Housing scheme unprofitable if developer has to meet council charges, planners told

Developers behind plans for an estate of almost 100 homes on council owned land in Barnsley want to sidestep rules which would cost them more than £1m in charges and involve handing over around nine properties for ‘affordable housing’.

Monday, 12th August 2019, 7:52 pm
Updated Friday, 23rd August 2019, 12:52 pm
Profit margin: A proposed housing development at Athersley would be profitable if council charges are removed, developer claims

The situation highlights the difficulties faced by the authority as it seeks to formalise the responsibilities house builders face through the introduction of a series of rules covered in Special Planning Documents.

An application has been made to put 93 houses on a site under joint ownership of the council and the Leeds Diocesan Board of Finance, but under normal planning rules that would leave the developer needing to hand over ten per cent of the homes for ‘affordable housing’ as well as contributing more than £1m to cover the extra burden on the education system from families moving in, the loss of green space and the cost of creating more open space for public use.

As part of the planning application, they have submitted a document which argues the development, off St Helen’s Boulevard in Athersley, would be uneconomic if the council insists on meeting those commitments.

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The ‘affordable housing’ stipulation is relatively light in that area, at 10 per cent, because in some of the town’s most affluent communities developers are now expected to hand over 30 per cent of the homes they build for that purpose.

Property companies could also face increasing burdens in future as the council prepares more SPDs, covering the contribution towards the cost of providing transportation in the area, which could include a charge per-bedroom, to reflect the burden on public transport – something developers have begun referring to as ‘bedroom tax’.

However, there is potential for builders to negotiate with the council in circumstances where they can argue the charges would make the development uneconomic.

Doncaster based Keepmoat Homes are currently negotiating to buy the land involved for £713,000, according to documents submitted as part of the planning application.

That is down from the £1.6m bid originally agreed by Keepmoat Homes in 2015, but that deal would have included a ‘risk share’ agreement.

Barnsley Council pulled back from that, wanting to leave the developer taking all the risk and that meant a reduction in the land price.

Now Keepmoat had used specialists to work out the development costs and likely profit margins from the site and they have concluded: “Our analysis has shown that the scheme cannot support the affordable housing requirement and non-housing s106 contributions whilst also agreeing to a land price of £713,000.”

They say the overall profit on the scheme would be less than 16 per cent, even without the council’s costs which, they say, is below industry norms.

The company also points out their scheme would provide 14 two bedroomed and homes and 63 with three bedrooms, in addition to 16 with four bedrooms, stating: “The proposed scheme provides a true mix of housing types and we would suggest that these are homes which are affordable to many potential purchases considering this location. The inclusion of 2 and 3 bedroom homes are an opportunity for families in the Barnsley area to become home owners.”

If that argument was accepted it would mean no additional homes for those who struggle with open market prices, however, and would leave the council to shoulder the costs of educating the additional children moving into the district.

Councils have the facility to negotiate over charges and financial obligations in such circumstances and recently granted planning permission for a development of 29 homes on the old Company Shop site in Tankersley.

They had faced a similar argument that the site could not sustain any additional costs, but eventually reached a compromise agreement that some, but not all, of the financial stipulations were met.

A decision on the application will be made later.