to be further validated and therefore to remain appropriate.

• Build Period

6 months for all schemes

• Land Survey Costs £500 per unit.

• Site Preparation

£4,000 per unit (based on uncomplicated basic site clearance for uncontaminated brownfield sites with no abnormals).

• Legal Fees on Land Purchase

0.5% of land value

• Planning Application costs £335 per dwelling. This is an increased amount from the 2007 study.

• Stamp Duty Land Tax

Between 0% and 4% depending on residual land value.

• Infrastructure Payments Variable – see Appendix II



The Planning Obligations costs used are the same as those for the original study. These are shown in Appendix II and were provided by North Hertfordshire District Council from its Planning Obligations SPD. They were agreed by both Councils to be used as the basis for the study. Although the planning obligations will be subject to price indexation, the values used in this study were those used at the time of the study last year. As this study states, this is a key area that will need to be monitored in terms of the overall burdens on sites.

Please note that these are the figures used in the appraisals, but are not necessarily representative across all new residential developments as each site will need to be assessed on its own merits. The same comments apply here as mentioned in the context of build costs and sustainable development, at pages 8 and 9 above. The Councils will need to be mindful that while per plot/unit planning obligations costs increases of less than say £3-5,000 may not normally have a significant additional impact on the viability outcomes (subject to all normal caveats on site specifics), larger increases in overall burdens would need to be reviewed in the context of site viability and impact on the deliverability of targets. This message is reinforced from the previous study. It is intended only as a general comment and does not form part of any recommendation. The intention is to reinforce the link between viability and all cost items, as well as development values.

• Finance related to land purchase

7.5% on land survey, planning costs, legal fees on land purchase and residual land value over build time plus a 26 week lead-in period, as these land related costs are a burden on the scheme for an extended period, estimated here.

As this is a relative exercise aimed at determining the likely effect of the Council’s potential policy positions, a key factor is consistency between assumptions used for modelling scenarios while the affordable housing assumptions are varied. Specific assumptions and values for our notional schemes may not be appropriate for any particular actual development. As with the original work we are confident, however, that our assumptions are reasonable in terms of making this viability overview and thus in the context of the Councils considering clear policy targets. The study is not intended to be used in any other or wider context.



3 FINANCIAL CONTRIBUTIONS METHODOLOGY and RESULTS

3.1 Financial Contributions Methodology

3.1.1 It was agreed with the Councils’ officers that Adams Integra would use the same methodology set out in the 2007 study and test the viability of such an approach. This does not preclude the Councils from adopting a different methodology. The methodology we discuss and propose in this section is rooted in the same type of process that has driven calculations and informed negotiations for other Local Authorities. The suggested calculation seeks to equate the financial contribution to the land value of the relevant dwelling plots (those that would have been made available for on-site affordable housing).

3.1.2 It is beyond the remit of this study to comment on the planning policy scope or wider merits of an approach to seek financial contributions towards meeting affordable housing needs from the smallest sites, but to inform only on the development viability aspects. There are potential practical advantages of requesting financial contributions from the smallest sites rather than adhering to on-site provision. There can be issues with affordability, integration, management and the like in relation to providing affordable housing on small sites. This policy approach could have practical merits with those issues in mind. If those concerns are removed through the use of financial contributions in lieu of on-site provision, then dependent on the scale of the payment being appropriately judged there is unlikely to be a pure financial viability issue – subject as normal to any existing/alternative use barriers and the normal negotiation process where necessary.

3.1.3 We recognise that other Local Authorities are exploring the scope for and issues with, lower thresholds and/or financial contributions from smaller sites in a similar way and at the time of writing, so far as we are aware there is no clear planning policy guidance which steers on the acceptability of this type of approach. However, Inspectors of LDF documents will be considering the soundness of this type of approach. Having worked in South Hams, we are aware that a similar approach received support from the Inspector there following Examination in Public of an Affordable Housing DPD. This was in the South Hams context, where following his binding recommendations 1 dwelling schemes will not contribute, so the Councils will find it useful to monitor other such developments and to consider how those compare and have local relevance to North Hertfordshire and Stevenage.

3.1.4 The results from the appraisals carried out on this basis, are set out within Appendix I. We will not describe them in detail here.

3.1.5 Compared with previous national advice under Circular 6/98 and PPG3 (now rescinded), PPS3 gives more scope for the consideration of thresholds lower



than the “national indicative minimum” of 15 it sets out, related to local circumstances “where viable and practicable”.

3.1.6 Policy guidance should clarify to landowners and developers how the Councils would apply their approach regarding financial contributions in-lieu of affordable housing and on what basis calculations would be made.

3.1.7 The following paragraphs will cover the financial contribution topic in outline. It is an area of the Councils’ potential approach that would need to be developed in detail through affordable housing Supplementary Planning Documents, or possibly a Development Plan Document.

3.1.8 Before outlining our thinking in more detail, it is worth considering other approaches briefly.

3.1.9 In order to establish or indicate payment levels, Local Authorities have adopted a number of calculation methods. Usually these mean considering a methodology which either:

• Relates to the build cost of the affordable homes, or • Relates to the land cost element – allied to a nil-cost land approach to

on site affordable housing, or

• Considers the difference between the open market sale revenue and the affordable housing revenue for the relevant homes which would have formed the on-site quota. This latter route may be more complex, need more updating and be viewed as less market-related.

3.1.10 Some Local Authorities have continued using mechanisms which relate back

to the former Housing Corporation Total Cost Indicator (“TCI”) regime in some way, or to RSL finance-driven models which link to how much finance RSLs are able raise or grant/other subsidy they need based on dwelling type and tenure assumptions.

3.1.11 Reference to TCIs is now outmoded. Furthermore, in our view such methodologies relate less well to the market. In our experience methodologies which relate more closely to the market-led provision that flows from the planning obligations are preferable and more widely understood.

3.1.12 In our view, the most appropriate route more generally may be to look at land value. In essence this involves calculating how much it would cost to go elsewhere and replace the land on which the affordable housing would have been provided on-site. This is the basis we have assumed.



3.1.13 In summary, in carrying out viability appraisals on this principle we add the relevant (estimated) land value and acquisition expenses associated with acquiring an equivalent plot in the market elsewhere to the cost section of the model. This is because we are assuming (for the purposes of this study) a straightforward payment being made by the landowner (who may be the developer) under the terms of a Section 106 agreement. This is in much the same way as occurs with planning obligations for other infrastructure aspects such as highways/transport, open space, education etc). So the methodology assumes an additional planning obligations payment being made by the developer, albeit from the increased Gross Development Value which results from having no affordable housing on-site. In our opinion the calculation should not (and this way it does not) seek to secure a level of subsidy beyond that which the developer would provide on-site. PPS3 requires the contribution secured to be “of broadly equivalent value” to that which would have been secured through on-site provision.

3.1.14 We have advised other Authorities similarly. In our experience a property or land value based calculation tends to be understood by landowners and developers better than potentially more complex affordable housing finance related mechanisms. A commuted sums methodology based on land value links better to market reality and processes, and is simpler to take account of in the early stages of site feasibility.

3.1.15 In practice, the Councils might not look to buy another site, but should in any

event have a strategy for monitoring, managing and spending these contributions. That strategy could include providing a variety of more creative affordable housing funding assistance to other local schemes, addressing priority needs and contributing to sustainable communities aims - again as required by PPS3.

3.1.16 We will now work through our calculation methodology, which is based on a formulaic approach to approximating the land value that needs to be replaced elsewhere, and then allowing also for the cost of acquiring and servicing that land.

3.1.17 We start by taking the value of the land as if no affordable housing were required on site, calculated as a percentage of the market sale value of a property. This percentage would reflect the pre-affordable housing (0%) residual land value results, as taken from this study (Appendix Ia). For this purpose, and for consistency with the earlier work, we have applied a proportion of 34.9% of the relevant property or properties Open Market Value (OMV). This was derived from all relevant 0% affordable housing appraisals – from sites in range 2 to 25 units – carried out for the 2007 study. An allowance is added for acquisition and (potentially) for servicing costs that would need to be borne in the case of replacing the land elsewhere in the market.



3.1.18 In summary, the indicative payment figures (see Figure 2 below) are arrived at by the following steps:

a) Open market value (OMV) of relevant or comparative property

(depending on to what degree the formulaic approach is to be site-specific, Borough/District-wide, etc.

b) Multiply by the residual land value percentage. We have used 34.9%, derived as above at 3.1.17 (note that it would be possible to look at this in a variety of ways, including on a more site-specific basis).

c) Add 15% of the result of a x b to reflect site acquisition and servicing

costs. This gives the per unit sum. d) Apply to the relevant site number and proportion (in this case 10%,

20%, 30% or 40%). Worked example (to illustrate the suggested calculation): (step a above) Scheme of 3 no. 3-bed houses selling at Value Point 3 = £266,600 each. Requirement for 20% equivalent affordable housing contribution (payment in- lieu): 20% proportion means 0.6 unit for affordable housing (3 x 20%). The per (whole) unit equivalent sum is then calculated as follows: (step b) £266,600 x 34.9% = indicative land (plot) value for that unit £93,043.

(step c) Add 15% acquisition and servicing cost. £93,043 x 115% = £107,000.

(At 20% target) scheme triggers requirement for 0.6 unit. So indicative financial contribution would be:

(step d) £107,000 x 0.6 = £64,200

3.1.19 Figure 2 sets out the “per unit” indicative financial contributions which we have arrived at on this basis, using our property size and wider assumptions. These figures are as applied in Appendix I appraisals of notional sites of 1 to 4 units assuming 10%, 20%, 30% and 40% proportions of affordable housing contributed. For the purposes of this study, we have looked only at notional sites containing 3-bed houses and have highlighted the appropriate column for clarity. The same approach would be used for all house types.



Figure 2: Indicative Financial Contributions In-lieu of Affordable Housing. Figures Used as Basis for Appraisals (source: extracted from Appendix I) Value Point 1 Bed Flat 2 Bed Flat

OMV £

Indicative £ payment

OMV £ Indicative £

payment 1 £132,600 £53,219 £171,600 £68,872 2 £142,800 £57,313 £184,800 £74,169 3 £158,100 £63,453 £204,600 £82,116 4 £173,400 £69,594 £224,400 £90,063 5 £188,700 £75,735 £244,200 £98,010 6 £204,000 £81,875 £264,000 £105,956 Value Point 2 Bed House 3 Bed House 4 Bed House

OMV £


OMV £ Indicative £ payment OMV £


1 £197,600 £79,307 £223,600 £89,742 £262,600 £105,395 2 £212,800 £85,407 £240,800 £96,645 £282,800 £113,502 3 £235,600 £94,558 £266,600 £107,000 £313,100 £125,663 4 £258,400 £103,709 £292,400 £117,355 £343,400 £137,824 5 £281,200 £112,860 £318,200 £127,710 £373,700 £149,984 6 £304,000 £122,010 £344,000 £138,064 £404,000 £162,145

3.1.20 The Councils could decide to further simplify the above type of approach with

District and Borough-wide single figures per property type. If this route were preferred then an average or mid-range figure from the above could be selected for each unit type. This would mean taking an average approach, with the outcome more favourable from some sites than others. In the case of local markets and typical value levels, as discussed, the point selected could be the Figure 2 indicative contribution figures relating to Value Point 3, or perhaps to Point 4. Point 3 would in our view be reasonably representative if a “one size fits all” approach were to be set out in District and Borough-wide guidance.

3.1.21 Alternatively, the approach could be worked up further to reflect a more local residual land value percentage (rather than a District or Borough-wide approach). This could then be applied to the property value in our formula. With reference to that range of RLV outcomes (as a % of GDV) set out in Appendix Ia, figures of 23.5% to 44.0% of GDV were indicated depending on the strength of values on any given site. For this study, however, we applied a figure of 34.9% of OMV being the average outcome (% of GDV remaining for residual land value) from all previous relevant 0% affordable housing appraisals – sites in the range 1 to 25 units.



3.1.22 Whether a District/Borough-wide or more location-specific route is taken will depend on resource availability (in terms of the number of staff available to carry out negotiations on the collection of financial contributions and the monitoring of those). Overall, the Councils may feel that a “one size fits all” simple guide to contribution figures by dwelling size would be the best compromise in terms of clarity, resourcing and operation. We feel that would serve well in terms of informing land owners’ expectations and supporting the necessary negotiated approach.

3.1.23 Overall, this formulaic approach based on land value and selected one point as a guide is felt to provide a sound basis. Whilst something more complex and reflective of particular local area values and land residuals could be used applying the same formulaic method, this fits with our overall feel for North Hertfordshire and Stevenage values given their level and consistency. In reality a replacement site, or scheme to be funded with the monies collected, could be anywhere within the District or Borough boundaries given the Local Authority-wide high affordable housing need, which perhaps again fits with a “one size fits all” approach to this aspect.

3.1.24 The scenarios investigated here overlap with the on-site approach studied. This provides the Councils with a range of options from which to formulate affordable housing policy. The formulaic approach suggested could be applied to a larger site (i.e. above the potential threshold for on-site affordable homes provision) in exceptional circumstances. The relevant higher proportion of affordable homes would be reflected in the calculation in such a case.

3.1.25 The Councils may also wish to consider developing policy which can fairly and effectively derive developer/landowner financial contributions towards meeting affordable housing needs, on an equivalent basis, from the type of very “upmarket” housing schemes. Such schemes may involve the development of a single, or a very small number of, very large and valuable homes. For example, a property type of 300 square metres (sq m) could very broadly generate a development value of approximately three times that for a more typical family home of say 100 sq m, and so on. Thus, in developing its detailed approach, the Councils could consider a parallel mechanism allied to property/development size to drive the formulaic type of approach to land value equivalent that we have suggested.

3.1.26 This could start with considering the property size to be developed so as to establish the equivalent number of more typical homes in terms of value. That equivalent number could then be applied within the suggested formula (See Note 1 below). Alternatively, there could be a straight calculation applying the relevant affordable housing proportion to the size (sq m) and value (£/sq m – as with our range of sales rates) – see Note 2 below.



By way of example:

Single large property developed at 300 sq m (as for example might trigger affordable housing requirement currently through site area criteria rather than site numbers)

1. 300sqm property in value terms is approximately equivalent to say 3 x 100 sq m properties:

Applying affordable housing proportion of 20% to 3 properties would mean a contribution based on 0.6 of a 100 sq m property. This aligns to 0.6 of our 4 bed property contribution of say £137,824 at Value Point 4 = contribution of £82,694.

2. Same 300 sq m market property – Adams Integra formulaic approach applied:

@ sales rate say £3,400/sq m = selling price (GDV) £1,020,000 multiplied by suggested average RLV (% of GDV) 34.9% = £355,980 (indicative land value for market property).

Plus 15% acquisition of and servicing of land = £409,377. Multiplied by relevant affordable housing equivalent proportion, again say 20% = contribution of £81,875.

3.1.27 In considering financial contributions calculations (particularly where, in lieu of

on-site provision on larger schemes, PPS3 states the benefit secured should be of broadly equivalent value), Adams Integra’s view is that care should be taken not to apply the approach inequitably. In this context the appropriateness of effectively expanding the site size to add back in what would have been the affordable housing content needs to be considered in planning terms. Of course, if applied in such a way there would also be additional viability impacts, to be tested, as compared with those modelled in this study.



3.2 Results

3.2.1 Appendix I sets out the results of the appraisals carried out on sites of between 1 and 4 units based on the methodology discussed above. The table in Appendix I shows the results by Value Point (1 to 6) and at each point shows the results of the appraisals where 0%, 10%, 20%, 30% and 40% affordable housing equivalent financial contribution has been assumed. It also details the financial contribution calculated as per the above methodology for these notional sites.

3.2.2 The reduction in residual land value varies between 64% (from a 0% to a 40% requirement) on a 1 or 2 unit scheme in Value Point 1 to approximately 9% (from a 0% to 10% requirement) on a 2 unit scheme in Value Point 6 – the range of results investigated.

3.2.3 The results follow the same general pattern as seen for the on-site appraisals in the original 2007 study with viability improving from Value Point 1 through to Value Point 6. The least viable of the appraisals are seen where a 40% affordable equivalent is required at the lowest value points.

3.2.4 There appears to be little relative difference in terms of viability between a 1 unit scheme and a 4 unit scheme. The basic trend in the results show, as expected, that the higher the financial contribution sought, the greater the impact on residual land value.

3.2.5 However, on sites as small as these, the Councils will have to bear in mind

the actual sums of money likely to remain available for land purchase after the introduction of a financial contribution. Although RLVs remain positive at all value points, it is not possible to define definitive cut-off points where a certain level of contribution will be viable, and where it will not. This is due to a number of factors including landowner’s expectation, existing use and potential alternative uses of a site. This also has to be viewed in the context of site specifics. What one landowner finds acceptable as a payment for their land will be different from another – this is especially true on small sites where we could be discussing garden plots or residential redevelopment etc. In real monetary terms, the residual value of land may reduce to the point whereby landowners of small plots do not feel there is sufficient recompense. Equally, where existing residential units are bought up and demolished to make way for a larger number of units viability issues may occur. This is due to the high existing use of the residential properties that have been demolished which needs to be overcome before the new development can become viable – a high enough RLV needs to be generated to finance the purchase of units which are going to be demolished.

3.2.6 What we can do is make reasoned judgements on the relative impact of increased financial contributions on a scheme. Although the results show



positive residual land values across all value points and at all proportions of affordable housing contribution, between Value Points 1 and 2 in our view there are likely to be viability difficulties where 30% or 40% equivalent is assumed. Residual land values drop significantly at all value points but here they approach minimal values and show very large decreases relative to the 0% (no affordable housing contribution) starting position. Where a 10% or 20% contribution is considered, results look more positive, with higher residual land values (or smaller reduction compared to existing 0% contribution policy).

3.2.7 Viability improves with increasing property (completed new build unit) values

as amounts available for land increase. By moving the same notional scheme from Value Point 1 to 6 we see land value (RLV) increased significantly. This applies both before and after affordable housing requirements are applied.

3.2.8 The exact relationship between the property values and the indicative

commuted payment levels in the particular scheme mix, affects results relative to each other.

3.2.9 At Value Point 3, results improve so that with 10% or 20% financial contribution, results are relatively strong. With increasing values, much stronger results are seen overall. However, even with stronger values, say from Value Point 4, some potential viability difficulties may be indicated if as much as a 40% equivalent affordable housing proportion were sought. Notwithstanding this finding, residual land values improve to the point where, viability should be workable with a financial contribution not exceeding 20% affordable housing equivalent. As with all aspects of such policy positions, this is with the normal caveats applying (with regard to site specifics, being allied to a target approach as with on-site provision, etc).

3.2.10 We consider that there are likely to be difficulties achieving a 30% or 40% affordable housing equivalent financial contribution across North Hertfordshire and Stevenage from these smallest sites on a regular basis. Given the likelihood that increased occurrence of lower value point sales values will be seen across the area in the current and short term market conditions, there may even be difficulties achieving a 20% financial contribution with guaranteed regularity. This is because although, from the evidence (Appendix III), property values in Summer 2008 are at similar levels to those seen when the previous study was conducted, sales volumes have dramatically reduced. This dominant market feature appears to be leading potentially to relatively large discounts to sales prices from those advertised.

3.2.11 Therefore, although we would recommend a target of up to 20% affordable

housing financial contribution, the Councils will, in our view, have to place an emphasis on adopting a practical approach to negotiations. This is an approach which should be adopted in any event, but the current market



means focusing on this point. The Councils will need to bear in mind that in the current market some sites may struggle to achieve these fairly modest targets. They will be impacted by affordable housing policy for the first time (typically the greatest viability impact). In addition it often means that the land value generated by the small schemes placed on those smaller sites is marginal when compared with existing or alternative use value.

3.2.12 This discussion does not alter our view that ambitious targets can and should

be set, based on the extent of need. We consider that it would be impractical to adjust targets up or down on what could be a regular basis in response to market movements or other particular viability issues. Such an approach would not provide clarity.

3.2.13 Alongside the discussion above, North Hertfordshire’s preferred option is to achieve a 20% on-site affordable housing target at 5 units. A financial contribution equivalent to this (or potentially at 10% equivalent) beneath the 5 unit on-site threshold would therefore be an appropriate, more workable and sustainable policy position than any higher target on smaller sites. As with the on-site provision route, flexibility needs to be considered, with viability related negotiations taking place in the context of the valuation and site-specific issues as raised in this study. The positions wherever pitched will need to be regarded as targets.



4 CONCLUSIONS, RECOMMENDATIONS and COMMENTARY

Viability principles as they affect smaller sites 4.1.1 Unless particular local characteristics (for example, in terms of site supply)

indicate to the Councils otherwise, from our findings here, as with all other studies, we can see that on a like-for-like basis, site size alone is not a determinant of viability. It is the impact of any new policy compared to existing that has a greater effect on these smaller sites.

4.1.2 There is no right or wrong answer in terms of viability, to suggest which

threshold point would be viable and which would not. Thresholds have always been arbitrary (for example, why would a scheme of 15 units provide affordable housing but one of 14 not do so?). There may be lower risks, and smaller planning obligations burdens on smaller sites but, conversely, there might not the same opportunities for savings through economies of scale. There are a range of factors which could well balance out or alter outcomes either way dependent on the circumstances. The outcomes relate to site specifics, crucially including value levels; it is simply not possible to say that a smaller site will be more or less viable than a larger one.

4.1.3 Viability is principally value rather than site size driven. Notwithstanding this general principle, however, there are two key features of typical smaller sites which deserve consideration in relation to the proportions selected.

4.1.4 Firstly, in likely monetary terms, on smaller schemes the residual value of the land may reduce to the point whereby owners of smaller sites will not feel there is sufficient justification to release their land. As an example, if we are envisaging the development of a garden plot for a 4 unit housing scheme, the RLVs remaining after the application of a 30% or 40% policy may not be strong enough to incentivise the owner to sell. Equally, where one or two existing properties are required to be bought by a developer to create a larger site for higher density housing, these will have relatively high “existing use values” – i.e. their market value will be high prior to any development taking place – these values need to be overcome before a proportion of affordable housing/other infrastructure can also be accommodated.

4.1.5 Secondly, the sharpest viability impacts are predominantly on sites which

provide affordable housing contributions (whether on or off-site) for the first time, as opposed to sites where an increased proportion is sought over that already required. We consider that carefully judged policies relating to smaller sites would be viable, and could be made workable from a practical point of view. As with all such policies, their workability would depend to a large extend on early knowledge of policies and appropriate land value expectations on the part of landowners.



Potential issues with on-site delivery – smaller sites

4.1.6 In addition, practicalities of delivery on the very small sites may be more of an issue than viability alone, for example scheme design/integration of affordable homes with the market housing, sustainable management, dealings with RSLs, marketing issues and perceptions, isolation of tenants, etc.

4.1.7 Relatively dispersed affordable housing stock can also result from an

affordable housing requirement on very small sites, which may be an issue for RSLs from a management perspective, and this needs to be considered. Our Local Authority and RSL clients and contacts have taken varying views on the sustainability of this. Key points - Recommendations

4.1.8 It is likely to be impractical to seek on-site affordable housing below 5 units. However, purely from practical and viability viewpoints we are able to support lower/introductory proportions of affordable housing being sought by way of financial contributions from sites of less than 5 dwellings.

4.1.9 A lower introductory proportion of 10% to 20% equivalent affordable housing provides stronger results than with higher proportions. A key way of reducing the large first time impact on smaller sites is to seek lower such “introductory” proportions of affordable housing on sites below the current policy threshold(s).

4.1.10 Therefore, respecting the sliding scale principle set out in our previous study and with carefully judged contribution levels our results suggest that a 10% to 20% affordable housing equivalent could be workable in viability terms on sites of fewer than 5 units. We must highlight however, the need to consider the wider planning policy framework and whether that allows this scope. Forthcoming inspector’s decisions should help to inform this further. We have looked at this in terms of viability only.

Related commentary, advice and limitations 4.1.11 A 10% to 20% equivalent proportion from sites of 1 to 4 dwellings would

continue the graduated approach to requirements already being proposed for sites of 5 or more (sliding scale). It would have a useful effect in aiding viability again compared with higher proportions. The Councils may take the view, however, that another different level of requirement could create a more complex policy.

4.1.12 The Councils will wish to consider exactly how an expanded approach to smaller sites might work and be set out in terms of detail. They will also need



to consider the drivers behind such an approach, wider evidence for it and therefore the likely benefits from it – i.e. looking at local characteristics, needs and site supply patterns for example.

4.1.13 As a part of considering the detail for application, the Councils will also need

to consider whether the principle would apply to sites of 1 or 2 dwellings plus. We assume that it would not apply to replacement dwellings. As with all such policy, there should be clarity as to whether it applies to all, or to net numbers (i.e. after allowing for any existing dwellings on a site or within a conversion) of new dwellings.

4.1.14 This study necessarily provides an overview of viability. It is not a substitute for site-specific appraisals or intended to prejudice any such discussions. Site-specific work would normally take precedence, based on more specific information relating to the particular circumstances. This study is intended to support North Hertfordshire District’s and Stevenage Borough’s policy consideration processes, and should not be used for other purposes.

4.1.15 The residual land value (RLV) figures stated are indicative, based on the

notional schemes, development value and range of other assumptions Adams Integra has used and explained.

4.1.16 The importance of considering existing and/or alternative use values,

amongst the wide range of variables discussed, has been acknowledged in the study. This, again, is a highly site-specific factor. Commercial values are very sensitive to location and it is not normally possible in this type of overview exercise to provide specific viability advice as to whether certain value levels will be outweighed by particular residential development proposals. Site specifics will need to be considered, in light of the clear target and practical, negotiated approach advocated in this report.

4.1.17 The study advises only in respect of viability and, where appropriate, practical

housing and development issues, based on our results and experience. It does not deal with the wider issues and planning scope to pursue particular policy options or approaches.

4.1.18 The study is necessarily based on a snap-shot in time, in terms of information

gathered and assumptions made. 4.1.19 We encourage the Councils to do their own monitoring of the local market

through routes such as the Land Registry and keeping an eye on the pricing of developments locally, etc. This would assist with maintaining a feel for development viability from the base point this study provides.

4.1.20 The housing market-led data, as for example used in the financial

contributions calculations, could be updated by reference to local house price



information trends from the Land Registry, such as we have reported in Appendix III. With reference to the potential financial contributions route (whether in lieu of affordable housing on sites of up to 5 dwellings or large sites in exceptional circumstances), the Councils will also need to consider indexing mechanisms for particular Section 106 agreements as there is often a significant time lapse between the agreement and payment dates.

4.1.21 The Councils will also need to consider policy for the use of financial contributions, where those are to be used and over what timescale through SPD or similar.

4.1.22 It will also be important for the Councils to detail contingency plans in the event of failure to meet affordable housing targets (potentially through short- term worsening of housing markets).

4.1.23 Given that assumptions have been made on areas such as planning

obligations costs, movements in such factors should be borne in mind and the study revisited or updated should those materially alter so as to affect the relationship between values and costs. In the same way, the growing areas of eco-friendly construction (for example the Code for Sustainable Homes), renewable energy and other sustainability issues should be monitored – regarding how they might affect development costs (and perhaps even values in the longer term). If the Councils seek to bring in significant policies in such areas, then those may well need to be considered in light of the collective costs scenario and viability.

End of Main Report Appendices follow

August - September 2008



Appendices Appendix I - Financial Contributions in lieu of on-site provision Appendix Ia - Average Residual Land Value as Percentage of GDV

on Sites of 0% Affordable Housing Appendix II - Planning Obligation Assumptions

Appendix III - North Hertfordshire District & Stevenage Borough

Property Values Report


Appendix I

Financial Contributions in lieu of on-site provision

Value Point 1Scheme Size Mix 0% Affordable Equivalent 10% Affordable Equivalent 20% Affordable Equivalent 30% Affordable Equivalent 40% Affordable Equivalent

RLV (£) RLV (% of GDV) Commuted Payment RLV (£) RLV (% of GDV) Commuted Payment RLV (£) RLV (% of GDV) Commuted Payment RLV (£) RLV (% of GDV) Commuted Payment RLV (£) RLV (% of GDV)1 House 1 x 3-bed house £53,975 24.1% £8,974 £45,254 20.2% £17,948 £36,533 16.3% £26,923 £27,813 12.4% £35,897 £19,092 8.5%2 Houses 2 x 3-bed houses £107,949 24.1% £17,948 £90,508 20.2% £35,897 £73,067 16.3% £53,845 £55,625 12.4% £71,793 £38,184 8.5%3 Houses 3 x 3-bed houses £160,305 23.9% £26,923 £134,404 20.0% £53,845 £109,600 16.3% £80,768 £83,438 12.4% £107,690 £57,276 8.5%4 Houses 4 x 3-bed houses £213,739 23.9% £35,897 £179,206 20.0% £71,793 £144,672 16.2% £107,690 £111,250 12.4% £143,587 £76,368 8.5%











Value Point 1-Bed FlatsCommuted

Payment (Per Unit)

2-Bed Flats Commuted Payment(Per Unit) 2-Bed Houses

Commuted Payment (Per

Unit)3-Bed Houses

Commuted Payment (Per

Unit)4-Bed Houses Commuted Payment

(Per Unit)

1 £132,600 £53,219 £171,600 £68,872 £197,600 £79,307 £223,600 £89,742 £262,600 £105,3952 £142,800 £57,313 £184,800 £74,169 £212,800 £85,407 £240,800 £96,645 £282,800 £113,5023 £158,100 £63,453 £204,600 £82,116 £235,600 £94,558 £266,600 £107,000 £313,100 £125,6634 £173,400 £69,594 £224,400 £90,063 £258,400 £103,709 £292,400 £117,355 £343,400 £137,8245 £188,700 £75,735 £244,200 £98,010 £281,200 £112,860 £318,200 £127,710 £373,700 £149,9846 £204,000 £81,875 £264,000 £105,956 £304,000 £122,010 £344,000 £138,064 £404,000 £162,145

Commuted payment calculated by:1. Taking average residual land value as percentage of GDV from all appraisals with zero affordable housing = 34.9%2. Multiplying this figure by the open market unit value3. Adding 15% on-costs4. Multiplying this figure by the equivalent affordable housing percentage (20% in this example).

Example - 3 Unit Housing Scheme of 3 x 3-bed houses (Value Point 3):3- bed houses at £266,600 x 0.349 =£93,043

£93,043+15% = £107,0003 x 3-bed houses x 20% = 0.6 houses x £107,000 =£64,200

Commuted Payment = £64,200

Appendix I - North Hertfordshire District & Stevenage Borough Council Financial Contributions in lieu of on-site provision - Value Points 1 to 6: 0%, 10%, 20%, 30% & 40% Equivalent Affordable Housing Provision - Sites Below 5 Units

Appendix I

Appendix Ia

Average Residual Land Value as Percentage of GDV on

Sites of 0% Affordable Housing

Band1 Band 2 Band 3 Band 4 Band 5 Band 6 Housing Mix2 Houses 26.1% 29.4% 33.8% 37.4% 39.7% 42.2% 2 x 3-bed houses3 Houses 27.5% 30.9% 34.4% 37.9% 40.8% 43.2% 3 x 3-bed houses4 Houses 27.7% 31.0% 34.4% 38.5% 40.9% 43.3% 4 x 3-bed houses5 Houses 28.8% 32.0% 36.0% 38.9% 41.6% 44.0% 3 x 3-bed houses; 2 x 2-bed houses10 Flats 23.8% 27.3% 31.5% 35.1% 38.2% 40.7% 5 x 1-bed flats; 5 x 2-bed flats10 Houses 28.6% 31.8% 35.8% 39.0% 41.8% 44.1% 5 x 2-bed houses; 5 x 3-bed houses15 Flats 23.5% 27.1% 20.7% 35.1% 38.2% 40.8% 5 x 1-bed flats; 10 x 2-bed flats15 Houses 28.4% 31.6% 35.5% 38.8% 41.6% 43.9% 5 x 2-bed houses & 10 x 3-bed houses20 Mixed 25.9% 29.2% 33.2% 36.6% 39.4% 41.8% 4 x 2-bed flats, 4 x 1-bed flats; 8 x 3-bed houses, 4 x 2-bed houses25 Mixed 25.9% 29.2% 33.2% 36.6% 39.4% 41.8% 5 x 2-bed flats, 5 x 1-bed flats; 10 x 3-bed houses, 5 x 2-bed housesAverage 26.6% 29.9% 32.9% 37.4% 40.1% 42.6%Overall Average 34.9%

Unit Value Point 1

Value Point 2

Value Point 3

Value Point 4

Value Point 5

Value Point 6Band

1-Bed Flat £132,600 £142,800 £158,100 £173,400 £188,700 £204,0002-Bed Flat £171,600 £184,800 £204,600 £224,400 £244,200 £264,0002-Bed House £197,600 £212,800 £235,600 £258,400 £281,200 £304,0003-Bed House £223,600 £240,800 £266,600 £292,400 £318,200 £344,0004-Bed House £262,600 £282,800 £313,100 £343,400 £373,700 £404,000

Appendix Ia: Average Residual Land Value as Percentage of GDV on Sites of 0% Affordable Housing - North Hertfordshire District & Stevenage Borough Council Viability Study

Appendix Ia

Appendix II

Planning Obligation Assumptions

Planning Infrasructure Cost Assumptions - North Herts & Stevenage CouncilsPrivate, Intermediate Affordable Tenures Affordable (Social Rent Only)

North Herts & Stevenage 1-BF 2-BF 2BH 3BH 4BH 1-BF 2-BF 2BH 3BH 4BHCommunity Centres/Halls £236.88 £334.64 £334.64 £471.88 £577.16 £236.88 £334.64 £334.64 £471.88 £577.16Leisure £391.86 £553.58 £553.58 £780.61 £954.77 £391.86 £553.58 £553.58 £780.61 £954.77Play Space £372.96 £526.88 £526.88 £742.96 £908.72 £372.96 £526.88 £526.88 £742.96 £908.72Pitch Sport £183.96 £259.88 £259.88 £366.46 £448.22 £183.96 £259.88 £259.88 £366.46 £448.22Informal Open Space £201.60 £284.80 £284.80 £401.60 £491.20 £201.60 £284.80 £284.80 £401.60 £491.20Sustainable Transport £500.00 £625.00 £625.00 £937.50 £1,250.00 £500.00 £625.00 £625.00 £937.50 £1,250.00Waste Collection £71.00 £71.00 £71.00 £71.00 £71.00 £71.00 £71.00 £71.00 £71.00 £71.00Total (District/Borough) £1,958.26 £2,655.78 £2,655.78 £3,772.01 £4,701.07 £1,958.26 £2,655.78 £2,655.78 £3,772.01 £4,701.07

County 1-BF 2-BF 2BH 3BH 4BH 1-BF 2-BF 2BH 3BH 4BHPrimary £0.00 £573.00 £1,127.00 £2,745.00 £3,415.00 £0.00 £2,043.00 £2,043.00 £3,880.00 £6,957.00Secondary £0.00 £474.00 £989.00 £3,204.00 £4,198.00 £0.00 £960.00 £960.00 £1,834.00 £3,358.00Nursery £0.00 £112.00 £224.00 £453.00 £539.00 £0.00 £290.00 £290.00 £610.00 £1,046.00Childcare £0.00 £46.00 £80.00 £166.00 £194.00 £0.00 £121.00 £121.00 £224.00 £373.00Youth £0.00 £11.00 £20.00 £59.00 £78.00 £0.00 £18.00 £18.00 £38.00 £77.00Library £102.00 £129.00 £153.00 £206.00 £228.00 £51.00 £71.00 £71.00 £102.00 £128.00Total (County) £102.00 £1,345.00 £2,593.00 £6,833.00 £8,652.00 £51.00 £3,503.00 £3,503.00 £6,688.00 £11,939.00Total Planning Contribution £2,060.26 £4,000.78 £5,248.78 £10,605.01 £13,353.07 £2,009.26 £6,158.78 £6,158.78 £10,460.01 £16,640.07Source: North Hertfordshire District Council LDF Planning Obligations Supplementary Planning Document November 2006

Notes:1.For the purposes of this study we have assumed no differences between flats and houses in terms of Waste collection. 2.Stevenage Borough planning obligation costs have been taken to be the same as North Herts. 3.For Sustainable Transport, given the notional nature of this study, an average of the Town Centre and "Other" areas figures has been taken.

Appendix II

Appendix III

North Hertfordshire District &

Stevenage Borough

Property Values Report

Appendix III

1

Supplementary Property Values Report for Stevenage Borough and North Hertfordshire District Introduction Adams Integra was asked to undertake additional work to supplement its previous (September 2007) viability overview study for North Hertfordshire District and Stevenage Borough Councils. This was in the context of the Councils giving further consideration to policy positions which could potentially seek to secure financial contributions from the smallest sites, i.e. those falling below the threshold for on-site affordable housing provision. Thus all sites would contribute, and the further viability study would concentrate on sites of 1 to 4 dwellings. In other cases, Adams Integra has considered this type of approach as a possible extension to the sliding scale principle, which we put forward in the 2007 study. To inform this supplementary work, Adams Integra revisited the property values research it carried out for the main, original study. This was again a key part of considering viability, particularly bearing in mind the widely reported deterioration of the market over the last year. In seeking to update our values research, firstly we looked at the Land Registry House Prices Index to see what had happened to values according to that data – between May 2007 when the initial research was carried out and July 2008 (at the point of fixing assumptions for this supplementary study). We carried out a similar review of property advertised as available on www.rightmove.co.uk to that for the 2007 study. Again in the same way, we reviewed available new build property (as at July 2008) and also considered the latest RICS and CLG (Government’s Communities and Local Government Department) market reporting. This updated information and research is outlined below. This can only be a snapshot. Housing Market Overview – July/August 2008 Land Registry The Land Registry House Price Index for June 2008 (released 28 July 2008) showed for England and Wales a monthly house price change of -1% (fall of 1%) and a change of the preceding year of 0.1% (house price increase of 0.1%). Other headlines of the Index were: ‘Accounting for seasonal adjustments, the data for June marks the tenth consecutive (monthly) decrease in annual price change in England and Wales.’ ‘This is sustained evidence of the weakening in annual growth rates that began approximately ten months ago.’

http://www.rightmove.co.uk/�

Appendix III

2

‘The average house price in England and Wales now stands at £180,781, which is a decrease from last month.’ Figures for the South East region showed a monthly change of -0.4% (so a greater decline for the month) and an annual change of 1.3% (a marginally more positive picture than the one for England and Wales overall. This put the average house price in the South East at £225,747. Looking at the Index data for Hertfordshire, the most local available in this case, the figures showed a monthly change of -0.5%, but an annual change still notably positive (when compared with the England and Wales or South East figures) at 3.6%. This placed the Land Registry’s average house price in Hertfordshire for June at £254,371, considerably higher than the England and Wales, and South East overall levels. It is possible to see this trend graphically represented at the Land Registry’s web-site, where the month on month index changes, and thus house price movements, are indicated. The graphs indicate that Hertfordshire prices peaked around March 2008, having risen notably from the Spring of 2007 to that point, but then from March 2008 starting falling away notably – a trend which has continued, and is ongoing. The above figures are borne out by looking at Hertfordshire, for which in May 2007 the Index stood at 188.7. For July 2008, the index is at 195. This represents a 3.34% increase in the index from May 2007 to July 2008. This more detailed information for Hertfordshire shows how the monthly change remained positive through to March 2008, when it turned negative – with signs that the monthly rate of decline is increasing. This trend has had the effect of reducing the monthly reported annual house price change from 9 – 10% where it remained through the second half of 2007 quite steeply down over the last 6 months to the modest annual increase figure we see in the June figures for Hertfordshire (to just over 3%, as above). So the Land Registry data indicates Hertfordshire house prices marginally ahead of where they were in May or July of 2007. Headlines and figures sourced from Land Registry House Price Index June 2008

However, price information takes a while to filter through and be reported by the Land Registry. Given what appears to be an established trend of declining house prices, it may be that the very latest data, when available, will show local prices at best equivalent to their summer 2007 levels, or perhaps even beginning to fall below those levels. The Land Registry also gives details of how sales volumes vary, in this case expressed as the numbers of sales completing monthly in Hertfordshire. Data for the two most recent months is not used as part of this comparison due to the lag in the registration of sold properties.

Appendix III

3

The monthly sales volume for Hertfordshire rose to approximately 2,500 in early summer 2007, at which level it plateaued in July and August 2007. Sales volumes then dropped steeply (by about 10%) in the early Autumn, recovered and stabilised around October and November, but then fell away steeply through the winter into 2008. By January 2008 the volume was down to about 1100 sales per month, where it stayed (approximately) through to the May 2008 latest figures. So based on the latest information, sales volumes have been running at about half their recent peak level. Once again it is the new build values that are of key relevance to studying development viability, given that such schemes are the supply source of the planning-led affordable housing being considered. A view of those compared with the overall market represented by the Land Registry data therefore needs to be considered to inform judgements behind the setting of assumptions for such a study. Therefore, for this update Adams Integra undertook a review of new build property available at the time. That work is contained later in this Appendix. RICS The July RICS (Royal Institution of Chartered Surveyors) Housing Market Survey was published under the headline: ‘Tentative signs that housing activity may be nearing a floor’. Key features noted were: ‘New buyer enquiries, agreed sales, and sales expectations post modest improvements.’ ‘Sales to stock ratio indicates further price falls in the near term.’ A marginally reducing proportion (although still in excess of 85%) of chartered surveyors were reporting falling house prices. ‘Completed sales per surveyor (over the last three months) continued to fall, pulling down the ratio of sales compared to the stock of unsold property on the market; so this key indicator of market slack (and a near term indicator of future price trends) fell to 17.0 from 18.2. However, to put this number in context, it is still comfortably above the lows seen in the early 1990s, when it briefly dropped to 11.4.’ ‘In terms of the outlook, the July survey lends further support to the notion that activity may be beginning to stabilise, albeit at a low level.’ The market comments section at the rear of the RICS monthly survey for July included a contribution from a Hertfordshire agency stating: ‘We are busier, with more offers and sales agreed, but still have problems holding chains together.’ RICS housing market survey United Kingdom, July 2008

CLG House price Index June 2008 This statistical release stated the following: ‘UK house prices were 0.6 per cent higher than in June 2007’ ‘…..prices fell by 1.1% in the quarter ending June 2008. This compares with a fall of 0.1 per cent for the quarter ending March 2008…’

Appendix III

4

In England, this meant the annual rise in prices ‘down from 3.1% in the year to May 2008, to 0.5% (to the year) to June…’ ‘The fall in UK prices between May and June 2008 can be attributed to decreases in average prices for flats (3.6 per cent), semi-detached houses (0.9 per cent) and terraced houses (0.3 per cent). The fall is offset by an increase in average prices for bungalows (0.8 per cent) and detached houses (0.7 per cent). The trends displayed in the index showed prices had risen marginally in the South East, London, East and Yorkshire and Humberside. In all other English regions covered, prices were marginally below their levels 12 months ago. CLG House Price Index June 2008

Overview of Index data The information reviewed above indicates house prices approximately where they were at the time of our original study research (May 2007), but with latest information to filter through, and this picture to be compared with our review of the local market (re-sale asking prices trends) and updated new build scheme pricing information, where available, as follows. The significant decline in the volume of sales (and the effect that may well have on future pricing) is clearly a major issue, more so than price levels in isolation. Re-sale (overall market) Property – Stevenage Borough The tables below show the marketing prices of various types of property within Stevenage Borough. The data was collected from www.rightmove.co.uk. The values collected from RightMove are necessarily largely asking prices (although some are “subject to contract” sale prices) and as such it is likely that actual sales values will be lower. For each of the wards there are two tables. Great Ashby is also included for reference purposes in the same way. The first table shows the average price of each unit type and the second table shows the data’s average, minimum, 1st quartile, median (2nd quartile), 3rd quartile and maximum points to show the range of pricing and to allow manipulation of it. Some cells are left blank as there was not enough data to provide a meaningful sample.


Appendix III

5

MARKETING PRICE OF PROPERTY IN STEVENAGE BOROUGH Bandley Hill 1 Bed 2 Bed 3 Bed 4 Bed Detached - £278,500 £305,989 Semi-Detached £198,380 £229,817 £317,500 Terraced £177,496 £198,485 £275,000 Flats £102,485 £135,995

Overall Average Minimum

1st Quartile Median

3rd Quartile Maximum

1-Bed Flat £102,485 £85,995 £96,461 £104,475 £110,499 £114,995 2-Bed Flats £135,995 £129,995 £129,995 £139,995 £139,995 £139,995 2-Bed Houses £189,115 £174,995 £179,984 £184,975 £191,246 £220,000 3-Bed Houses £210,086 £179,995 £188,975 £214,500 £224,225 £278,500 4-Bed Houses £304,993 £275,000 £288,734 £302,500 £316,250 £350,000

Data Sourced from: www.rightmove.co.uk – July 2008 Bedwell 1 Bed 2 Bed 3 Bed 4 Bed Detached £179,999 £289,950 £279,950 Semi-Detached - £208,748 £239,975 Terraced £156,375 £176,759 £207,832 Flats £110,876 £155,379


1st Quartile Median



Data Sourced from: www.rightmove.co.uk – July 2008



Appendix III

6

Chells 1 Bed 2 Bed 3 Bed 4 Bed Detached #DIV/0! £269,998 £313,989 Semi-Detached #DIV/0! £231,990 £287,250 Terraced £175,398 £189,829 £226,650 Flats £110,418 #DIV/0!


1st Quartile Median


1-Bed Flat £110,418 £99,995 £102,495 £107,995 £109,975 £139,995 2-Bed Flats #DIV/0! £0 #NUM! #NUM! #NUM! £0 2-Bed Houses £175,398 £159,995 £169,995 £173,500 £179,245 £200,000 3-Bed Houses £205,947 £165,000 £174,999 £189,950 £231,238 £279,950 4-Bed Houses £282,440 £219,950 £237,375 £307,475 £314,999 £330,000


Great Ashby 1 Bed 2 Bed 3 Bed 4 Bed Detached - £263,543 £325,514 Semi-Detached - £241,481 - Terraced £191,216 £231,414 - Flats - £172,186


1st Quartile Median


1-Bed Flat - - - - - - 2-Bed Flats £172,186 £154,950 £162,995 £162,995 £184,995 £194,995 2-Bed Houses £191,216 £174,950 £179,950 £189,995 £196,213 £215,000 3-Bed Houses £242,988 £199,950 £229,950 £239,950 £264,950 £300,000 4-Bed Houses £325,514 £269,950 £297,450 £328,500 £356,246 £375,000

Data Sourced from: www.rightmove.co.uk – July 2008 Longmeadow 1 Bed 2 Bed 3 Bed 4 Bed Detached #DIV/0! £272,475 £358,743 Semi-Detached #DIV/0! £286,225 £323,300 Terraced £175,000 £197,750 £202,500 Flats £143,724 £139,950


1st Quartile Median







Appendix III

7

Chells Manor 1 Bed 2 Bed 3 Bed 4 Bed 5 Bed Detached - £249,973 £339,669 - Semi-Detached £187,789 £235,623 - - Terraced - £201,647 £244,997 - Flats - -


1st Quartile Median


1-Bed Flat - - - - - - 2-Bed Flats - - - - - - 2-Bed Houses £191,111 £179,950 - - - £209,995 3-Bed Houses £236,481 £164,995 £222,500 £244,995 £249,995 £299,995 4-Bed Houses £315,757 £209,995 £269,995 £319,995 £379,995 £399,950 5-Bed Houses - - - - - -

Data Sourced from: www.rightmove.co.uk – May 2007 Martinswood 1 Bed 2 Bed 3 Bed 4 Bed Detached - - £326,990 Semi-Detached £208,738 £268,317 - Terraced £184,970 £178,734 £320,000 Flats £110,981 £160,000


1st Quartile Median






Appendix III

8

Old Town 1 Bed 2 Bed 3 Bed 4 Bed Detached £320,000 £314,967 £312,475 Semi-Detached £239,277 £257,474 £289,983 Terraced £218,733 £229,106 £252,475 Flats £132,764 £168,324


1st Quartile Median



Data Sourced from: www.rightmove.co.uk – July 2008 Pin Green 1 Bed 2 Bed 3 Bed 4 Bed Detached - - - Semi-Detached - £235,679 £249,983 Terraced - £194,478 £209,906 Flats £109,756 £139,479


1st Quartile Median


1-Bed Flat £109,756 £94,950 £105,495 £113,500 £114,995 £116,995 2-Bed Flats £139,479 £130,000 £132,500 £139,950 £144,995 £149,950 2-Bed Houses - - - - - - 3-Bed Houses £202,489 £168,995 £179,995 £197,475 £221,213 £259,950 4-Bed Houses £220,836 £179,500 £199,950 £219,950 £242,475 £265,000

Data Sourced from: www.rightmove.co.uk – July 2008 Roebuck 1 Bed 2 Bed 3 Bed 4 Bed Detached £199,950 - £404,278 Semi-Detached £192,317 - £254,963 Terraced £165,830 £201,855 £229,986 Flats £111,484 £139,848


1st Quartile Median







Appendix III

9

Shephall 1 Bed 2 Bed 3 Bed 4 Bed Detached - £256,617 £330,240 Semi-Detached £164,863 £235,761 £289,982 Terraced £161,519 £187,477 £214,965 Flats £98,988 £149,613


1st Quartile Median



Data Sourced from: www.rightmove.co.uk – Jul 2008

St. Nicholas 1 Bed 2 Bed 3 Bed 4 Bed Detached - - - Semi-Detached £195,000 £215,817 - Terraced £166,970 £187,104 £193,311 Flats £104,523 -


1st Quartile Median


1-Bed Flat £104,523 £84,995 £98,734 £104,950 £104,995 £139,995 2-Bed Flats - - - - - - 2-Bed Houses £171,642 £154,950 £157,463 £170,000 £182,463 £195,000 3-Bed Houses £191,637 £164,995 £174,995 £189,950 £199,950 £240,000 4-Bed Houses £193,311 £175,000 £189,950 £195,000 £199,950 £210,000

Data Sourced from: www.rightmove.co.uk – July 2008 Symonds Green 1 Bed 2 Bed 3 Bed 4 Bed Detached - £290,833 £321,663 Semi-Detached £177,473 £251,087 - Terraced £170,833 £181,036 £182,495 Flats £120,870 £139,950


1st Quartile Median







Appendix III

10

Woodfield 1 Bed 2 Bed 3 Bed 4 Bed Detached - £287,978 £430,295 Semi-Detached £210,000 £262,970 £285,950 Terraced £179,986 £253,725 £276,200 Flats £235,000 £154,950


1st Quartile Median





Appendix III

11

STEVENAGE BOROUGH – Indicative values hierarchy and asking price analysis 2008

Average Asking Prices Analysis – Stevenage Borough Rank

(highest

to lowest)

Settlement 1 Bed Flats 2 Bed Flats

2 Bed House

3 Bed House

4 Bed House

All Properties

1 Woodfield £235,000 £154,950 £185,989 £269,260 £376,771 £313,698 2 Manor - £170,995 £189,823 £243,935 £318,951 £256,633 3 Longmeadow £143,724 £139,950 £175,000 £239,974 £326,527 £255,110 4 Old Town £132,764 £168,324 £236,239 £269,094 £337,132 £250,034 5 Great Ashby - £172,186 £191,216 £242,988 £325,514 £245,989 6 Martinswood £110,981 £160,000 £195,533 £224,955 £325,825 £210,798 7 Roebuck £111,484 £139,848 £182,056 £201,855 £317,983 £210,182

8 Symonds Green £120,870 £139,950 £171,940 £221,325 £265,996 £203,999

9 Bandley Hill £102,485 £135,995 £189,115 £210,086 £304,993 £203,421 10 Chells £110,418 - £175,398 £205,947 £282,440 £202,142 11 Shephall £98,988 £149,613 £162,188 £197,787 £279,881 £200,702 12 Pin Green £109,756 £139,479 - £202,489 £220,836 £179,690 13 St Nicholas £104,523 - £171,642 £191,637 £193,311 £166,631 14 Bedwell £110,876 £155,379 £158,737 £186,405 £230,566 £166,001 - Overall £115,818 £153,233 £183,451 £216,653 £305,725 £214,894

Average Asking Price Analysis – Stevenage Borough

1 Bed Flat - £115,818 2 Bed Flat - £153,233 Terraced £175,761 Semi-Detached £202,120

2 Bed House Detached £233,316

Terraced £196,716 Semi-Detached £244,097

3 Bed House

Detached £278,798 Terraced £221,537 Semi-Detached £280,850

4 Bed House

Detached £354,783 The above shows some variation to the exact positioning of the hierarchy of price levels when compared with the 2007 research. Variations will be bound to occur with regard to this picture being dependent on the type of property for sale at any point in time. The same applies with all such data presented in this appendix. However, the general pattern of which are typically the more and less expensive areas with the Borough is consistent with that seen in 2007. Whilst Old Town was seen as the most expensive previously, it remains towards the top of the hierarchy along with Manor, Woodfield, Great Ashby (although Great Ashby is outside the Borough boundary) – common with the previous findings. Again as previous, Bedwell, St Nicholas, Pin Green and Shephall are shown to be typically the least expensive areas of the Borough.

Appendix III

12

MARKETING PRICE OF PROPERTY IN NORTH HERTFORDSHIRE DISTRICT The tables below show the marketing prices of various types of property within North Hertfordshire District. The data was collected from www.rightmove.co.uk. The values collected from RightMove are necessarily largely asking prices (although some are “subject to contract” sale prices) and as such it is likely that actual sales values will be lower.

For each of the settlements there are two tables. The first table shows the average marketing price of each unit type and the second table shows the average, minimum, 1st quartile, median (2nd quartile), 3rd quartile and maximum pricing points show that the range can be seen and to allow manipulation of the data. Some cells are left blank as there was not enough data to provide a meaningful sample.

Baldock 1 Bed 2 Bed 3 Bed 4 Bed Detached £249,950 £330,924 £414,337 Semi-Detached £190,430 £246,283 £316,413 Terraced £195,136 £256,344 £348,300 Flats £138,358 £193,768


1st Quartile Median




Hitchin

1 Bed 2 Bed 3 Bed 4 Bed Detached £326,665 £373,395 £470,094 Semi-Detached £235,822 £271,000 £363,682 Terraced £210,285 £233,674 £407,474 Flats £128,645 £186,288


1st Quartile Median







Appendix III

13

Letchworth 1 Bed 2 Bed 3 Bed 4 Bed Detached £281,842 £398,813 £457,017 Semi-Detached £188,500 £264,392 £350,710 Terraced £183,931 £200,920 £243,725 Flats £119,098 £157,592


1st Quartile Median



Data Sourced from: www.rightmove.co.uk – July 2008 Royston 1 Bed 2 Bed 3 Bed 4 Bed Detached £225,000 £262,490 £388,282 Semi-Detached £204,048 £243,237 £314,785 Terraced £186,403 £196,303 £211,489 Flats £136,316 £156,251


1st Quartile Median



Data Sourced from: www.rightmove.co.uk – July 2008 The following table has been repeated from the original study for clarity as to rural settlements’ inclusion. Again, for the purposes of this exercise only, rural settlements have been grouped together to enable analysis of the data. The settlement grouping can be seen in the table below, and is the same as assumed for the 2007 study. Eight settlements (displayed in the last column) did not provide any property pricing information at the point of the 2007 research. Those which provided information for the original research were updated for this supplementary work; the final column (‘No Data’) settlements were not investigated this time.



Appendix III

14

Core Settlements Pop. North-East Pop. North-West Pop.South Pop. No Data Pop.Baldock 9,866 Ashwell 1,660 Bygrave 271 Codicote 3,161 Caldecote 20

Hitchin 30,851 Barkway 656 Graveley 1,731 Kimpton 2,113 Hexton 134

Letchworth 32,932 Barley 659 Hinxworth 136 Kings Walden 957 Kelshall 149

Royston 14,570 Clothall 161 Holwell 316 Knebworth 4,433 Langley 164

Nuthampstead 139 Ickleford 1,848 Offley 1,307 Lilley 374

Reed 290 Newnham 89 Preston 481 Radwell 106

Rushden 242 Pirton 1,217 St. Ippollyts 2,014 St. Paul's Walden 1,205

Sandon 493 Weston 965 Wymondley 1,110 Wallington 159

Therfield 539 Rural Settlements (North East) 1 Bed 2 Bed 3 Bed 4 Bed Detached £397,500 £486,314 £634,926 Semi-Detached £272,500 £356,044 £429,967 Terraced £312,488 £335,000 £427,475 Flats £149,950 £163,298


1st Quartile Median


1-Bed Flat £149,950 £149,950 £149,950 £149,950 £149,950 £149,950 2-Bed Flats £163,298 £159,950 £159,973 £159,995 £164,973 £169,950 2-Bed Houses £323,744 £195,000 £221,238 £335,000 £386,250 £495,000 3-Bed Houses £442,111 £220,000 £382,375 £425,000 £485,000 £745,000 4-Bed Houses £579,362 £299,950 £465,000 £577,475 £649,950 £1,300,000


Rural Settlements (North West) 1 Bed 2 Bed 3 Bed 4 Bed Detached £409,975 £429,433 £625,864 Semi-Detached £274,995 £291,421 £574,975 Terraced £208,723 £234,987 - Flats - -


1st Quartile Median


1-Bed Flat - - - - - - 2-Bed Flats - - - - - - 2-Bed Houses £275,691 £199,950 £209,973 £214,995 £297,498 £499,950 3-Bed Houses £342,239 £214,950 £268,749 £310,000 £353,750 £850,000 4-Bed Houses £618,035 £329,500 £475,000 £550,000 £750,000 £1,000,000

-Data Sourced from: www.rightmove.co.uk – July 2008



Appendix III

15

Rural Settlements (South) 1 Bed 2 Bed 3 Bed 4 Bed Detached £274,950 £418,820 £537,042 Semi-Detached £293,323 £356,892 £419,867 Terraced £212,701 £271,852 £334,875 Flats £125,179 £176,371


1st Quartile Median





Appendix III

16

NORTH HERTFORDSHIRE DISTRICT HIERARCHY - Indicative values hierarchy and asking price analysis

Average Asking Prices Analysis - North Hertfordshire District

Rank

1 Bed Flats 2 Bed Flats

2 Bed House

3 Bed House

4 Bed House

All Properties

1 Rural NE £149,950 £163,298 £323,744 £442,111 £579,362 £465,080 2 Rural NW - - £275,691 £342,239 £618,035 £420,227 3 Rural S £125,179 £176,371 £227,867 £355,214 £495,636 £334,233 4 Baldock £138,358 £193,768 £197,453 £274,565 £387,562 £258,502 5 Letchworth £119,098 £157,592 £198,096 £243,367 £425,322 £254,799 6 Hitchin £128,645 £186,288 £219,955 £275,339 £434,310 £250,769 7 Royston £136,316 £156,251 £192,395 £226,895 £352,305 £229,113 - Overall £127,859 £173,241 £215,679 £275,068 £439,323 £271,426

Average Asking Price Analysis –

North Hertfordshire District 1 Bed Flat - £127,859 2 Bed Flat - £173,241 Terraced £202,974 Semi-Detached £225,879

2 Bed House Detached £309,316

Terraced £217,641 Semi-Detached £275,250

3 Bed House

Detached £389,167 Terraced £325,296 Semi-Detached £362,988

4 Bed House

Detached £478,011 As seen with the 2007 research, the rural settlements dominate the property pricing hierarchy with settlements in the rural areas of North Hertfordshire being consistently the most expensive. The lower number of flats typically found in the rural areas tend not to fit this values pattern however. Royston remains generally the least expensive place in which to buy in North Hertfordshire. This updated research indicates values in Hitchin, Letchworth and Baldock to be at similar levels, whereas previously we had found Hitchin to have typically the highest values of the North Hertfordshire larger settlements.

Appendix III

17

COMPARISON BETWEEN ASKING PRICES MAY 2007 and JULY 2008 The two tables below show the 2007 and 2008 asking price data we gathered. The first table makes this comparison for Stevenage Borough; the second for North Hertfordshire District. This helps us consider the direction and strength of the local market alongside the other information reviewed.

Average Asking Prices Analysis – Comparison - Stevenage Borough

Settlement 1 Bed Flats 2 Bed Flats 2 Bed House

2007 2008 2007 2008 2007 2008

Bandley Hill £113,996 £102,485 £139,996 £135,995 £175,488 £189,115 Bedwell £108,738 £110,876 £138,482 £155,379 £161,236 £158,737 Chells - £110,418 £147,498 - £173,996 £175,398 Great Ashby - - £171,969 £172,186 £185,772 £191,216 Longmeadow £114,997 £143,724 £139,973 £139,950 £185,000 £175,000 Manor £124,950 - - £170,995 £189,823 £189,823 Martinswood £110,708 £110,981 £157,982 £160,000 £176,860 £195,533 Old Town £136,822 £132,764 £179,980 £168,324 £228,484 £236,239 Pin Green £115,754 £109,756 £133,973 £139,479 - - Roebuck £121,248 £111,484 £136,871 £139,848 £189,973 £182,056 Shephall £111,225 £98,988 £132,995 £149,613 £170,419 £162,188 St Nicholas £120,599 £104,523 £130,497 - £169,975 £171,642 Symonds Green £126,451 £120,870 £155,600 £139,950 £196,245 £171,940

Woodfield - £235,000 £179,995 £154,950 £184,995 £185,989

Overall £118,002 £115,818 £153,218 £153,233 £185,481 £183,451 Settlement 3 Bed House 4 Bed House Overall 2007 2008 2007 2008 2007 2008 Bandley Hill £192,997 £210,086 £286,234 £304,993 £176,427 £203,421 Bedwell £189,761 £186,405 £225,000 £230,566 £166,327 £166,001 Chells £197,212 £205,947 £252,484 £282,440 £195,432 £202,142 Great Ashby £235,803 £242,988 £340,697 £325,514 £231,775 £245,989 Longmeadow £215,755 £239,974 £331,241 £326,527 £232,025 £255,110 Manor £243,935 £243,935 £318,951 £318,951 £260,546 £256,633 Martinswood £214,582 £224,955 £312,997 £325,825 £195,916 £210,798 Old Town £276,534 £269,094 £357,048 £337,132 £263,151 £250,034 Pin Green £196,583 £202,489 £200,987 £220,836 £174,181 £179,690 Roebuck £201,195 £201,855 £339,578 £317,983 £225,405 £210,182 Shephall £186,732 £197,787 £279,995 £279,881 £183,337 £200,702 St Nicholas £179,457 £191,637 £190,496 £193,311 £164,289 £166,631 Symonds Green £233,524 £221,325 £312,485 £265,996 £194,879 £203,999 Woodfield £293,879 £269,260 £356,585 £376,771 £322,706 £313,698 Overall £213,674 £216,653 £318,924 £305,725 £212,386 £214,894

Aage

Asking Prices Analysis – Comparison - Stevenage Borough

Appendix III

18

Average Asking Prices Analysis – Comparison – North Hertfordshire District

Rank Settlement 1 Bed Flats 2 Bed Flats 4 Bed House 2007 2008 2007 2008 2007 2008 1 Rural S £144,470 £125,179 £149,892 £176,371 £509,184 £495,636 2 Rural NW - - £190,388 - £566,574 £618,035 3 Rural NE £147,982 £149,950 £174,995 £163,298 £507,438 £579,362 4 Royston £134,345 £136,316 £158,508 £156,251 £342,603 £352,305 5 Letchworth £121,475 £119,098 £155,457 £157,592 £415,612 £425,322 6 Hitchin £142,913 £128,645 £191,735 £186,288 £417,946 £434,310 7 Baldock £163,819 £138,358 £178,291 £193,768 £365,397 £387,562 - Overall £138,808 £127,859 £174,871 £173,241 £433,775 £439,323 Rank Settlement 2 Bed House 3 Bed House Overall 2007 2008 2007 2008 2007 2008 1 Rural S £219,515 £227,867 £352,655 £334,233 £352,655 £334,233 2 Rural NW £251,223 £275,691 £439,306 £420,227 £439,306 £420,227 3 Rural NE £245,893 £323,744 £372,289 £465,080 £372,289 £465,080 4 Royston £201,921 £192,395 £232,560 £229,113 £232,560 £229,113 5 Letchworth £180,958 £198,096 £252,081 £254,799 £252,081 £254,799 6 Hitchin £219,332 £219,955 £245,904 £250,769 £245,904 £250,769 7 Baldock £184,100 £197,453 £236,519 £258,502 £236,519 £258,502 - Overall £208,236 £215,679 £267,007 £271,426 £267,007 £271,426

On comparing the 2007 and 2008 figures it can be seen that there is a high level of consistency between asking prices between these two points in time. It must be acknowledged that these are asking prices, but this lends support to the overall picture gleaned from the Land Registry in particular that prices in July 2008 were at about the same level as in May 2007. There are variations in exact trend between settlements and property types, which would be expected as all such comparisons are dependent on the make up of available or sold property at any given point or over any given period. In rounding up our views, we will consider the potential variation from asking price to sale price in the current market, particularly for new build property which is of key relevance to the planning-led supply of affordable housing.

Appendix III

19

New Build Pricing For this supplementary work, the new build pricing information was collected through desktop research. A review of new build marketing prices of all available unit types at the time of the study across the two Local Authority areas again enables us to underpin our judgements on the value levels for the range of dwelling types to be used in our appraisal modelling. The results of the new build pricing research, as set out in the following tables, helped us to consider whether the 6 Value Points used in the 2007 study remained appropriate. Those represented the overall range of values we considered was predominantly seen across the two Local Authority areas. As a variety of property values is seen in most areas, the results of this research can be used independently of location where approximate sales values can be estimated. New build property marketing prices in Stevenage Borough

Address Property Type Price Developer/Agent Incentives

Houses

Stevenage Borough

Walkern Road, Stevenage 4 bed detached £389,995 Connells

5 bed detached £439,995




3 bed £286,995

3 bed £284,995

3 bed terrace £279,995


Great Ashby, Stevenage, Hertfordshire SG1 6AW


Bovis Homes, Central Region

Mortgage Subsidy available for 3 years if you reserve this summer. Stamp duty paid on selected plots

4 bed detached £289,950 4 bed detached £269,950 3 bed detached £246,000 3 bed semi detached £214,950

Burleigh Park, Haycock Round, Great Ashby, Stevenage, Hertfordshire, SG1 6GS

3 bed semi detached £214,950

Croudace Homes

Appendix III

20

2 bed terrace £206,950 2 bed terrace £204,950 1 bed terrace £139,950 1 bed terrace £139,950

2 bed terrace £204,950 3 bed detached TBR 3 bed semi detached £214,950

Burleigh Park, Cotswold Drive, Great Ashby, Stevenage, Hertfordshire, SG1 6GT 3 bed semi

detached £214,950

Croudace Homes

3 bed detached £234,950 3 bed house £224,950 3 bed semi detached £214,950


3 bed terrace Price upon application

3 bed detached Price upon application

Whitehorse Lane, Great Ashby, Stevenage, Hertfordshire, SG1 6NJ

2 bed terrace Price upon application

Croudace Homes

Great Ashby Way, Stevenage, SG1 6NH 5 bed detached £399,950 Croudace Homes

5 bed detached £379,950 3 bed semi detached £219,950



Great Ashby Way, Stevenage, Hertfordshire, SG1 6DT


Croudace Homes

The Plantation, Walkern Road 3 bed terrace £279,995 Connells

Flats

StevenageBorough

2 bed apartment £315,000





Sacombe Mews, Stevenage, SG2


Putterills, Land & New Homes


2 bed penthouse £189,950


Woolners Way, Stevenage, SG1


Higgins Homes 5% assisted deposit, flooring included

Appendix III

21

2 bed apartment

£179,950

1 bed penthouse £169,950



Shared Ownership: 40% share for £58,000




1 bed apartment £125,000 Shared Ownership: 40% share for £50,000


Affinity Sutton


The Plantation, Walkern Road, Stevenage 2 bed apartment £184,995 Connells



Shared Ownership: £68,000 for a 40% share












The Pavilion, Nokeside, Stevenage, SG2


Affinity Sutton


2 bed flat £194,995 2 bed flat £189,995 2 bed flat £184,995

Cuttys Lane, Stevenage

2 bed flat £184,995

Connells

Brick Kiln Road, Stevenage 2 bed apartment £159,950 Connells

The Monet at Great Ashby, Stevenage, Hertfordshire SG1 6AW

2 bed flat £169,995 Bovis Homes, Central Region

Stamp duty paid on selected plots

1 bed apartments £129,950 Croudace Homes

Knott Close, Stevenage, Hertfordshire, SG1 6NP 2 bed apartments £160,000 Affinity Sutton


Appendix III

22


2 bed apartment POA


2 bed apartment POA

2 bed apartment POA

2 bed apartment POA

1 bed apartment POA


2 bed apartment POA



Vincent Place, High Street, Old Town, Stevenage, SG1



Old Town, Stevenage 2 bed flat £62,000 Your Move Shared Ownership Property

Pinetree Court, Stevenage 1 bed flat £189,995 Kings Group

Prices per m² Although we did not gather any price per ft² / m² directly from developers on this occasion, we were able to approximate floor areas from some plans provided with sales information. A sample exercise on the Woolners Way scheme, for example, suggested the following: Property type Marketing

Price Indicative £/m² 2 bed apartment £214,950 £3,838

2 bed penthouse £189,950 £3,454

2 bed apartment £189,950 £3,454

2 bed apartment £187,500 £3,409

2 bed apartment £179,950 £3,272

1 bed penthouse £169,950 £3,541

Appendix III

23

A similar exercise in respect of available properties at two other locations showed the following: Location Property type Marketing

Price Indicative £/m² Walkern Road, Stevenage

4 bed detached £389,995 £3,120

3 bed £286,995 £3,189

3 bed £284,995 £3,167

3 bed terrace £279,995 £3,256

3 bed terrace £276,995 £3,221

Great Ashby, nr Stevenage

3 bed terrace £269,950 £3,139

Appendix III

24

New Build Property Values in North Hertfordshire District

Address Property Type Price Developer/Agent Incentives

North Herts Rural S Houses

No houses for sale at this time Flats

No flats for sale at this time

Rural NW Houses



Rural NE Houses



Royston Houses

Orchard Way, Royston 3 bed detached £274,995 William H Brown Stamp duty paid Flats

2 bed apartment £203,000 2 bed apartment £167,000 2 bed apartment £180,000 2 bed apartment £180,000

Heathside Court, Baldock Road, Royston


William H Brown

Precious Court, Melbourn Road, Royston

2 bed apartment £159,995 William H Brown

2 bed apartment £155,000 1 bed apartment £135,000 1 bed apartment £135,000

George Lane, Royston


William H Brown

Letchworth Houses

4 bed detached £549,000 4 bed detached £539,950 4 bed detached £539,950 4 bed detached £499,950 3 bed terrace £299,950 2 bed terrace £249,950 2 bed terrace £249,950 2 bed terrace £249,950 2 bed terrace £249,950

Norton Road, Letchworth


Miller Homes

Appendix III

25

2 bed terrace £249,950 2 bed terrace £244,950


4 bed detached £499,950 Letchworth Garden City, Hertfordshire


Satchells

Letchworth Garden City, Hertfordshire 2 bed terraces £335,000 Satchells

Norton Way North, Letchworth Garden City, SG6

3/4 Bed Mews £389,950 Wheatley Homes Ltd

Eastern Way, Letchworth Garden City 3 bed detached £249,950 Connells

Flats Letchworth Garden City, Hertfordshire

2 bed penthouses £249,500 Country Properties

2 bed apartment £219,950 2 bed apartment £215,950 2 bed apartment £199,950

Norton Road, Letchworth


Miller Homes

2 bed flat £219,950 Letchworth Garden City, Hertfordshire 2 bed flat £169,950

Satchells

2 bed apartment £209,950 Wheatley Homes Ltd

Carpets Fitted Throughout. Stamp Duty & £500.00 towards Legal Fees Paid. Norton Way North,

Letchworth Garden City, SG6

1 bed apartment From £149,950

Wheatley Homes Ltd

Carpets Fitted Throughout. Stamp Duty & £500.00 towards Legal Fees Paid.

2 bed apartment £177,0002 bed apartment £159,950Letchworth Garden City,

Hertfordshire 1 bed apartment £127,500

Country Properties

Hitchin Houses

Hitchin, Hertfordshire 4 bed detached £549,995 Your Move

St. Johns Road, Hitchin, Hertfordshire, SG4 3 bed terrace From

£415,000 Land & New Homes

4 bed terrace £319,950 Connells

Meridian Mews, Walsworth Road, Hitchin

2 bed semi detached £247,950 Connells

Stamp duty paid. Legal fees paid. Choice of carpets & curtains. Mortgage arrangement fee & valuation fee refunded on completion, plus £500 per month towards your mortgage for 1 year.

Fairfield Park, Hitchen Road, Stotfold, Hitchen, Hertfordshire, SG5 4JH

2 bed semi detached/terrace

Price in the region

of £209,995

Stamford Homes

Appendix III

26


Price in the region

of £219,995


Price in the region

of £219,995


Price in the region

of £224,995


Price in the region

of £229,995

4 bed town house

Price in the region

of £284,995

4 bed town house

Price in the region

of £315,000


Price in the region

of £349,995

Flats Cedar Dell, St Andrews Place, Hitchin 2 bed apartment From

£254,950 Connells

Bucklersbury, Hitchin, Hertfordshire

Development of 31 luxury apartments

From £245,000 Country Properties

2 bed flat From £235,000



New Mercia, Walsworth Road, Hitchin


Savills New Homes

2 bed apartment £225,000 Griffin Court, Stevenage Road, Hitchin


Connells

Stevenage Road, Hitchin 2 bed apartment From

£199,950 Connells

1 bed apartment £154,950 Connells

Meridian Mews, Walsworth Road, Hitchin 1 bed apartment £139,950 Connells

Stamp duty paid. Legal fees paid. Choice of carpets and curtains, plus mortgage arrangement fee and valuation fee refunded on completion. Subject to terms and conditions.

Walsworth Road, Hitchin 1 bed apartment From

£150,000 Connells

Appendix III

27

Imperial Place, Bridge Street Hitchin, SG5 2DF

1/2 Bed Apartment

From £189,950

to £294,950

Gladedale Shared equity scheme

2 bed apartment

Price in the region

of £169,995 Fairfield Park, Hitchen

Road, Stotfold, Hitchen, Hertfordshire, SG5 4JH

2 bed apartment

Price in the region

of £169,995

Stamford Homes

1 bed apartment £18,750 (12.5% Share) Riverside Court, Grove

Road, Hitchin, Hertfordshire

2 bed apartment £22,500 (12.5% Share)

AssetTrust Housing Shared Ownership

Queen Street, Hitchin, Hertfordshire SG4 9TT 2 bed flat From

£234,950 Pegasus Retirement Homes

Baldock Houses


2 bed duplex apartment £249,950

2 bed duplex apartment £249,950


Knights Court, Weston Way, Baldock, SG7



Prices per m² Again, although we did not gather any price per ft² / m² directly from developers for this desktop based supplementary work, we were able to approximate floor areas from some plans provided with sales information. A sample exercise on the following schemes, for example, suggested the following: Location Property type Marketing

Price Indicative £/m² Precious Court, Royston 2-bed flat £159,995 £3,800 George Lane, Royston 2-bed flat £155,000 £3,300 Norton Road, Letchworth 4-bed house £549,000 £3,420 Norton Road, Letchworth 2-bed house £249,950 £3,845 Norton Road, Letchworth 2-bed flat £215,950 £3,130

Appendix III

28

Summary and Outcomes for values and viability overview Supplementary research into property prices across Stevenage Borough and North Hertfordshire District, was undertaken through desktop work to supplement and update our previous information and understanding of pricing in the local market. This again helped to determine realistic development values for the further appraisal modelling carried out. Rather than divide the Borough and District into neighbourhood areas, it was again decided to consider the range of values seen, and assess whether our range of values assumptions used in the 2007 study remained appropriate. Once again, the blurring of values between, and even within, some neighbourhoods and areas makes it difficult to rank areas in terms of property values on any consistent or reliable basis. By ‘banding’ values or creating a ‘range of Value Points’, we can therefore consider the appraisal results independently of location and, more usefully, by the approximate value levels which may be seen across the two Local Authority areas. Taking an overview of the updated research, we consider that the range of Values Points applied previously, as re-confirmed in the table below, remains relevant as at July 2007. The value ‘points’ are determined by looking at the full range of values and making informed judgements as to reasonably how many Value Points to model. An allowance has been made for the size of units modelled in this study. In addition, extremely high value units have not been included as these skew the results. We consider that values at the point of our update research and appraisals are broadly similar to those seen last year. They would have increased in the intervening period, but have now slipped back again. However, current signs are that values are continuing to decline, albeit relatively modestly in locations such as this when compared with local markets that are inherently less strong. The local area offers attractive housing locations with good access to facilities, rural areas and employment – including commuting to London and other centres. With the very low level of activity in the market (now sustained low sales volume), the general theme of much of the market reporting is that that will not help price recovery. The market is very difficult to assess. It is not possible to say with any precision what a typical reduction from asking price to sale price may be. This will be highly dependent on the particular scheme and developer. Incentives are generally being offered ahead of price reductions – which we are not seeing universally and often not on an open, advertised basis. Developers need to try to protect headline prices as far as possible, whilst also trying to secure ongoing sales. Subject to these comments, which are not in any way unique to North Hertfordshire District and Stevenage Borough, in our estimate marketing prices are being reduced by say 5 to 15% to achieve sales, depending on the scheme specifics and incentives package offered, etc. It is possible that as more recent sales price figures recorded for example by the Land Registry flow in to the available data, we will see more adjustment to the overall picture seen here of approximately equivalent prices between Spring/Summer of 2007 and Summer 2008. We would see prices fall below those earlier levels assumed for the 2007 study.

Appendix III

29

Currently, new build values appear to lie in the range of Value Points 2 to 5 typically. The examples we considered in a little more detail above suggested a range of Points 3 to 5, but as asking prices. In our view this means that a typical new build scheme for the area may well have shifted down our scale of points slightly. For example, a typical scheme being marketed at, say, Value Point 3 to 4 may be achieving values in the range of Points 2 to 3. This potentially means more occurrences of lower value schemes than seen previously (noting that lower value is a relative term in the context of Hertfordshire values). This points to more caution when considering viability in the short term, at least while these uncertain market conditions prevail. Based on this, and acknowledging that development costs have typically risen, we do not feel that it amounts to any radical reassessment of development viability when considered at this overview level. What it may well mean is an increased emphasis on the Council’s practical, adaptable approaches to ensure all round housing delivery during this challenging time; and an emphasis on monitoring of experiences and delivery, coupled with contingency planning. The above will be considered further during and after the carrying out of the additional appraisals. Confirmation of range of range of Value Points, as per 2007 study:

Unit Value

Point 1 Value

Point 2 Value

Point 3 Value

Point 4 Value

Point 5 Value

Point 6 1-Bed Flat £132,600 £142,800 £158,100 £173,400 £188,700 £204,000 2-Bed Flat £171,600 £184,800 £204,600 £224,400 £244,200 £264,000 2-Bed House £197,600 £212,800 £235,600 £258,400 £281,200 £304,000 3-Bed House £223,600 £240,800 £266,600 £292,400 £318,200 £344,000 4-Bed House £262,600 £282,800 £313,100 £343,400 £373,700 £404,000 £ / sq m Equivalent £2,600 £2,800 £3,100 £3,400 £3,700 £4,000