Circular AHS 2/05
8th.September 2005.
Planning and Development Acts 2000-2004
Part V, Section 96(3)(d)(ii) – “ Profit on the Costs”
A Chara,
I am directed by the Minister for the Environment, Heritage and Local
Government to refer to previous guidelines and correspondence from this
Department in relation to the implementation by local authorities of Part V of the
Planning and Development Acts 2000 – 2004.
Following representations made by the Irish Home Builders Association, it has
been decided that ‘profit on costs’ in Section 96 3(d)(ii) of the Planning and
Development (Amendment) Act 2002 should, in addition to contractor’s profit,
allow for developer’s profit, the level of which can be up to 15% depending on a
number of factors. Whilst this percentage currently represents the industry norm,
it includes an amount to offset against the level of risk being taken by the
developer and local authorities should bear in mind that Part V units, both social
and affordable, are effectively guaranteed sales thereby reducing the level of risk
involved.
Accordingly, where houses or sites are to be transferred to the planning authority
in accordance with an agreement under Part V, the price payable to the
developer for the units is determined as being the sum of the building and
attributable development costs (as agreed between the authority and the
developer) plus profit on the costs as set out above, plus land costs calculated in
accordance with Section 96(6) of the Planning and Development (Amendment)
Act 2002. An indicative example of how the purchase price is calculated is set
out at Appendix 1.
Notwithstanding the above, planning authorities are reminded of the need to ensure that
Notwithstanding the above, planning authorities are reminded of the need to
ensure that any such agreements constitute the best use of the resources
available to it for the delivery of social and affordable housing. This is best
achieved by comparing the cost negotiated with the developers with the unit
cost of undertaking the project itself on the relevant land bearing in mind the
need for cohesive developments and early delivery of units. In addition, when
making application for budget approval for social housing acquired under Part
V, the Department will require a report (see Appendix II) setting out a
breakdown of the cost of the units. This report must be submitted prior to
concluding any Part V agreement involving the transfer of units for social
housing purposes.
In the case where a single development is yielding less
than 5 units it will not be necessary to seek a formal budget cost from the
Department prior to concluding a Part V agreement provided the purchase
price is considered to be reasonable by reference to the provisions of this
circular.
This update of the guidelines, which applies with effect from the date of the
circular, is issued to planning authorities under Section 28(1) of the Planning
and Development Act 2000 as an expression of the Minister’s policy to which
planning authorities shall have regard and do not purport to be a legal
interpretation of the relevant sections of the Acts or of any of the Regulations
made under the Acts.
Any enquiries regarding this circular letter should be directed to Mr. Niall
Hayden at 01-888 2735, e-mail: [email protected]
Mise le meas
______________________
Tony Boland,
Principal,
Affordable Housing Section.
To each local authority
Appendix I
Indicative Calculation
Construction costs excluding VAT and builders profit.
€100,000
Builder’s profit @ say 7½%
€7,500
Developers profit @ say 15% of costs net of builders profit
€15,000
Attributable development costs
€8,000
Developers profit @ say 15% on attributable development costs
€1,200
Land costs generally at existing use value
€1,760
Vat @13.5%
€18,017
TOTAL
€151,477
Appendix II
Department approval to Part V Agreements
Prior to concluding a Part V agreement, the local authority should make application to
the Department for budget approval, such application to be accompanied by details
of the agreed cost, identifying the amounts agreed for the land, construction costs,
other costs and profit (see Appendix III) and plans and documentation sufficient to
describe the works.
A report setting out the authority’s assessment of the proposal should also be
included and address the following issues:




where completed units on site are not proposed (the preferred option), the
rational for the proposed means of compliance with the Part V obligation;
where completed units are proposed, an assessment indicating that the mix of
units to be provided correspond to the profile of the social housing need in the
area;
a technical assessment of the proposal confirming that construction standards
will meet the requirements of the Building Regulations, an indication as to the
extent to which the planning and design of the housing development takes
account of the Department’s Design Guidelines for Social Housing and the future
management/maintenance of the completed development at reasonable cost;
and
a value for money assessment of the proposal by reference to the local
authority’s UCC and/or recent comparable tenders.
The Department recognises the administrative and technical resources required for
the successful implementation of the Part V requirements. The Department expects
that local authorities will develop an expertise in this area in order that it may engage
effectively and efficiently with planning applicants in the interest of early resolution of
agreements. The Department also recognises that in some instances local authorities
may need to engage consultants where in-house expertise is not available, e.g.,
where complex negotiations in regard to land valuation or construction costs are
involved.
The bottom line is that social housing units provided through the Part V process are
to an acceptable standard, represent value for money and compare reasonably with
units procured by other means.
In recognition of these resource implications and of the requirement to submit a
comprehensive report at budget approval stage, the Department is prepared to allow
local authorities a 1% management allowance on top of the amount payable to the
developer under a Part V agreement. Note that this allowance applies only to the
social housing units.
Appendix III
Summary of Compensation Costs
€
1.
Compensation for land transfer (EUV, ex VAT @ 13.5%)
2.
Construction costs (ex. VAT):
Substructures
Superstructures
External Works
Site Development Works
Abnormal Works
Indirect Project Costs
Total Construction Costs
3.
Other costs (ex. VAT):
Design team fees
Service connections
Development contributions (if applicable)
Site investigation
Financing charges
Legal expenses
Homebond registration (or equal approved)
Planning fees/charges
Other (specify)
Total Other Costs
4.
Developer’s Profit:
On construction costs (ex. construction profit)
On other costs
Total amount for profit
5.
Total of 1 – 4 above
Add VAT @ 13.5%
Total amount payable to developer