Summary of Commuted Sum Methodology
Adams Integra
August 2015
1
1.1
Adams Integra has prepared this report to propose commuted sums per
square metre in circumstances where, firstly, there was no on-site affordable
housing and, secondly, there was a partial on-site affordable provision. This
summary seeks to confirm and clarify that methodology and outcomes.
1.2
We would make the following points:
1.2.1
The methodology has been adopted by other authorities, for example
Sevenoaks.
1.2.2
The principle is that the Council is losing affordable units and requires,
therefore, the means to create these units elsewhere. In normal, policy
compliant circumstances, a developer would transfer completed
affordable units to a registered provider, which would have paid the
build cost to the developer. In the event that the affordable units are
not provided on site, the developer will be able to build and sell a
higher proportion of market units, which will improve his revenues. The
commuted sum methodology allows the Council to recoup, from the
developer, the equivalent open market land value, from which the
developer is benefitting.
1.2.3
Appendix 1 sets out the proposed commuted sum rates per square
metre for different locations within the District.
1.2.4
Appendix 2 sets out the methodology in three steps which is
summarised below:
STEP 1: undertake residual land valuations of different development
scenarios, in different value locations, to establish a percentage of the
total sales revenue (GDV) that might apply to the land. It is common
practice, within the house building industry, to relate land value to
GDV in this way. This percentage will, broadly, rise as unit sales
values increase. We proposed four location groups, resulting in land
value percentages of between 16% and 26%.
STEP 2: apply the land percentage (step 1) to the GDVs applicable to
development scenarios agreed with the Council. We initially
considered sites of 10, 25 and 75 units in the four location groups, at
densities ranging from 25 to 40dph. We then add 15% to the resultant
land value, representing the Council’s costs to acquire the land. We
then take 40%, as representing the Council’s policy proportion of
affordable housing. This would reduce to 35% for Whitehill and
Bordon. By way of example, we will assume that the GDV of a 10 unit
scheme, at 25dph, is £3,660,000 in the lowest value location. The total
floor area is 1,366 sqm, taken from the Viability Report to support a
Preliminary Draft Charging Schedule for Community Infrastructure
Levy (March 2014). The commuted sum calculation is detailed
overleaf:
2
GDV:
Land value percentage:
£3,660,000
16%
-------------Resultant land value:
Add 15% costs:
£585,600
£87,840
--------------
Total land cost:
Policy affordable %:
£673,440
40%
--------------
Commuted sum
Commuted sum per sqm:
£269,376
£197
1.2.5
This figure can be seen at step 2 of Appendix 2, where other rates per
square metre have been calculated in a similar way for the different
location groups.
1.2.6
In the event that the Council wanted to reflect a lower affordable
housing proportion, say 25%, then the new percentage would be
applied to the total land cost, in this case £673,440, as follows:
Total land cost:
Affordable %:
£673,440
25%
-----------Commuted sum:
Commuted sum per sqm:
£168,360
£123
3
STEP 3: Tests the viability of the proposed commuted sum rates,
adding them as a cost into residual land valuations. We compare the
land value outcomes to existing use value thresholds to confirm
viability with the commuted sum rates. At this point, we may amend
the commuted sum rates to ensure viability .In this instance it was
decided, for viability reasons, that the commuted sum rate for larger
sites (£200 at Appendix 2 step 2 below) should be reduced to £160
(see Appendix 3 below).
1.2.7
We also considered appropriate commuted sum rates for sites of 1
and 3 units. Appendix 3 contains the blended rates for both smaller
and larger sites in the four different location groups, based on 40%
affordable housing, as follows:
Group 1
£160 per sqm
Group 2
£270 per sqm
Group 3
£355 per sqm
Group 4
£450 per sqm
Finally, a typical development scenario could be a 25 unit scheme, at 30dph, on a
brownfield site in Rowlands Castle. Assume the following mix and unit sizes:
3 bed house
4 bed house
5 bed house
7
11
7
90sqm
121sqm
160sqm
630 sqm
1,331 sqm
1,120 sqm
--------------3,081 sqm
Commuted sum rate (40% affordable)
£270
--------------£831,870
Total floor area
Commuted sum
Alternatively, based on, say, 25% affordable housing the commuted sum would be
3,081 sqm x £168 per sqm = £517,608.
4
Appendix 1 – Affordable Housing Commuted Payment
Parish
Group 1
Whitehill & Bordon
Group 2
Clanfield
Headley
Horndean
Average
commuted sum (£)
per square metre
@ 40% affordable.
£160
Group 3
Alton
Bramshott and
Liphook
Four Marks
Rowlands Castle
Froyle
Grayshott
Lasham
Medstead
Ropley
Shalden
£270
£355
Group 4
Beech
Bentley
Bentworth
Colemore/Priors
Dean
Froxfield
Greatham
Hawkley
Kingsley
Wield
Worldham
£450
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Appendix 2 – Commuted Sums Calculation Tables
STEP 1: Calculating Land Value (%)
No. units
Group 1
Group 2
Group 3
Group 4
£3,660,000
£640,000
17%
£4,280,000
£995,000
23%
£4,780,000
£1,227,000
26%
£5,280,000
£1,550,000
29%
dph
10
25
GDV
LV
LV:GDV%
10
35
GDV
LV
LV:GDV%
£2,990,000
£610,000
20%
£3,310,000
£783,000
24%
£3,640,000
£927,000
25%
£4,110,000
£1,232,000
30%
25
30
GDV
LV
LV:GDV%
£8,435,000
£1,446,000
17%
£9,685,000
£2,128,000
22%
£10,820,000
£2,638,000
24%
£12,035,000
£3,399,000
28%
25
40
GDV
LV
LV:GDV%
£6,900,000
£1,316,000
19%
£7,550,000
£1,646,000
22%
£8,385,000
£2,015,000
24%
£9,475,000
£2,697,000
28%
75
30
GDV
LV
LV:GDV%
£24,385,000
£3,812,000
16%
£27,715,000
£5,500,000
20%
£30,860,000
£6,811,000
22%
£34,465,000
£8,928,000
26%
75
40
GDV
LV
LV:GDV%
£20,825,000
£3,501,000
17%
£22,925,000
£4,516,000
20%
£25,375,000
£5,517,000
22%
£28,550,000
£7,381,000
26%
16%
20%
22%
26%
Proposed
LV:GDV %
Calculating the appropriate land value
(LV) to sales (GDV) percentage.
Valuations assume zero affordable
housing S106 costs at £3,000per unit
Code 4 build costs. Note: Figures are
taken from individual valuations of the
different scenarios.
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STEP 2: Contributions per sqm
Apply the previous LV:GDc percentages (Step1) to the total sales value to calculate a land figure. Add 15% land servicing costs.
Take 40% as policy affordable housing proportion. Express the resultant figure as a sum per square metre of the total floor area
proposed development, which will have zero affordable housing.
Resultant contributions per square metre for larger sites are:
No. units
10
10
25
25
75
75
Proposed contributions per sqm
dph
25
35
30
40
30
40
Group1
£197
£215
£201
£215
£205
£214
£200*
Group 2
£288
£297
£289
£294
£291
£295
£288
Group 3
£354
£360
£355
£359
£356
£359
£355
Group 4
£462
£480
£467
£480
£470
£477
£462
*It should be noted that this figure was reduced to £160 for viability reasons.
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STEP 3: Resulting Land Value per Hectare
Testing larger sites with recommended CIL rates and suggested contributions from Step 2. Generating land values per hectare that
are then compared to threshold land values for viability.
No.
units
dph
10
10
25
25
75
25
35
30
40
30
75
40
Group 1
Group 2
Group 3
Group 4
Rates per sqm
CIL
£65
£110
£180*
£180
Contribution
£160
£270
£355
£450
Total
£225
£380
£535
£630
Land value per ha
Land value per ha
Land value per ha
Land value per ha
Land value per ha
Net:gross=+20%
Land value per ha
Net:gross=+20%
£1,180,076
£1,696,446
£1,288,445
£1,664,049
£941,390
£1,726,348
£1,954,471
£1,761,440
£1,838,619
£1,247,911
£2,090,562
£2,235,155
£2,148,068
£2,198,442
£1,518,232
£2,627,055
£3,013,879
£2,775,083
£2,997,997
£2,012,154
£1,203,429
£1,374,834
£1,637,315
£2,233,633
£1,328,973
£1,650,604
£1,971,296
£2,609,967
Average land value per hectare
*
The settlement of Alton falls within Group 3 but has a lower CIL charging rate of £150 per sqm.
Continued overleaf
8
Average land
value per
hectare
Group 1
Group 2
Group 3
Group 4
£1,328,973
£1,650,604
£1,971,296
£2,609,967
Land values
against
EUV per
EUVs
ha
Greenfield
£450,000
Employment
£945,000
Employment £1,386,000
Residential
£2,016,000
Residential
£2,772,000
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Appendix 3 – Recommended financial contribution per house type
These rates are blended between the previous rates for small sites and the new rates for larger sites:
Group
Group 1
Group 2
Group 3
Group 4
Smaller sites
Larger sites
Blended rates
£190
£270
£360
£450
£160
£288
£355
£462
£160
£270
£355
£450
For individual house types, assuming recommended CIL rates, the contributions would be:
Type of
dwelling
1 bed flat
2 bed flat
2 bed house
3 bed house
4 bed house
5 bed house
Floor area
(sqm)
46
65
76
90
121
160
Group 1
£160 per sqm
£7,360
£10,400
£12,160
£14,400
£19,360
£25,600
Group 2
£270 per sqm
£12,420
£17,550
£20,520
£24,300
£32,670
£43,200
Group 3
£355 per sqm
£16,330
£23,075
£26,980
£31,950
£42,955
£56,800
Group 4
£450 per sqm
£20,700
£29,250
£34,200
£40,500
£54,450
£72,000
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