This report relates to the financial contributions secured via a S106 agreement related to the wider Chatham Waters development and to the fact that due viability, the delivery of the affordable housing element of the Chatham Waters development cannot afford to meet the financial contributions required (for that element only).
Members considered a report regarding the financial contributions secured via a S106 agreement related to the wider Chatham Waters development and to the fact that due to viability, the delivery of the affordable housing element of the Chatham Waters development cannot afford to meet the financial contributions required (for that element only).
The Head of Planning advised that only one provider of affordable housing (L&G) had come forward. Since planning permission had been granted the economic climate had changed and costs had risen significantly. Peel still wanted to deliver affordable housing on site but had requested that the S.106 financial contributions, (£440,000) as they related to the 237 affordable units, be set aside.
The report presented two Options:
· Option 1: Planning Committee agree a deed of variation to the S106 to allow the affordable housing development to proceed without paying the S106 financial contributions that would apply to residential development but only in relation to the affordable units. If this was agreed work would continue on the delivery of the affordable housing scheme on site.
· Option 2: Planning Committee do not agree a deed of variation in which case affordable housing would not be able to be delivered on site. Discussions would then need to take place regarding the alternatives of either off site provision or financial contributions.
Members also heard from the Council’s independent viability consultant who had considered the affordable housing element of the scheme based on three assumptions: the land value for the 237 units was zero, developer profit was zero and the scheme did not include any contributions to the site wide infrastructure costs. In response to why there was not an independent build cost assessment to consider alongside Peel’s figures, the consultant advised that he considered the real figures to be higher than provided by Peel. Also, the report had been completed in April 2022 and build costs since then had risen significantly. He considered this was a strong offer from Peel in terms of the value it offered. He advised the affordable housing scheme generated a loss of £2.5m but this could be nearer to £8m. The applicant could decide to apply to vary the S106 agreement and, if so, there was a risk of a significant reduction in the figure currently proposed.
In response to whether the Council’s consultant had considered whether off site construction would have been more viable, Members were advised that this would result in less affordable housing as off-site construction would lead to less units and delays in delivering them.
The Head of Planning, in response to whether other developers might adopt the same approach, commented that for greenfield sites there were no issues with developers agreeing S106 contributions. With brownfield sites the Council was receiving more requests which offered less or asked to re-negotiate S106 agreements, as costs were far greater when it came time to build.
In discussing the report Members made the following points:
· The wider site was likely to generate revenue of more than £200m, therefore the £440,00 sum in question represented a small amount of this figure.
· The £440,000 S106 contributions would pay for lots of community benefits.
· The lack of affordable housing in the area was a real problem and the options presented meant the Council either lost £440,000 towards community benefits or lost much needed affordable housing.
· House prices had increased significantly since the application had been approved and it was difficult to see how Peel could be making a loss.
· There was a risk that if Peel’s request was refused then they could re-apply with an offer of less affordable housing, which could prevent hundreds of people from having an affordable home. There was always a long gap from the original agreement to development taking place and developers were at risk of price increases.
· By agreeing to Peel’s proposal a precedent could be set. Whilst all Members wanted more affordable housing, decision making should not be subject to pressure from developers.
· The Council had commissioned an independent assessment which concluded there was no margin and Peel could lose up to £8m on this development. Effectively, Peel were asking the Council to make a contribution so affordable housing could be delivered quickly.
· Peel could choose to raise the prices of houses to offset the £440,000.
It was then proposed that the original S.106 agreement be adhered to and not amended.
The Committee agreed thatthe original S.106 agreement relating to the affordable housing element of the Chatham Waters development be adhered to and not amended.