The existing obligation stipulated that 60 affordable units should be provided. The appellants sought a reduction to 31 in order to ensure that a 20 per cent profit margin on the gross development value could be secured. They relied on another appeal decision to justify this minimum level.
They had followed government guidance published in April 2013 regarding how the land value should be assessed and claimed that this resulted in a figure of approximately £2.6m compared with the council’s estimate of almost £1.8m which was based on figures within a previous development appraisal submitted by the appellants.
The inspector decided that there were various ‘rules of thumb’ when discussing the most appropriate profit level for a development and these ranged between 15 per cent and 25 per cent.
However, providing affordable housing carried less risk and consequently a developer profit of 6 per cent might not be unreasonable. Nonetheless, a ‘blended’ profit of around 18 per cent seemed reasonable reflecting the balance between open market and affordable housing.
On this basis up to 36 affordable homes would seem realistic. While this did not meet the council’s requirement for 40 per cent of the dwellings to fall within this category this was somewhat higher than the appellants’ preferred option and struck the right balance allowing a reasonable return on profit to be achieved.
Inspector: Philip Major; Hearing