Monthly Archives: June 2018

 

Greater Birmingham HMA Strategic Growth Study

 

In February 2018, the Greater Birmingham HMA Strategic Growth Study prepared by GL Hearn and Wood Plc was published. We provide a summary of the key findings of the report.

Birmingham’s functional HMA covers more than Birmingham and includes the Black Country and parts of Worcestershire, Warwickshire and Staffordshire. It also covers authorities which are within the Greater Birmigham and Solihull LEP and the Black Country LEP. North Warwickshire and Stratford-on-Avon Districts  are authorities with an area of overlap between the Birmingham and Coventry/Warwickshire HMA.

 

The study’s  four main aims are:

  1. Review of existing identified supply to consider whether, by positively applying policies that are consistent for each type of site across the HMA, more dwellings could be provided through increased densities.
  2. Consider the potential additional supply on other land outside of the Green Belt that has not been previously considered for housing development
  3. If a shortfall remains after aim 1 & 2, to then consider the development potential and suitability of any large previously developed sites within the Green Belt that may lie in sustainable locations.
  4. Should a shortfall remain after undertaking tasks (1) to (3), undertake a full strategic review of the Green Belt within the HMA utilising a consistent Green Belt Review methodology, which assesses Green Belt against its five purposes.

”Whilst a single plan is not being prepared, housing need is a strategic issue which the HMA authorities need to collaborate in addressing through the Duty to Cooperate”.

Objectively Assessed Need

Existing Evidence Base

The report looks at the findings already published by local authorities as follows and also reviews the housing requirements within the adopted plans There is a 38,000 dwelling unmet need arising from the Birmingham Development Plan to 2031. In addition, there is an unmet need from Tamworth (1,825 dwellings to 2031) and Cannock Chase (500 dwellings to 2028).

Local Authority OAN Plan period Housing requirement Shortfall
Birmingham 89,000 2011-2031 51000 -38,00
Bromsgrove 6,648 (2011-2030) 7000 0
Cannock Chase 5300 2006-2028 5300 -500
Lichfield 8600 2008-2029 10,030 0
Redditch 6400 2011-2030 6400 0
Solihull 14,277 2014-2033 15029
Tamworth 6250 2006-2031 4425 -1,825
Warwickshire 3150 2011-2029 9070
Stratford on Avon 14,600 2011-2031 14600
Black Country 78,190 2014-2036 63000
South Staffordshire 5933 2014-2036 3850
HMA total 11,500

Projections

The GL Hearn assessment of OAN has been considered using four projections:

Economic Projections

Economy Plus Scenario

The Economy plus is a scenario modelled in the Strategic Economic Plan for further and faster growth than predicted in the three LEP Strategic Economic Plans. This is an aspirational ‘policy on’ scenario based on a policy aspiration to improve economic performance.

The West Midland Strategic Economic Plan is based on the economy plus scenario( as set out in the West Midlands Combined Authority’s Strategic Economic Plan) up to 2036 this scenario suggests a requirements for 310,188 dwellings.

Baseline Economic Growth

The baseline economic growth projection is based on a continuation of past trends, but takes into account how different economic sectors are expected to perform in the future (relative to the past). It should be regarded as ‘policy neutral’. Up to 2036 this projection suggests a need for 240,012 dwellings

Demographic Projections

There are three demographic projections that the report considers:

2014 Based Subnational Population Projections

These were the latest official, 2014-based, Household Projections, which Government’s Planning Practice Guidance identifies as the ‘starting point’ for quantifying OAN and suggests 255,533 dwellings required to 2036. 

Rebased Sub National Population Projections

The rebased SNPP rebases the 2014-based Population and Household Projections to take account of population growth between 2014-15 shown in ONS Mid-Year Population Estimates. This projection suggests a requirement for  254,873 dwellings to 2036 .

10 year Migration

The 10 year migration projection considers the difference between the trends in migration over the input period to the SNPP (the 5 years to 2014 for domestic and 6 years for international migration) and those over a 10 year period (2005-15), and then adjusts future trends in migration based on the difference between these. This projection shows a requirement for 251, 647 dwellings up to 2036. 

Government Standardised Approach

The report also considers the Governments standardised approach to OAN which is to use latest official projections, with adjustments then applied based on the degree to which the affordability ratio is over 4, with a 1% increase in the ratio of median house prices to earnings over.

The report envisages a cap which is 40% above existing local plan figures where the local plan was adopted in the previous 5 years; or 40% above either the latest local plan or the household projections (whichever is the higher) where there is not an up-to-date local plan.

The uncapped need figures arising from this approach align broadly with the demographic baseline position to 2031, showing a need for 207,000 homes. To 2036 the uncapped need is for 265,000 homes which is around 4% above the demographic need shown by the projections within the report.

 Unmet Needs

North Warwickshire and Stratford-on-Avon have agreed to make provision for Coventry’s unmet housing needs. North Warwickshire is contributing 860 dwellings to meeting Coventry’s unmet needs to 2031 and 2,020 dwellings from Stratford-on-Avon, totalling 2,880 dwellings. If this was rolled forward to 2036 on a pro-rata basis, this would be 3,600 dwellings.

“GL Hearn conclude that on the basis of the current evidence provision of between 205,000 – 246,000 homes is needed across the Birmingham HMA to 2031; and provision of between 256,000 – 310,000 homes to 2036 (from a 2011 baseline) to meet the Birmingham HMA’s housing needs and taking account of Coventry’s unmet need of 208,000 dwellings to 2031 and 258,500 homes to 2036”. 

Land Supply

Shortfall

GL Hearn’s initial information submitted indicated a land supply of around 203,000 dwellings to 2036, of which 200,000 dwellings could be delivered over the period to 2031.

This is made up of

  • Completions –
  • Sites with Planning Permissions (i.e. Commitments) –
  • Extant Allocations without Planning Consent
  • Allocations in Emerging Plans
  • Additional Urban Supply
  • Windfalls

Land supply by Authority

Birmingham (April 2016):A total land supply for 51,458 dwellings is identified to 2031 and 59,858 to 2036.

Bromsgrove (April 2017): A total land supply of 5,099 dwellings is identified to 2031 and 5,299 dwellings to 2036.

Cannock Chase (April 2016): A total land supply of 4,615 dwellings is identified to 2031 and 4,685 dwellings to 2036.

Dudley (April 2016): A total land supply of 17,918 dwellings is identified to 2031 and 18,668 dwellings to 2036.

Lichfield( August 2017): A total land supply of 10,973 dwellings is identified to 2031 and 11,248 dwellings to 2036.

North Warkwickshir(April 2017): A total land supply of 9,060 dwellings is identified to 2031 and 9,360 dwellings to 2036. This includes making specific provision to meet an unmet need for 4,410 dwellings from other parts of the Birmingham HMA, as identified in Section 3 as well as 860 dwellings unmet need from Coventry.

Redditch (April 2017): 7,488 dwellings to 2031 and 7,543 dwellings to 2036.

Sandwell (April 2016): 19,930 dwellings is identified to 2031 and 20,813 dwellings to 2036. The land supply has been assessed to 2036.

Solihull (April 2016): 5,717 dwellings  to 2031 and 16,945 dwellings to 2036 including specific provision for a contribution of 2,000 dwellings to meeting unmet needs of the Birmingham HMA.

South Staffordshire (April 2017): 3,493 dwellings to 2031 and 3,643 dwellings to 2036

Stratford-on-Avon (April 2016):16,713 dwellings to 2031 and 19,358 dwellings to 2036

Tamworth (April 2017): 4,495 dwellings to 2031 and 4,680 dwellings to 2036.

Walsall (April 2017): 10,879 dwellings to 2031 and 11,284 dwellings to 2036.

Wolverhampton (April 2016):13,816 dwellings to 2031 and 16,495 dwellings to 2036.

Following the submission of the initial information, adjustments were made to ensure consistency with the windfall approach and non implementation discounts.

Approaches to Delivery

Existing Sites

The report explores in detail approaches to be taken to providing additional land to be identified within urban areas including brownfield land, disposing of surplus public sector land, estate regeneration, town centre regeneration and disposing of surplus open space.  The report also assesses in detail the potential to increase densities across the HMA and concludes that  it would be reasonable to assume minimum densities of 40 dph are achieved in the conurbation (Birmingham and the Black Country urban area), with minimum densities of 35 dph in other parts of  the HMA. This approach would yield additional supply of 13,000 dwellings, principally over the period to 2031.

Identifying and Allocating Additional Land

Taking into account the potential housing supply which could be achieved by increasing densities, there remains a need to identify capable of supporting delivery of over 15,000 homes to 2031, and a total of over 47,800 homes to 2036. Additional land needs to be identified and allocated to meet this. This provides a clear basis for progressing a strategic review of the Birmingham Green Belt.

Given the scale of unmet need, the report focuses on strategic development options as follows:

  • Urban Extensions (1,500 – 7,500 dwellings);
  • Employment-led Strategic Development (1,500 – 7,500 dwellings); and
  • New Settlements (10,000+ dwellings). –

Potential Areas of Search for Strategic Development beyond the Green Belt

South Staffordshire

  • Urban Extension: North of Penkridge
  • Urban Extension: South of Stafford
  • New Settlement: Around Dunston

Lichfield

The Study initially identifies three potential Areas of Search for Strategic Development:

  • Urban Extension: East of Lichfield
  • Urban Extension: North of Tamworth
  • New Settlement: Around Fradley and Alrewas

North Warwickshire

One potential Area of Search for Strategic Development is identified to be tested:  Urban Extension: East of Polesworth

Within the HMA, the only location which has been identified by Government for new strategic development is Long Marston, which is designated a Garden Village. Consideration has therefore been given to the potential for enhanced strategic development in this broad area.

The potential Areas of Search for strategic development identified to be tested are thus:

  • Urban Extension: South of Stratford-upon-Avon town
  • New Settlement: Around Wellesbourne
  • New Settlement: South-West of Stratford-upon-Avon District

Potential Areas of Search in the Green Belt

The Study undertook a Strategic Green Belt Review, assessing the form and strategic function of the Green Belt against the purposes of Green Belt policy set out in the National Planning Policy Framework (NPPF) (Para 80).

Four spatial development models were created:

  • New settlements
    • Scale attracts greater opportunity for central government investment
  • Urban Extensions
    • Lead in times of typically 5+ years
    • Larger and more costly infrastructure requirements
  • Employment focus
    • Lead in times of 3-5 years
    • Larger infrastructure requirements
  • Proportionate Dispersal
    • These have the shortest lead in times and have typically lower requirements for strategic infrastructure

Six Areas of Search for new settlements and six for urban extensions are identified; together with three Areas of Search for employment-led development.

Recommended Areas of Search for Strategic Development

Employment-Led

  • I54
  • East of Birmingham
  • Birmingham Airport/ NEC

These Areas of Search have the following characteristics:

  • Strategic employment areas with a key employer and/or clustering of employers
  • Likely to be located adjacent to, or in the vicinity of, a Motorway junction.
  • Potential to support some housing provision as part of mixed-use development (1,500 to 7,500 dwellings).

Urban Extensions

The Study concludes that the strongest performing Urban Extension options which should be taken forward for more detailed consideration by the HMA authorities are:

  • South of Dudley
  • North of Tamworth
  • East of Lichfield
  • North of Penkridge.

New Settlements

The report recommends the following areas of search should be taken forward:

  • South of Birmingham
  • Between Birmingham and Bromsgrove/Redditch
  • Around Shenstone
  • Around Balsall Common

Summary

There is a minimum housing need for 205000 up to 2031 and 255,000 up to 2036. Taking into account shortfalls this increases to 208,000 up to 2031 and 258,00 to 2036.

The current evidence suggests provision of between 205,000 – 246,000 homes across the Birmingham HMA to 2031; and 256,000 – 310,000 homes to 2036.

There is a developable land supply of 180,000 to 2031 and 197,000 to 2036. Bringing together the need and currently identified supply, there is an outstanding minimum shortfall of 28,150 dwellings to 2031 and 60,900 dwellings to 2036 across the Birmingham HMA.

New strategic allocations will be required to address this shortfall across the whole HMA.

Next Steps

It is envisaged that further technical and feasibility work will be underway to assess the suitability of the areas of search as identified by the report along with a process of iterative Masterplanning and consultation with local residents.

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Is the NPPF Trying to Nationalise the Sale of Land?

 

 

The draft NPPF was published in March 2018 and stated at Paragraph 34 that “plans should set out the contributions expected in association with particular sites and types of development. This should include setting out the levels and types of affordable housing provision required, along with other infrastructure (such as that needed for education, health, transport, green and digital infrastructure). Such policies should not make development unviable, and should be supported by evidence to demonstrate this. Plans should also set out any circumstances in which further viability assessment may be required in determining individual applications”

Paragraph 57 then went on the state that “planning obligations should only be sought where they meet all of the following tests: a) necessary to make the development acceptable in planning terms; b) directly related to the development; and c) fairly and reasonably related in scale and kind to the development.”

The HBF have argued that Paragraph 34 was not consistent with paragraph 57 in that it moved away from the rules set out in paragraph 57 (and the tests set out in Regulation 122 of the Community Infrastructure Levy Regulations 2010) into the realms of value capture.

The revised 2018 Framework which was published on 24th July 2018 has been revised to state at paragraph 57: “Where up-to-date policies have set out the contributions expected from development, planning applications that comply with them should be assumed to be viable. It is up to the applicant to demonstrate whether particular circumstances justify the need for a viability assessment at the application stage”.

Viability has moved from a standalone matter to a key consideration within planning decisions in both policy and development management. This significant shift now requires viability to be dealt with at the plan making stage, thus shifting responsibility on LPAs as opposed to developers. Essentially, LPAs will now be required to set strategic site allocations, infrastructure requirements and a minimum level of affordable housing which they consider viable.

Viability in short is the difference between the price paid for a site compared to the costs of building a development. A development scheme is only viable if, after taking into account all development costs into account including site value, the scheme provides a competitive return so that a scheme can be implemented and the land value is sufficient to incentivise a landowner to sell.

Components of Viability

I’m no surveyor but my simple mind understands that viability comprises:

  1. Value of land
  2. Development costs
  3. Return to Developer

1.Land Value

The starting point to assessing viability is to establish the benchmark land value. The Benchmark Land Value is made up of the Existing Use Value with a premium to the landowner which should reflect the minimum price at which a landowner would be willing to sell their land.

The price at which a landowner would be willing to sell their land can be subjective as an individual may wantmore than the actual value of a site. Where a local authority may be under pressure to deliver sites and their preferred sites undeveloped by landowners not wishing to sell as depressed values, sites may be granted permission either by either LPA or on appeal. As the HBF rightly point out this will not result in homes being developed faster or more sustainably.

Existing Use Value (EUV) is defined as the value of the land in its existing use together with the right to implement any development for which there are extant planning consents, including realistic deemed consents, but without regard to other possible uses that require planning consent, technical consent or unrealistic permitted development

EUV can be established by assessing the value of the specific site or type of site using a range of sources of information. The NPPG advises that:

“Determining the existing use value of the land should be based on the assumption that no future planning consents will be obtained, but including the value of any consented use”.

The NPPG requires Benchmark Land Value to:

  • Fully reflect the total cost of all relevant policy requirements including S106 and CIL
  • Include abnormal costs, site specific infrastructure costs and professional site fees
  • Allow for a premium to landowners (including equity resulting from those building their own homes); and
  • Be informed by comparable market evidence of current uses, costs and values wherever possible. Where recent market transactions are used to inform assessment of benchmark land value there should be evidence that these transactions were based on policy compliant development. This is so that previous prices based on non-policy compliant developments are not used to inflate values over time.

The Benchmark Land Value would be established through engagement with plan makers, landowners, developers, infrastructure and affordable housing providers. Whilst engagement makes sense, it is not clear who would intervene if parties disagree on what the Benchmark Land Value should be.

A premium to the landowner above the Existing Use Value would be determined by plan makers in consultation with developers and landowners and a minimum premium can be established by looking at comparable sites which would establish the price paid having regard to outliers in market transactions, the quality of land, expectations of local landowners and different site scales.

2. Development Costs

Costs are defined as follows:

  • Build costs based on appropriate data, for example that of the Building Cost Information Service;
  • Abnormal costs, including those associated with treatment for contaminated sites or listed buildings, or costs associated with brownfield, phased or complex sites. These costs should be taken into account when defining benchmark land value;
  • Site-specific infrastructure costs, which might include access roads, sustainable drainage systems, green infrastructure, connection to utilities and decentralised energy. These costs should be taken into account when defining benchmark land value;
  • The total cost of all relevant policy requirements including contributions towards affordable housing and infrastructure, Community Infrastructure Levy charges, and any other relevant policies or standards. These costs should be taken into account when defining benchmark land value;
  • General finance costs including those incurred through loans;
  • Professional Fees, project management, sales, marketing and legal costs incorporating organisational overheads. Any professional site fees should also be taken into account when defining benchmark land value; and
  • Explicit reference to project contingency costs should be included in circumstances where scheme specific assessment is deemed necessary, with a justification for contingency relative to project risk and developers return.

 The NPPG requires as far as possible for costs to be included at the plan making stage

3. Return to Developers

A return to developers is assumed at 20% of Gross Development Value or 6% in consideration of affordable housing. The NPPG advises that Plan makers may choose to apply alternative figures where there is evidence to support a different figure according to the type and scale of development.

Gross Development Value is defined as total sales and/or capitalised net rental income. These can be calculated using market evidence from the site itself or from comparable existing developments and adjusted to suit the site circumstances.

The HBF argue that The proposal to include just 20% of gross development value as a suitable return to a developer (with a lower figure of just 6% on the delivery of affordable housing) will not be appropriate in all circumstances or for all types of developer. While the guidance on viability acknowledges this fact it gives no guidance on when deviation from this standard approach would be necessary. It is also unclear from the guidance as to whether the application of “alternative figures” might result in a lower return to a developer as well as a higher one.

Transparency & Commercially Sensitive Information

The NPPG sets out in detail the approach to be taken to ensure accountability of assessments, and that assessments should be prepared and published in such a way to aide and support decision makers. The NPPG requires the preparation of a summary report using a standard template currently being created by CLG.

Assessments should be drafted on the basis that they will be made publicly available other than in exceptional circumstances. This aligns with the London Mayor’s approach that assessments would be made public where a developer would not commit to providing 50% affordable housing on public land, and 35% on private land.

The HBF would agree with the NPPF at paragraph 58 which suggests that where a site cannot support a policy compliant application (for site specific reasons) then a viability assessment should still, in exceptional circumstances, be submitted. However, there would still be elements of such appraisals that are commercially sensitive and have suggested that applicants should be allowed to agree with local planning authorities where this is the case and why and agree that this limited information is redacted.

The HBF also believes that there should be a clear transition period to move towards this radical new approach of development viability. Many sites and projects will be considerably advanced towards development using the current assumptions and methodology of site by site negotiation. An overnight change to this regime will threaten many sites in terms of meeting agreed minimum land values. A transition period of at least five years is considered appropriate.

All in all, the proposed change to viability assessments could well result in a slow down with less homes being delivered faster and in a sustainable manner.

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