How we did it: Using a viability review tool to secure affordable homes

A viability review mechanism was used to agree an affordable homes delivery process for a major scheme in York.

Partnership: Neil Jones (left) of Rapleys and City of York Council's Mike Slater used a viability review mechanism to agree affordable homes delivery on a former British Sugar site
Partnership: Neil Jones (left) of Rapleys and City of York Council's Mike Slater used a viability review mechanism to agree affordable homes delivery on a former British Sugar site

Project: Affordable housing delivery review mechanism at the British Sugar site in York.

Organisations involved: British Sugar, City of York Council, Rapleys, Valuation Office Agency.

The former sugar beet processing plant in York had been disused for nearly eight years when redevelopment plans were submitted in March 2015. Both the landowner, British Sugar, and City of York Council agreed that the 42-hectare site should be used for housing. Indeed, a supplementary planning document adopted by the local authority in 2012 described the site as "a rare opportunity to grow a new part of the city" with a "residential-led development". But while the principle of development was agreed, the site’s level of affordable housing provision soon emerged as a stumbling block.

"Our policy is for 20 per cent affordable housing on brownfield sites," says Mike Slater, the council’s assistant director of economy and place. But a number of issues at the British Sugar site suggested this aspiration was unlikely to be met – at least in the development phases. Differences in site levels, contamination and other mitigation measures necessary to adapt the site for housing use were likely to produce significant upfront development costs, according to Neil Jones, a partner at consultancy Rapleys and planning adviser to British Sugar. "The viability in the early phases is very challenging," he says.

York council officers recognised the problem. "Potentially, you could be looking at four years from starting work, or even longer, before you get the first houses built," says Slater. Pre-application negotiations included discussions about the possibility of a viability review mechanism – a means of reducing the developer’s financial obligations in the project’s early phases while allowing the council to capture a share of the profits later for affordable housing. "It’s a case of priming the project to enable it to come forward, capturing the future house-price growth and converting it over time into additional affordable housing," says Jones.

Those discussions were still in progress when British Sugar decided to take the application to appeal for non-determination in an attempt to avoid uncertainty amid tight time pressures for the project. Despite the appeal being lodged – which was subsequently recovered by former communities secretary Sajid Javid in July 2017 – officers in York maintained regular communication with British Sugar, reaching a series of agreements during the course of the appeal. "We continued to work with them over the planning, implementation and section 106 details," says Slater. "We had common ground and agreements between us were increasing week by week in the run-up to the inquiry, which is quite unusual."

As time went on, the affordable housing review mechanism became the last remaining issue to be agreed. City of York Council had used similar mechanisms before but never on a project of this scale. Crucially, both parties had to have confidence in the figures underlying the viability calculations. British Sugar sought the advice of Rapleys while the local authority employed the services of the district valuer while negotiations took place. In February 2018, two weeks after a local public inquiry into the application, a section 106 agreement was signed that set out the terms of the viability review.

Jones says ongoing engagement with the council – even while an inquiry was taking place – was crucial to signing the agreement and, ultimately, securing consent for the scheme. "It was important to maintain that positive working relationship with officers even when we went down the appeal route, so we could continue to reach as much agreement as possible." he says. 

The section 106 agreement sets a baseline contribution of three per cent affordable housing across the whole site – regardless of viability. However, reviews will take place alongside every reserved matters application to examine the extent to which this contribution can be increased, the council says. Reserved matters applications will be submitted for 10-12 development parcels over a period of 15-20 years, it says. The viability of each phase will dictate an affordable housing contribution of between three and 35 per cent, with the total site contribution capped at a policy-compliant 20 per cent. Both parties expect contributions to be higher in later phases of the project.

Details of the agreement were published in the section 106 agreement and can be used as the basis for review mechanisms by other local authorities. City of York is already considering implementing a similar agreement on another large site. "For schemes that are likely to have a long build-out period, it could be applicable in many cases," says Slater. 

Following the conclusion of the appeal and the signing of the agreement, outline planning permission was granted in October this year for 1,100 homes, community facilities and public open space. Communities secretary James Brokenshire said the scheme "is now able to deliver affordable housing from the outset" and, although not guaranteed, is likely "to achieve a policy-compliant 20 per cent affordable housing for the site as a whole". 

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