Profit-related contribution claim ruled excessive

A south Wales council's insistence that a developer proposing 25 flats with ground-floor commercial uses should make a financial contribution if the profit margin rises above 15 per cent has been overruled.

200-004-322 (Image Credit: al3d)
200-004-322 (Image Credit: al3d)

The council supported the scheme in principle, acknowledging that it would deliver a range of benefits. However, following advice from the district valuer, it sought financial contributions towards affordable housing, transport, public open space, community facilities and public art should the developer’s profit exceed 15 per cent, the point at which the development was judged viable while still providing a reasonable return on investment.

The appellant referred to the council’s own affordable housing viability report, which used 20 per cent as a benchmark for assessing appropriate profit levels, together with various appeal decisions allowing for a margin of 17.5 per cent or more. The inspector agreed that a 20 per cent profit level was not unreasonably high, particularly given risks associated with the scheme. He noted that the local housing market was not particularly buoyant and the scheme faced competition from larger developers offering incentives to buyers.

In his view, it would not be appropriate to impose a section 106 obligation requiring regular reviews of the scheme’s profitability. He decided that the best way forward was to require the development to be implemented within two years, failing which the council would be in a position to review the position. The appeal was allowed with no allowance any financial contributions or a review mechanism.o allowance for the scheme to make any financial contributions or incorporate a review mechanism.

Inspector: Aidan McCooey; Hearing

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