Draft Black Country Plan

Comment

Representation ID: 23576

Received: 08/10/2021

Respondent: Urban Remediation Ltd

1.2. MAPPING/STRATEGIC ALLOCATION BOUNDARY
1.2.1. There are errors on mapping boundaries regarding allocated site DUH203 on the Black Country Draft Policies Map and also the application of the Strategic Allocation boundary. These should be rectified for clarity.
1.2.2. Both the Ketley Quarry site and Ketley Farm site were remediated in 2019/2020 and have been prepared for onward housing development. There are no physical boundaries between the two areas and indeed, they are in the same ownership. In all practical sense, they can be considered as the same site.
1.2.3. The Dudley Metropolitan Borough Council (DMBC), Strategic Housing Land Availability Assessment (SHLAA) (2019-2020) update correctly identifies both the Ketley Quarry and Ketley Farm sites in their entirety. This covers a combined area of 22Ha (see Appendix 1). The Site is identified as Site 206.
1.2.4. The Black Country Draft Policies Map only shows the boundary of the Ketley Quarry Site (DUH203). To accord with the DMBC SHLAA (2019-2020), the Strategic Allocation mapping should also incorporate the Ketley Farm site. This is referenced as Site ID 247 (Ketley Farm, Dudley Road, Kingswinford) in the Black Country Call for Sites Submissions. (see Appendix 2)
1.3. SITE ALLOCATION DETAILS
1.3.1. Clarification is necessary regarding the development areas, housing numbers and deliverability with reference to the development strategy as set out in Chapter 13 Sub Areas and Site Allocations (Section A. Dudley).
1.3.2. Table 14 Dudley Housing Allocations in the Black Country Plan (BCP Policy HOU1) refers to Site reference DUH203. The Site name and address is given as Ketley Quarry/Ketley Farm, Dudley Road, Kingswinford. It has not been previously allocated and appropriate uses are noted as for housing. It identifies the indicative development capacity (net new homes) as 612 houses at 40/45 dph, The gross site area (ha) is 20.81 Ha and net site area is 13.52Ha. Anticipated delivery timescales are stated as 2024 - 2029 (50 homes), 2030 - 2035 (250 homes) and 2035 - 2039 (312 homes). It is a Strategic Allocation under Policy DSA3.
1.3.3. The Site area of Ketley Quarry and Ketley Farm is accurately measured to be 22Ha. Applying the 65% proportionality for net areas, this equates to a 14.3Ha (net) and a delivery of 644 dwellings. There are active discussions ongoing with DMBC Planning Officers as part of a pre-application process (reference PRE20/00485) with a predicted development of up to 650 dwellings. Housing availability is forecasted to commence in 2024 with an annual delivery of up to 100 dwellings per year.

Comment

Representation ID: 23577

Received: 08/10/2021

Respondent: Urban Remediation Ltd

1.5. POLICY DSA3 LAND AT KETLEY QUARRY KINGSWINFORD
1.5.1. This concerns an assumption of school provision within the Site and also the out of date Site descriptions which are used, given that it has now been remediated in preparation for housing development. We address each paragraph in turn. In addition, a submission is made from Highgate Land and Development concerning matters relating to affordable housing, viability assessment and education provision which have informed the development description in the Policy.
1.5.2. Paragraph A98 estimates delivery as 50 homes until 2029, 250 home between 2030 and 2035 and the remaining between 2035 and 2039. As noted above in Section 1.3, the estimated delivery will commence in 2024 with an annual release of approximately 100 dwellings.
1.5.3. School Place Requirements are set out in Paragraph A 103 and states 'Should it be determined that some form of primary school provision is required as the BCP progresses towards adoption, this may need to be accommodated on the site and land will need to be allocated to accommodate a two-form entry primary school (approximately 2.4ha)'. It is considered that the location of current school provision at both primary and secondary level is adequate. Existing facilities, necessary extensions to such facilities and the allocation can be met through required developer contributions.
1.5.4. Nature Conservation and Net Biodiversity Gain Requirements are set out in Paragraphs A105 and A106. The description of the Site is not correct. In fact, the quarry has been infilled and engineered in preparation for housing. Nor is it vegetated with ruderal species. Reference is made to a disused farmhouse for bat interest, however, this building has now been demolished under a previous planning consent.
1.5.5. The Site description is better represented by stating that both the Ketley Quarry site and adjacent Ketley Farm are bare of vegetation and is left as a levelled ground in readiness for future development.
1.5.6. Further submissions are made on the matters relating to the provision of affordable housing, the viability assessments undertaken as part of the Black Country Plan, education provision and related matters that are of concern in the application of Policy DSA3.these are contained in the copy of correspondence in Appendix 3.

Comment

Representation ID: 23578

Received: 08/10/2021

Respondent: Urban Remediation Ltd

Strategic Review of Aspinall Verdi Black Country Plan (BCP) Viability and Deliverability Study (May 2021) - On behalf of Urban Regeneration Ltd in respect of the former Ketley Quarry, Dudley, DY6 8WT
8 October 2021
Dear //
Strategic Review of Aspinall Verdi Black Country Plan (BCP) Viability and Deliverability Study (May 2021) - On behalf of Urban Regeneration Ltd in respect of the former Ketley Quarry, Dudley, DY6 8WT
Introduction & Overview
As instructed by Urban Regeneration Ltd, I write to provide you with the outcome of the strategic review that I have undertaken of the viability evidence prepared by Aspinall Verdi (AV) on behalf of the four Black Country Local Authorities (BCLA's), which comprises the viability evidence base which informs the draft Black Country Plan (BCP).
I understand that you will be including this review as part of your wider representations to the draft BCP Regulation 18 consultation, which in particular, focuses on the proposed draft allocation of the site by virtue of draft Policy DSA3 - Land at Ketley Quarry, Kingswinford.
You require me to undertake a strategic review of AV's viability evidence having regard to the fact that draft Policy HOU3 identifies the site as falling within a 'Higher Value Zone' within the Black Country (reference Figure 5- Black Country Housing Value Zones) on Page 104 of the draft BCP, and hence 'Limb 2c' of the draft policy would require a minimum proportion of affordable housing of 30% provision. I understand that you will be making representations to ensure that this level of affordable housing provision is subject to the viability test. This is very prudent, given AV's own findings, which are crystallised in
Paragraph 6.27 of the draft BCP which states:
'However, viability issues can vary significantly from site to site and are often caused by poor ground conditions, the extent of which cannot be accurately assessed until planning application stage. Therefore, to maximise delivery of affordable housing over the plan period, it is important that affordable housing is sought on all eligible sites, that viability is assessed on a site by site basis where required, and that a flexible approach is employed wherever possible to allow for changing market conditions.'
Flexibility in the policy will be particularly important based on my initial review of AV's viability evidence, and in particular, my findings in respect of Ketley Quarry; other Key Large Sites (KLSs), and the viability of all sites across the Black Country generally.
You also noted that draft Policy DSA3 also references the potential requirement for primary school provision on the Former Ketley Quarry site, which may be identified as the BCP progresses towards adoption. Hence, the site may need to accommodate a two-form entry primary school requiring approximately 2.4 hectares (5.9 acres). I have therefore reviewed AV's evidence and considered how this requirement has been viability tested by AV.
The remainder of this letter therefore sets out my strategic comments on AV's viability evidence that supports the draft BCP to date. I then provide a commentary on key aspects of AV's methodology and assumptions adopted to viability test both the KLSs (including Ketley Quarry), as well as all other sites across the Black Country.
Strategic Issues
Having reviewed the viability evidence base prepared by AV, it is clear from Appendix 2 'Residential Typologies Matrix' of their report that Ketley Quarry has indeed been subject to a viability test, and forms part of the KLS that have been considered to inform the viability testing.
However, the site-specific viability testing of all KLS's (including Ketley Quarry) is not included in the viability evidence base underpinning the Local Plan, and has not been released into the public domain. Paragraph ESS of AV's report confirms this, stating that:
'A separate confidential report provides viability and delivery advice in respect of the portfolio of Key Large Sites (KLSs)'.
The analysis of the KLSs is confirmed as remaining confidential again at Paragraph 1.13 of AV's report, and again at Paragraph 7.8.
Paragraph 58 of the National Planning Policy Framework (NPPF) July 2021 states that:
'Where up-to-date policies have set out the contributions expected from development, planning applications that comply with them should be assumed to be viable. It is up to the applicant to demonstrate whether particular circumstances justify the need for a viability assessment at the application stage. The weight to be given to a viability assessment is a matter for the decision maker, having regard to all the circumstances in the case, including whether the plan and the viability evidence underpinning it is up to date, and any change in site circumstances since the plan was brought into force. All viability assessments, including any undertaken at the plan-making stage, should reflect the recommended approach in the National Planning Guidance, including standardised inputs, and should be made publicly available.' [My emphasis].
Paragraph 58 of the NPPF therefore requires all viability assessments including those at the plan-making stage to be made publicly available.
This approach is also echoed in the viability section of the Planning Practice Guidance (PPG), which was published on the 6 March 2014 and last updated on 1 September 2019.
In terms of viability and plan-making, Paragraph: 002 Reference ID: 10-002-20190509 states that the role for viability assessment is primarily at the plan-making stage. It goes on to state that it is the responsibility of plan-makers in collaboration with the local community, developers and other stakeholders, to create realistic, deliverable policies:
'Drafting of plan policies should be iterative and informed by engagement with developers, landowners, and infrastructure and affordable housing providers.'
Paragraph Reference ID: 10-003-20180724 states that:
'Assessing the viability of plans does not require individual testing of every site or assurance that individual sites are viable. Plan makers can use site typologies to determine viability at the plan making stage. Assessment of samples of sites may be helpful to support evidence. In some circumstances more detailed assessment may be necessary for particular areas or key sites on which the delivery of the plan relies.'
Paragraph Reference ID: 10-005-20180724 continues:
'It is important to consider the specific circumstances of strategic sites. Plan makers can undertake site specific viability assessments for sites that are critical to delivering the strategic priorities of the plan. This could include, for example, large sites, sites that provide a significant proportion of planned supply, sites that enable or unlock other development sites or sites within priority regeneration areas. Information from other evidence informing the plan (such as Strategic Housing Land Availability Assessments) can help inform viability assessment for strategic sites.'
Paragraph Reference ID: 10-006-20190509 also states that plan-makers should engage with landowners, developers and infrastructure and affordable housing providers to secure evidence on costs and values to inform viability assessment at the plan-making stage. It also states that it is the responsibility of site promotors to engage in plan-making, taking into account any costs included in their own profit expectations and risks, and ensure the proposals for development are policy compliant.
Paragraph 58 of the NPPF therefore requires all viability assessments to be made public, even at the plan-making stage. In addition, the PPG encourages site promoters to engage with the Local Plan process in respect of development viability. I am therefore unsure as to why the viability appraisals that AV have undertaken for all KLS's (such as Ketley Quarry) have not been made available for review as part of the draft BCP evidence base, and remain confidential. This is contrary to Paragraph 58 of the NPPF and will also prevent any further meaningful engagement from site promoters in respect of all KLSs in respect of site viability, as promoted by the PPG.
I would therefore respectfully request that the viability evidence underpinning the four KLS is made available for public review as soon as possible, to ensure that the draft BCP is compliant with Paragraph 58 of the NPPF and that site promoters can meet the requirements of the PPG.
Strategic Comments on AV Viability Approach/Assumptions to date
Given that the site-specific viability testing for KLSs is not included in the BCP viability evidence base, I am unable to interrogate how AV have viability tested the Former Ketley Quarry site; the precise assumptions that they have adopted; or their findings as to the viability and deliverability of the KLSs. Interrogating this information will be necessary both for the promoters of the KSLs, and also, the Planning Inspector at the Examination in Public (EiP) to ensure that the requirements being placed on the KLSs are viable and deliverable.
The remainder of this letter therefore provides my strategic comments and observations on AV's viability evidence which is available in the public domain, and how it may impact not only on the viability appraisal of the KLSs (such as Ketley Quarry), but also, all other sites across the Black Country.
My strategic comments/observations on AV's viability testing to date as included in Aspinall Verdi's Black Country Plan Viability and Deliverability Study (May 2021) are as follows:
• RICS Guidance - Paragraph 1.9 of AV's report refers to the 'Financial viability in planning' guidance produced by the RICS in 2012 as currently being reviewed. However, as at May 2021, that updated guidance had been issued by the RICS on the 30 March 2021. AV's report will therefore need to be considered and updated to ensure that it reflects the most up to date guidance from the RICS as the BCP evolves.
• Infrastructure requirements - Table 3.5 at Paragraph 3.17 of AV's report states in respect of draft Policy DEL1 -- 'Infrastructure Provision' that for KLSs, that AV have engaged with the landowners, developers and site promoters in order to establish what infrastructure is required. As we highlighted to AV during the stakeholder process, assessing the infrastructure and cost requirements for Ketley Quarry is an ongoing process, and hence the information provided was the best information available at that time. There is no detail in AVs' report as to what infrastructure has been assumed for KLS sites in AV's evidence (as this presumably is contained in the confidential report which does not form part of the draft BCP evidence base). AV should provide further information on their assumptions for the KLS, to ensure that the requirements of draft Policy DELl have been adequately viability tested.
• Education - Table 3.5 of AV's report states that in terms of education: 'For both the generic Typologies and the KLS we have included the sum of£4,471.40 per home, unless there is a site-specific assumption for the cost of a new school to be provided to serve a KLS. Notwithstanding these allowances, the policy is specifically stated to be 'subject to viability'.'
In the absence of the evidence relating to the KLS sites being made available to us, we are unable to ascertain AV's precise assumptions in respect of education provision on the Former Ketley Quarry (or other KLS sites). We are also uncertain as to how the £4,471.40 rate per dwelling assumption for education has been calculated, and hence whether it is robust.
Paragraph Reference ID: 10-029-20190509 of the PPG is entitled 'How should viability for education provision be addressed?', and states that: 'When considering viability, it is recommended that plan makers and local authorities for education work collaboratively to identify which schools are likely to expand, and where new schools will be needed as a result of planned growth. It is important that costs and land requirements for education provision are known to inform site typologies and site-specific viability assessments, with an initial assumption that development will provide both funding for construction and land for new schools required onsite, commensurate with the level of education need generated by the development'.
In this context, this does not appear to have been undertaken in respect of any of the KLS's, given that Paragraph A102 in respect of school place requirements in Policy DSA3 states that it is currently anticipated that both primary and secondary school place requirements arising from housing developments in the north-west of Dudley over the plan period will be capable of being met through extensions to existing primary and secondary schools. Notwithstanding this, Paragraph A103 states that this situation may be subject to change, as it states: 'should it be determined that some form of primary school provision is required as the BCP progresses towards adoption, this may need to be accommodated on the site and land will need to be allocated to accommodate a two-form entry primary school (approximately 2.4 ha).'
Therefore, the allocation as currently drafted seems to conclude that no on-site school would be required (based on the information available to date), but leaves flexibility for a school to be included in the future.
Such a requirement is likely to have a significant impact on development viability. Assuming that 650 dwellings are delivered, we would anticipate that the allowance for education at the £4,471.40 per dwelling rate assumed by AV equates to £2,906,410. The provision of a school on site is likely to cost significantly in excess of this, and hence would need to be viability tested.
In addition, the requirement to provide a school on site could also have an impact on the ability to achieve the anticipated number of residential homes on the site (as it will impact on the land use budget and hence the number of dwellings that can be provided).
In the absence of the viability report relating to the KLS sites being available, we have been unable to ascertain whether this has been tested by AV and hence what the viability implications are.
• Residential Mix- Paragraph 6.17 of AV's report highlights that one-bedroom houses have been included in the assumed mix for site typologies, along with five• bedroom dwellings. In our experience, one-bedroom houses are not popular house types in the market for potential occupiers, and hence we are uncertain as to why these dwellings have been assumed in the viability test. In addition, five-bedroom houses are also less popular, with the market seeking to focus on the provision of 2, 3 and 4 bedroom dwellings.
Appendix 2 'Residential Typologies Mix' sheds some light as to some of the mix assumptions for the KLSs. For the Former Ketley Quarry, one-bedroom flats appear to have been assumed to comprise approximately 15% of the overall development mix, along with 7% two bedroom flats. In addition, 4% of dwellings are one• bedroom houses. Again, in our experience, developers typically avoid delivering flats (in line with AV's findings in their report), as they impact upon development viability and are not a preferred house type (often occupiers preferring second• hand traditional two-bedroom housing stock rather than buying a new build two• bedroom apartment). In addition, the proportion of one-bedroom flats is high at 15%, as is 4% for one-bedroom houses (for the reasons set out above).
• Residential Floor Area Assumptions -- The floor area per sq m assumptions that have been applied by AV set out in Table 6.6 of their report are at the larger end of the scale than we would anticipate for new build residential development. In our experience, we would anticipate that the two-bedroom houses would comprise an average of approximately 69 sq m (750 sq ft); three-bedroom dwellings would comprise approximately 88 sq m (950 sq ft), and four-bedroom dwellings would comprise an average of 116 sq m (1,250 sq ft). We are broadly comfortable with the assumed sizes of the one and two-bedroom apartments applied by AV.
• Aspinall Verdi Black Country Housing Zones (Figure 6.5) - Paragraph 6.31 sets out new build achieved sales values that AV have researched, presenting them in 'Heat Map' format at Figure 6.2. Figure 6.2 demonstrates that the Former Ketley Quarry site falls within the 'middle' value range of £2,369 to £2,641 per sq m, with very few sites/areas in the Black Country achieving the highest new build sales values of £2,912 per sq m to £3,184 per sq m (which are typically located in Stourbridge and in dark green on AV's Heat Map at Figure 6.2). Notwithstanding this, the Ketley Quarry site is included in a 'Higher Value Zone' by Aspinall Verdi in Figure 5 (which is included in draft Policy HOU3 to define the value areas and hence affordable housing requirements).
Paragraph 3.2 of AV's report also highlights that in areas such as Aldridge, Blackheath and Stourbridge, some of the highest average achieved values were recorded ranging from £2,641- £3,184 per sq m. This casts further doubt on the Ketley Quarry site being situated in a Higher Value Area. This is also supported by AV's Figure 6.4 which sets out the Index of Multiple Depravation Map. Again, Ketley Quarry is situated in an area where the Index of Multiple Depravation is much higher (i.e. brown/orange shading) when compared to the rest of neighboring Kingswinford (which is in either light or dark green shading, i.e. a lower Index of Multiple Depravation). At Paragraph 6.37, AV acknowledge that although the Index is not a direct comparison to housing values, it is a very good proxy, and that in their experience, values are lower in areas where there is the greatest depravation.
Finally, Figures 3.1, 3.2 and 3.3 of AV's report set out the residential CIL Charging Zones across the Black Country. The most recent version of the CIL Charging Schedule for Dudley is dated July 2020. Figures 3.1 and 3.2 show that the Zone 1 Charging Area for CIL is inconsistent with the value areas now proposed by the draft BCP. For example, in relation to Ketley Quarry, the site is situated within residential Zone 1- the lowest value area in Dudley and hence no CIL applies. However, for informing AV's viability study, the site sits within the Higher Value Zone. Whilst we acknowledge that AV state that the value area plans can never be perfect, this is clearly an inconsistency which casts a doubt on the analysis of Higher Value Zones that AV have undertaken.
Figure 6.5 should therefore be more carefully considered by AV to ensure that it is more in line with their own evidence at Figures 6.2 and 6.4 of their report, and the associated plan in draft Policy HOU3 (i.e. Figure 5 of the draft BCP) should be updated accordingly
• 'Absolute Market Values Applied -- When considering Ketley Quarry, we would anticipate that the 'absolute market values' that AV have applied for the Medium Value Zone are more in line with those that are likely to be achievable. The Higher Value Zone values (which we assume that the confidential report testing KLSs has applied) are significantly in excess of those that are achievable in this location.
Appendix 3 of AV's report entitled 'Residential Market Paper' provides further detail on the residential market analysis that AV have undertaken, which is extensive, and includes a range of evidence, including an analysis of new build sales values.
The nearest comparable new build development to Ketley Quarry reviewed by AV is 'Catesby View' undertaken by Taylor Wimpey. This development is approximately 1 mile to the north-east of the subject site; however, AV's analysis identifies it as being within the 'Middle Value Zone'. AV have collected sales evidence from this development as follows:
o Three-bedroom dwellings - ranging from £236,950 to £241,000; and o Four-Bedroom Dwellings - £306,950 to £316,500 for four bedroom detached dwellings.
There is no other evidence for two-bedroom dwellings or apartments.
It should be noted that the capital values for this nearby development fall more in line with those that AV have applied in Middle Value Zones of £250,000 for a three• bedroom house and £310,000 for a four-bedroom house. This indicates that new build sales values achievable in the area are more in line, if not slightly below, the values applied for the Medium Value Zone area, and hence it is unrealistic to include Ketley Quarry within a Higher Value Zone area.
Turning to AV's analysis of new build sales values for Higher Value Zones, it should be noted that only three new build comparable developments have been considered by AV. One includes 'The Langlands', Bowling Green Road, Stourbridge, but no comparable evidence is quoted for this scheme being undertaken by Persimmon. Accordingly, comparable information for only two new build schemes in High Value Zone areas for the whole of the Black Country area are quoted, namely 'Sunnyside View' by Owl Homes in Walsall Wood (one of the more well regarded residential locations in Walsall) which comprises 62 homes. Only two com parables are provided for this scheme which range between £305,000 to £310,000 capital value for four-bedroom homes. Again, these values are more akin to the values AV have assumed for Medium Value Zones, and are significantly below those that they have applied for High Value Zones. The final scheme quoted by AV for Higher Value Zones is 'Stencil Gardens' developed by Kendrick Homes, again in a better part of Walsall, which comprises only 12 homes (i.e. below the current threshold for affordable housing). The values on this site are significant, representing the small-scale nature of the scheme. This limited new build sales value evidence for High Value Zone areas calls into question the values that AV have applied for Higher Value Zone areas, as there is very limited new build evidence to substantiate the values that AV have applied.
Finally, we would also comment that the apartment values proposed throughout all of AV's value areas are very high, at approximately £120,000 for a one-bedroom apartment and £140,000 for a two-bedroom apartment. As stated above, apartments are not a popular product throughout the Black Country, particularly in non-town centre (i.e. suburban locations), and the values achievable are constrained by the value of secondary housing stock which typically provides larger and more cost effective two bedroom accommodation (typically with driveways and gardens).

• Residential delivery rates - Paragraph ES16 of AV's report confirms that for large sites of greater than 500 units with a single sales outlet, AV have assumed a residential delivery rate of 100 dwellings per annum.
Whilst we broadly agree with all of the other delivery rates that AV have adopted, we believe that for larger sites, AV's assessment of the delivery rates is too high. AV have assumed that sites of over 500 units with a single outlet will achieve a delivery rate of 100 dwellings per annum. However, where there may be two or more sales outlets, AV have assumed 200 dwellings per annum.
It is unclear from AV's evidence as to whether these delivery rates include market dwellings only, or whether they also include affordable dwellings. However, later on in AV's report, the evidence provided by Black Country case studies shows that across all four Local Authorities, a delivery rate exceeding 50 units per annum is rarely exceeded.
Therefore, we would propose that a delivery rate of 4 market dwellings per month is assumed for the larger sites (48 market dwellings per annum). The delivery of affordable dwellings will be in addition to this figure.
It may be possible to exceed this level where there are two outlets of sale for larger sites; however, in our experience, it is unlikely that over 100 market dwellings per annum will be achievable and indeed this is demonstrated by AV's own evidence having regard to all the Black Country Case Studies they quote at Paragraphs 4.38 4.47 of their report.
• Affordable Housing Transfer Values -- Transfer values for affordable rented affordable housing of between 60% and 67.5% have been assumed by AV (reference Table 6.7 of their report). For affordable rented dwellings, we would usually anticipate transfer values of 55% - 60% of Market Value. Therefore, the assumptions applied for affordable rented in both Wolverhampton and Sandwell are above the market values we would anticipate. The assumption applied for affordable rented accommodation in Dudley is at the higher end of the range that we would anticipate at 60% of Market Value.
• Construction and Abnormal Costs - Paragraph 6.54 of the AV report sets out the construction cost assumptions for residential typologies, along with the abnormal costs assumed. Site clearance, demolition and remediation has been included at a '£54,000 per acre' baseline assumption. This is low in our experience in the Black Country, albeit that we recognise that AV have undertaken sensitivity tests of up to £1.26 million per hectare (£510,000 per acre).
We are unable to comment further in relation to the KLS (such as the Former Ketley Quarry), given that the results of the viability and sensitivity testing of abnormal costs has not been provided as part of the BCP evidence base.
In terms of construction costs, AV have utilised the 'lower quartile' BCIS cost of £990 per sq m (£91.97 per sq ft) for all sites, but a slightly higher rate for sites of 60 units or less of £1,116 per sq m (£103.68 per sq ft). We would caution AV's reliance on the use of 'lower quartile' BCIS costs, as this is unlikely to be achievable even on the most 'standard' developments even with the largest house builders.
AV's lower quartile BCIS build cost equates to a total construction cost of £105.77 psf (including their allowance for externals). In our experience, many housebuilders of typical sites across the Black Country are unable to achieve this level (and are unable to achieve costs below approximately £115 per sq ft). Further, this situation has become more acute during 2021, with the shortage of materials that has been seen in the first half of the year and the consequent rise in construction prices(etc.).
AV's use of the lower quartile BCIS cost is also inconsistent with the draft BCP's desire/requirement to achieve 'high quality' design as required by draft Policy ENV9- Design Quality of the draft BCP, Limb 2 of which states that: 'Development’ will be designed to the highest possible standards, creating a strong sense of place.'
The use of the 'lower quartile' BCIS build cost will therefore paint an over-optimistic picture of viability across all sites across the four local authorities.
• Professional Fees - Paragraph 6.55 confirms that AV have applied professional fees at 6.5% of construction costs. In our experience, a 6.5% allowance for professional fees will be insufficient to adequately cover the professional fees that will be incurred to develop sites across the Black Country (particularly given that the construction costs are already based on the lower quartile BCIS costs, and hence the allowance for professional fees will be lower). We would propose a more prudent assumption of 8% for professional fees for all sites throughout the Black Country.
• Marketing Fees -- AV have allowed 3% for sales discounts and incentives, with a further 1% for Sales Agent's fees and 0.25% for Legal Fees (with a separate figure for affordable housing). We would comment that a 3% allowance is unlikely to be sufficient to cover all marketing activities if this is to also account for sales discounts and incentives. This should be clarified by AV, as in our experience, sales prices are usually inputted into the appraisal net of sales values and discounts/incentives, with a separate allowance for marketing costs ranging from 1-2% of Gross Development Value (GDV).
• Developer's Return for Risk (profit)- It is noted that AV's viability testing sensitivity tested a 15% profit on GDV, noting at Paragraph 6.58 that the 20% profit on GDV that they have assumed is at the 'top end' of the range. We welcome AV's approach to apply 20% profit on GDV on the market housing and 6% for the affordable element, as it is in line with our experience and reflects the risk of delivering sites throughout the Black Country area (which typically involves complex brownfield sites etc.). Developer's/house builders are unlikely to target a profit of 15% on GDV throughout the majority of the Black Country in our experience, given the nature of sites and the risks involved.
• Residential Land Value Assumptions (i.e. AV's Benchmark Land Values, BLV) • Table 6.12 sets out AV's BLV assumptions. It should be noted that it appears that all of the residential Key Large Sites (KLS) are assumed to be in greenfield locations regardless of the value area tested, for the purposes of arriving at the BLV. We are therefore confused as to the approach to BLV that has been applied for the KLS sites, in the absence of having sight of AV's confidential report, given that Appendix 2 'Residential Typologies Matrix' of AV's report also highlights that some of the specific KLS's viability tested are situated in brownfield, rather than greenfield, locations.
In terms of Greenfield sites, whilst we broadly agree with the £200,000 per acre assumption that AV have applied for greenfield sites (rising to £250,000 in higher value locations), in reality, the actual land value AV have applied is much lower than this, as a net to gross area of 50% is assumed, and the £200,000 to £250,000 per acre applied by AV in calculated on the 'net' rather than the 'gross' area.
Therefore, AVs gross land value will range between £100,000 and £125,000 per gross acre. In our experience, this is a very low benchmark for greenfield land, and is unlikely to provide land-owners with a reasonable return in order to for them to bring greenfield land forward for development. Landowners will need to release all of the site area, not merely that which is developable for residential (as the areas of the site which are outside the net developable area still need to be sold in order to facilitate the development - perhaps providing infrastructure, open space etc.).
AV's approach therefore reflects no value on these significant areas of land for greenfield sites.
In respect of brownfield sites, we understand that no such adjustment for net to gross land area is applied, and consequently, the Existing Use Value (EUV) of such uses applies to 100% of the site area. We agree with this approach, and broadly agree with the EUV rate per acre that AV have applied of between £200,000 and £300,000 per acre.
However, we are concerned that the uplift/multiplier AV have applied for brownfield land is low, ranging between 5% and 10% of the EUV. This means that a landowner would generate a return of only £10,000 per acre for a brownfield site in a low value area, rising up to £30,000 per acre uplift for a brownfield site in a high value area.
The percentage uplifts AV have applied are significantly below the minimum levels required in order for brownfield land to be released throughout the Black Country, which typically are in the order of 20% and 30% minimum above the EUV throughout the Black Country. AV's assumption therefore leaves very little (if any) incentive for a prudent landowner of brownfield land to promote and release their land for development over and above its EUV. This is likely to significantly constrain the amount of land coming forward for residential development over the plan period.
• AV's Conclusions and Recommendations - Paragraph ES30 of AV's report states that AV's recommendations in the Higher Value Zone are that for greenfield sites, affordable housing could increase to 40% affordable housing and a CIL Charge of up to £200 per sq m (excluding strategic sites). For brownfield land, AV conclude that the affordable housing provision can be increased to 30%, with CIL of up to £120 per sq m (albeit that this appears to exclude strategic sites). These are significant affordable and CIL requirements even for Higher Value Zone areas in the Black Country. Hence, it will be necessary to ensure that there is flexibility in draft Policy HOU3 to ensure that the level of affordable housing can be adjusted downwards based upon site specific viability circumstances.
Paragraph 6.68 of AV's report confirms that only the results of the viability appraisals for the residential typologies (excluding the KLS which are the subject of a separate confidential report) are included in the report. Therefore, all of the viability testing for the KLSs is confidential, and does not form part of the draft BCP evidence base, contrary to the requirements of Paragraph 58 of the NPPF.
However, it is worth noting that the largest site typology tested in Dudley of 300 dwellings is anticipated to be viable in Higher Value Zone areas. However, where the same site typology is tested in a Medium Value Zone, Table 6.13 states that larger schemes in medium value areas 'become viable when reducing to 0% affordable housing and £10 per sq m CIL'.
This therefore indicates that the sales values are very important to the deliverability of these large sites, and hence it will be particularly important to ensure that the sales values have been appraised correctly, particularly for the KLS sites. For example, if KLS's are included in a High Value Area but those values cannot be achieved (i.e. the values are more in line with the Medium Value Zone), this will have a significant impact on viability and hence the KLS's ability to deliver the 30% affordable housing requirement. This is also echoed in Paragraph 6.14 of AV's report for greenfield sites, as AV anticipate that they would only become viable by reducing affordable housing to 10% and CIL to £40 per sq m.
Finally, Paragraph 10.19 of the AV report states that: 'It is not considered appropriate to recommend setting affordable housing or CIL to the margins of viability due to the limitations of an area wide viability study. However, in the case of the Black Country the margins are much 'tighter' than many LA areas due to the values and abnormal site costs. The figures set out below are considered to be more realistically deliverable and achievable across the Black Country Authorities.' This demonstrates the continued need for values to be accurate and draft Policy HOU3 to be subject to the viability test.
• Grant Funding - Paragraph ES36 - ES39 states that in order for the Black Country to achieve its housing targets, it is likely that grant funding will be required to facilitate development (particularly on brownfield sites with an industrial legacy to overcome and/or in low value market areas). Whilst this analysis is interesting, in our experience, grant funding is only available for some key sites, and hence it is therefore unlikely to assist in securing the deliverability of a significant amount of affordable housing across the Black Country at the scale identified by AV.
Summary and Conclusions
The above sets out our strategic review of the viability evidence base that AV has prepared to inform the BLP, alongside our comments regarding the specific assumptions that have been utilised by AV in order to inform their viability testing.
The key issue that we have identified with the viability evidence base is that it does not include AV's viability analysis of KLSs across the Black Country, as this is contained in a 'confidential report'. This is contrary to Paragraph 58 of the NPPF, which requires all viability assessments, including those undertaken at the plan making stage, to be publicly available. In the absence of this information being published, we are unable to interrogate the extent of viability testing that has been undertaken for the KLSs; the nature of the assumptions adopted by AV; or their findings/conclusions as to the viability and deliverability of these key sites.
We would therefore respectfully request that the BCLA's publish this information as a matter of urgency, in order to ensure that the draft BCP is compliant with the NPPF and the full range of evidence underpinning the BCP can be reviewed by both site promoters and the public.
I trust that this is the information you require and enables you to complete your submissions to the Regulation 18 consultation for the BCP. However, if you have any queries, please do not hesitate to contact me on the details set out above.
Yours sincerely,

Object

Representation ID: 23579

Received: 08/10/2021

Respondent: Urban Remediation Ltd

1.4. POLICY HOU3 DELIVERING AFFORDABLE, WHEELCHAIR ACCESSIBLE AND SELF BUILD/CUSTOM BUILD HOUSING
1.4.1. Clarification is required concerning the phrasing of Policy HOU3 Delivering Affordable, Wheelchair Accessible and Self Build/Custom Build Housing regarding the approach to affordable housing percentages and exceptions that apply. Furthermore, the evidence for the proportion of affordable housing contributions appears to be without merit.
1.4.2. We wish to highlight the following paragraphs of Policy HOU3.
1.4.3. Affordable Housing, Paragraph 2 states 'All developments of ten homes or more should provide a proportion of affordable housing, where this is financially viable. The minimum proportion of affordable housing that should be provided is:' [etc].
1.4.4. The clarification of wording relates to the emphasis of 'financially viable' and the suggested phrasing is as follows 'All developments of ten homes or more should provide a proportion of affordable housing. The minimum proportion of affordable housing that should be provided where this is financially viable is:' [etc].
1.4.5. Affordable Housing, Paragraph 2c notes that for higher value zones, it is 30% affordable housing.
1.4.6. The evidence base seems to be contrary to this. The Black Country Housing Market Assessment (Final Report) (March 2021) states at paragraph 8.7
'The total annual affordable housing need in the Black Country of 867 per year (as set out in Chapter 6) represents 21.6% of the annual dwelling growth of 4,019 in the housing market area as assessed using the revised Standard Method. It would be reasonable to expect this proportion of new housing as affordable to be delivered on a large housing site in the Black Country, where a figure of 25% would be plausible (subject to viability). The Councils can therefore be confident that the affordable housing need identified in the model will be addressed by the dwelling growth identified by the Standard Method and no adjustment is required to this figure'.
1.4.7. Accordingly, there should be a presumption to retain 25% as set out for Dudley Borough Development Strategy (Adopted March 2017). Policy L3 Affordable Housing in New Developments of which notes a 25% value of the total units. Any proportionality of affordable housing contribution should not be based on the land value mapping which at best can only be regarded as a general rule of thumb. It should be taken from the financial viability report specific to each development site which will in any event, take account of market forces and recognised land values.
1.4.8. Financial Viability Assessments, Paragraph 7 states 'On sites where applying the affordable housing or wheelchair accessibility requirements can be demonstrated to make the development unviable, the maximum proportion of such housing will be sought that will not undermine the viability of the development, subject to achieving optimum tenure mix and securing other planning obligations necessary for the development to gain planning permission'.
1.4.9. The Policy is inclusive of affordable housing, wheel chair and self build/custom build. Therefore, the wording should be altered (bold type indicates additional text) as follows: On sites where applying the affordable housing or wheelchair accessibility requirements or self build and custom build plots can be demonstrated to make the development unviable, the maximum proportion of such housing will be sought that will not undermine the viability of the development, subject to achieving optimum tenure mix and securing other planning obligations necessary for the development to gain planning permission.

Comment

Representation ID: 23580

Received: 08/10/2021

Respondent: Urban Remediation Ltd

Agent: Bright & Associates

1.2. MAPPING/STRATEGIC ALLOCATION BOUNDARY
1.2.1. There are errors on mapping boundaries regarding allocated site DUH203 on the Black Country Draft Policies Map and also the application of the Strategic Allocation boundary. These should be rectified for clarity.
1.2.2. Both the Ketley Quarry site and Ketley Farm site were remediated in 2019/2020 and have been prepared for onward housing development. There are no physical boundaries between the two areas and indeed, they are in the same ownership. In all practical sense, they can be considered as the same site.
1.2.3. The Dudley Metropolitan Borough Council (DMBC), Strategic Housing Land Availability Assessment (SHLAA) (2019-2020) update correctly identifies both the Ketley Quarry and Ketley Farm sites in their entirety. This covers a combined area of 22Ha (see Appendix 1). The Site is identified as Site 206.
1.2.4. The Black Country Draft Policies Map only shows the boundary of the Ketley Quarry Site (DUH203). To accord with the DMBC SHLAA (2019-2020), the Strategic Allocation mapping should also incorporate the Ketley Farm site. This is referenced as Site ID 247 (Ketley Farm, Dudley Road, Kingswinford) in the Black Country Call for Sites Submissions. (see Appendix 2)
1.3. SITE ALLOCATION DETAILS
1.3.1. Clarification is necessary regarding the development areas, housing numbers and deliverability with reference to the development strategy as set out in Chapter 13 Sub Areas and Site Allocations (Section A. Dudley).
1.3.2. Table 14 Dudley Housing Allocations in the Black Country Plan (BCP Policy HOU1) refers to Site reference DUH203. The Site name and address is given as Ketley Quarry/Ketley Farm, Dudley Road, Kingswinford. It has not been previously allocated and appropriate uses are noted as for housing. It identifies the indicative development capacity (net new homes) as 612 houses at 40/45 dph, The gross site area (ha) is 20.81 Ha and net site area is 13.52Ha. Anticipated delivery timescales are stated as 2024 - 2029 (50 homes), 2030 - 2035 (250 homes) and 2035 - 2039 (312 homes). It is a Strategic Allocation under Policy DSA3.
1.3.3. The Site area of Ketley Quarry and Ketley Farm is accurately measured to be 22Ha. Applying the 65% proportionality for net areas, this equates to a 14.3Ha (net) and a delivery of 644 dwellings. There are active discussions ongoing with DMBC Planning Officers as part of a pre-application process (reference PRE20/00485) with a predicted development of up to 650 dwellings. Housing availability is forecasted to commence in 2024 with an annual delivery of up to 100 dwellings per year.

1.5. POLICY DSA3 LAND AT KETLEY QUARRY KINGSWINFORD
1.5.1. This concerns an assumption of school provision within the Site and also the out of date Site descriptions which are used, given that it has now been remediated in preparation for housing development. We address each paragraph in turn. In addition, a submission is made from Highgate Land and Development concerning matters relating to affordable housing, viability assessment and education provision which have informed the development description in the Policy.
1.5.2. Paragraph A98 estimates delivery as 50 homes until 2029, 250 home between 2030 and 2035 and the remaining between 2035 and 2039. As noted above in Section 1.3, the estimated delivery will commence in 2024 with an annual release of approximately 100 dwellings.
1.5.3. School Place Requirements are set out in Paragraph A 103 and states 'Should it be determined that some form of primary school provision is required as the BCP progresses towards adoption, this may need to be accommodated on the site and land will need to be allocated to accommodate a two-form entry primary school (approximately 2.4ha)'. It is considered that the location of current school provision at both primary and secondary level is adequate. Existing facilities, necessary extensions to such facilities and the allocation can be met through required developer contributions.
1.5.4. Nature Conservation and Net Biodiversity Gain Requirements are set out in Paragraphs A105 and A106. The description of the Site is not correct. In fact, the quarry has been infilled and engineered in preparation for housing. Nor is it vegetated with ruderal species. Reference is made to a disused farmhouse for bat interest, however, this building has now been demolished under a previous planning consent.
1.5.5. The Site description is better represented by stating that both the Ketley Quarry site and adjacent Ketley Farm are bare of vegetation and is left as a levelled ground in readiness for future development.
1.5.6. Further submissions are made on the matters relating to the provision of affordable housing, the viability assessments undertaken as part of the Black Country Plan, education provision and related matters that are of concern in the application of Policy DSA3.these are contained in the copy of correspondence in Appendix 3.

Comment

Representation ID: 23581

Received: 08/10/2021

Respondent: Urban Remediation Ltd

Agent: Bright & Associates

1.4. POLICY HOU3 DELIVERING AFFORDABLE, WHEELCHAIR ACCESSIBLE AND SELF BUILD/CUSTOM BUILD HOUSING
1.4.1. Clarification is required concerning the phrasing of Policy HOU3 Delivering Affordable, Wheelchair Accessible and Self Build/Custom Build Housing regarding the approach to affordable housing percentages and exceptions that apply. Furthermore, the evidence for the proportion of affordable housing contributions appears to be without merit.
1.4.2. We wish to highlight the following paragraphs of Policy HOU3.
1.4.3. Affordable Housing, Paragraph 2 states 'All developments of ten homes or more should provide a proportion of affordable housing, where this is financially viable. The minimum proportion of affordable housing that should be provided is:' [etc].
1.4.4. The clarification of wording relates to the emphasis of 'financially viable' and the suggested phrasing is as follows 'All developments of ten homes or more should provide a proportion of affordable housing. The minimum proportion of affordable housing that should be provided where this is financially viable is:' [etc].
1.4.5. Affordable Housing, Paragraph 2c notes that for higher value zones, it is 30% affordable housing.
1.4.6. The evidence base seems to be contrary to this. The Black Country Housing Market Assessment (Final Report) (March 2021) states at paragraph 8.7
'The total annual affordable housing need in the Black Country of 867 per year (as set out in Chapter 6) represents 21.6% of the annual dwelling growth of 4,019 in the housing market area as assessed using the revised Standard Method. It would be reasonable to expect this proportion of new housing as affordable to be delivered on a large housing site in the Black Country, where a figure of 25% would be plausible (subject to viability). The Councils can therefore be confident that the affordable housing need identified in the model will be addressed by the dwelling growth identified by the Standard Method and no adjustment is required to this figure'.
1.4.7. Accordingly, there should be a presumption to retain 25% as set out for Dudley Borough Development Strategy (Adopted March 2017). Policy L3 Affordable Housing in New Developments of which notes a 25% value of the total units. Any proportionality of affordable housing contribution should not be based on the land value mapping which at best can only be regarded as a general rule of thumb. It should be taken from the financial viability report specific to each development site which will in any event, take account of market forces and recognised land values.
1.4.8. Financial Viability Assessments, Paragraph 7 states 'On sites where applying the affordable housing or wheelchair accessibility requirements can be demonstrated to make the development unviable, the maximum proportion of such housing will be sought that will not undermine the viability of the development, subject to achieving optimum tenure mix and securing other planning obligations necessary for the development to gain planning permission'.
1.4.9. The Policy is inclusive of affordable housing, wheel chair and self build/custom build. Therefore, the wording should be altered (bold type indicates additional text) as follows: On sites where applying the affordable housing or wheelchair accessibility requirements or self build and custom build plots can be demonstrated to make the development unviable, the maximum proportion of such housing will be sought that will not undermine the viability of the development, subject to achieving optimum tenure mix and securing other planning obligations necessary for the development to gain planning permission

Comment

Representation ID: 23582

Received: 08/10/2021

Respondent: Urban Remediation Ltd

Agent: Bright & Associates

Letter from Highgate Land and Development, 8" October 2021
Strategic Review of Aspinall Verdi Black Country Plan (BCP) Viability and Deliverability Study (May 2021) - On behalf of Urban Regeneration Ltd in respect of the former Ketley Quarry, Dudley, DY6 8WT
8 October 2021
Dear //
Strategic Review of Aspinall Verdi Black Country Plan (BCP) Viability and Deliverability Study (May 2021) - On behalf of Urban Regeneration Ltd in respect of the former Ketley Quarry, Dudley, DY6 8WT
Introduction & Overview
As instructed by Urban Regeneration Ltd, I write to provide you with the outcome of the strategic review that I have undertaken of the viability evidence prepared by Aspinall Verdi (AV) on behalf of the four Black Country Local Authorities (BCLA's), which comprises the viability evidence base which informs the draft Black Country Plan (BCP).
I understand that you will be including this review as part of your wider representations to the draft BCP Regulation 18 consultation, which in particular, focuses on the proposed draft allocation of the site by virtue of draft Policy DSA3 - Land at Ketley Quarry, Kingswinford.
You require me to undertake a strategic review of AV's viability evidence having regard to the fact that draft Policy HOU3 identifies the site as falling within a 'Higher Value Zone' within the Black Country (reference Figure 5- Black Country Housing Value Zones) on Page 104 of the draft BCP, and hence 'Limb 2c' of the draft policy would require a minimum proportion of affordable housing of 30% provision. I understand that you will be making representations to ensure that this level of affordable housing provision is subject to the viability test. This is very prudent, given AV's own findings, which are crystallised in
Paragraph 6.27 of the draft BCP which states:
'However, viability issues can vary significantly from site to site and are often caused by poor ground conditions, the extent of which cannot be accurately assessed until planning application stage. Therefore, to maximise delivery of affordable housing over the plan period, it is important that affordable housing is sought on all eligible sites, that viability is assessed on a site by site basis where required, and that a flexible approach is employed wherever possible to allow for changing market conditions.'
Flexibility in the policy will be particularly important based on my initial review of AV's viability evidence, and in particular, my findings in respect of Ketley Quarry; other Key Large Sites (KLSs), and the viability of all sites across the Black Country generally.
You also noted that draft Policy DSA3 also references the potential requirement for primary school provision on the Former Ketley Quarry site, which may be identified as the BCP progresses towards adoption. Hence, the site may need to accommodate a two-form entry primary school requiring approximately 2.4 hectares (5.9 acres). I have therefore reviewed AV's evidence and considered how this requirement has been viability tested by AV.
The remainder of this letter therefore sets out my strategic comments on AV's viability evidence that supports the draft BCP to date. I then provide a commentary on key aspects of AV's methodology and assumptions adopted to viability test both the KLSs (including Ketley Quarry), as well as all other sites across the Black Country.
Strategic Issues
Having reviewed the viability evidence base prepared by AV, it is clear from Appendix 2 'Residential Typologies Matrix' of their report that Ketley Quarry has indeed been subject to a viability test, and forms part of the KLS that have been considered to inform the viability testing.
However, the site-specific viability testing of all KLS's (including Ketley Quarry) is not included in the viability evidence base underpinning the Local Plan, and has not been released into the public domain. Paragraph ESS of AV's report confirms this, stating that:
'A separate confidential report provides viability and delivery advice in respect of the portfolio of Key Large Sites (KLSs)'.
The analysis of the KLSs is confirmed as remaining confidential again at Paragraph 1.13 of AV's report, and again at Paragraph 7.8.
Paragraph 58 of the National Planning Policy Framework (NPPF) July 2021 states that:
'Where up-to-date policies have set out the contributions expected from development, planning applications that comply with them should be assumed to be viable. It is up to the applicant to demonstrate whether particular circumstances justify the need for a viability assessment at the application stage. The weight to be given to a viability assessment is a matter for the decision maker, having regard to all the circumstances in the case, including whether the plan and the viability evidence underpinning it is up to date, and any change in site circumstances since the plan was brought into force. All viability assessments, including any undertaken at the plan-making stage, should reflect the recommended approach in the National Planning Guidance, including standardised inputs, and should be made publicly available.' [My emphasis].
Paragraph 58 of the NPPF therefore requires all viability assessments including those at the plan-making stage to be made publicly available.
This approach is also echoed in the viability section of the Planning Practice Guidance (PPG), which was published on the 6 March 2014 and last updated on 1 September 2019.
In terms of viability and plan-making, Paragraph: 002 Reference ID: 10-002-20190509 states that the role for viability assessment is primarily at the plan-making stage. It goes on to state that it is the responsibility of plan-makers in collaboration with the local community, developers and other stakeholders, to create realistic, deliverable policies:
'Drafting of plan policies should be iterative and informed by engagement with developers, landowners, and infrastructure and affordable housing providers.'
Paragraph Reference ID: 10-003-20180724 states that:
'Assessing the viability of plans does not require individual testing of every site or assurance that individual sites are viable. Plan makers can use site typologies to determine viability at the plan making stage. Assessment of samples of sites may be helpful to support evidence. In some circumstances more detailed assessment may be necessary for particular areas or key sites on which the delivery of the plan relies.'
Paragraph Reference ID: 10-005-20180724 continues:
'It is important to consider the specific circumstances of strategic sites. Plan makers can undertake site specific viability assessments for sites that are critical to delivering the strategic priorities of the plan. This could include, for example, large sites, sites that provide a significant proportion of planned supply, sites that enable or unlock other development sites or sites within priority regeneration areas. Information from other evidence informing the plan (such as Strategic Housing Land Availability Assessments) can help inform viability assessment for strategic sites.'
Paragraph Reference ID: 10-006-20190509 also states that plan-makers should engage with landowners, developers and infrastructure and affordable housing providers to secure evidence on costs and values to inform viability assessment at the plan-making stage. It also states that it is the responsibility of site promotors to engage in plan-making, taking into account any costs included in their own profit expectations and risks, and ensure the proposals for development are policy compliant.
Paragraph 58 of the NPPF therefore requires all viability assessments to be made public, even at the plan-making stage. In addition, the PPG encourages site promoters to engage with the Local Plan process in respect of development viability. I am therefore unsure as to why the viability appraisals that AV have undertaken for all KLS's (such as Ketley Quarry) have not been made available for review as part of the draft BCP evidence base, and remain confidential. This is contrary to Paragraph 58 of the NPPF and will also prevent any further meaningful engagement from site promoters in respect of all KLSs in respect of site viability, as promoted by the PPG.
I would therefore respectfully request that the viability evidence underpinning the four KLS is made available for public review as soon as possible, to ensure that the draft BCP is compliant with Paragraph 58 of the NPPF and that site promoters can meet the requirements of the PPG.
Strategic Comments on AV Viability Approach/Assumptions to date
Given that the site-specific viability testing for KLSs is not included in the BCP viability evidence base, I am unable to interrogate how AV have viability tested the Former Ketley Quarry site; the precise assumptions that they have adopted; or their findings as to the viability and deliverability of the KLSs. Interrogating this information will be necessary both for the promoters of the KSLs, and also, the Planning Inspector at the Examination in Public (EiP) to ensure that the requirements being placed on the KLSs are viable and deliverable.
The remainder of this letter therefore provides my strategic comments and observations on AV's viability evidence which is available in the public domain, and how it may impact not only on the viability appraisal of the KLSs (such as Ketley Quarry), but also, all other sites across the Black Country.
My strategic comments/observations on AV's viability testing to date as included in Aspinall Verdi's Black Country Plan Viability and Deliverability Study (May 2021) are as follows:
• RICS Guidance - Paragraph 1.9 of AV's report refers to the 'Financial viability in planning' guidance produced by the RICS in 2012 as currently being reviewed. However, as at May 2021, that updated guidance had been issued by the RICS on the 30 March 2021. AV's report will therefore need to be considered and updated to ensure that it reflects the most up to date guidance from the RICS as the BCP evolves.
• Infrastructure requirements - Table 3.5 at Paragraph 3.17 of AV's report states in respect of draft Policy DEL1 -- 'Infrastructure Provision' that for KLSs, that AV have engaged with the landowners, developers and site promoters in order to establish what infrastructure is required. As we highlighted to AV during the stakeholder process, assessing the infrastructure and cost requirements for Ketley Quarry is an ongoing process, and hence the information provided was the best information available at that time. There is no detail in AVs' report as to what infrastructure has been assumed for KLS sites in AV's evidence (as this presumably is contained in the confidential report which does not form part of the draft BCP evidence base). AV should provide further information on their assumptions for the KLS, to ensure that the requirements of draft Policy DELl have been adequately viability tested.
• Education - Table 3.5 of AV's report states that in terms of education: 'For both the generic Typologies and the KLS we have included the sum of£4,471.40 per home, unless there is a site-specific assumption for the cost of a new school to be provided to serve a KLS. Notwithstanding these allowances, the policy is specifically stated to be 'subject to viability'.'
In the absence of the evidence relating to the KLS sites being made available to us, we are unable to ascertain AV's precise assumptions in respect of education provision on the Former Ketley Quarry (or other KLS sites). We are also uncertain as to how the £4,471.40 rate per dwelling assumption for education has been calculated, and hence whether it is robust.
Paragraph Reference ID: 10-029-20190509 of the PPG is entitled 'How should viability for education provision be addressed?', and states that: 'When considering viability, it is recommended that plan makers and local authorities for education work collaboratively to identify which schools are likely to expand, and where new schools will be needed as a result of planned growth. It is important that costs and land requirements for education provision are known to inform site typologies and site-specific viability assessments, with an initial assumption that development will provide both funding for construction and land for new schools required onsite, commensurate with the level of education need generated by the development'.
In this context, this does not appear to have been undertaken in respect of any of the KLS's, given that Paragraph A102 in respect of school place requirements in Policy DSA3 states that it is currently anticipated that both primary and secondary school place requirements arising from housing developments in the north-west of Dudley over the plan period will be capable of being met through extensions to existing primary and secondary schools. Notwithstanding this, Paragraph A103 states that this situation may be subject to change, as it states: 'should it be determined that some form of primary school provision is required as the BCP progresses towards adoption, this may need to be accommodated on the site and land will need to be allocated to accommodate a two-form entry primary school (approximately 2.4 ha).'
Therefore, the allocation as currently drafted seems to conclude that no on-site school would be required (based on the information available to date), but leaves flexibility for a school to be included in the future.
Such a requirement is likely to have a significant impact on development viability. Assuming that 650 dwellings are delivered, we would anticipate that the allowance for education at the £4,471.40 per dwelling rate assumed by AV equates to £2,906,410. The provision of a school on site is likely to cost significantly in excess of this, and hence would need to be viability tested.
In addition, the requirement to provide a school on site could also have an impact on the ability to achieve the anticipated number of residential homes on the site (as it will impact on the land use budget and hence the number of dwellings that can be provided).
In the absence of the viability report relating to the KLS sites being available, we have been unable to ascertain whether this has been tested by AV and hence what the viability implications are.
• Residential Mix- Paragraph 6.17 of AV's report highlights that one-bedroom houses have been included in the assumed mix for site typologies, along with five• bedroom dwellings. In our experience, one-bedroom houses are not popular house types in the market for potential occupiers, and hence we are uncertain as to why these dwellings have been assumed in the viability test. In addition, five-bedroom houses are also less popular, with the market seeking to focus on the provision of 2, 3 and 4 bedroom dwellings.
Appendix 2 'Residential Typologies Mix' sheds some light as to some of the mix assumptions for the KLSs. For the Former Ketley Quarry, one-bedroom flats appear to have been assumed to comprise approximately 15% of the overall development mix, along with 7% two bedroom flats. In addition, 4% of dwellings are one• bedroom houses. Again, in our experience, developers typically avoid delivering flats (in line with AV's findings in their report), as they impact upon development viability and are not a preferred house type (often occupiers preferring second• hand traditional two-bedroom housing stock rather than buying a new build two• bedroom apartment). In addition, the proportion of one-bedroom flats is high at 15%, as is 4% for one-bedroom houses (for the reasons set out above).
• Residential Floor Area Assumptions -- The floor area per sq m assumptions that have been applied by AV set out in Table 6.6 of their report are at the larger end of the scale than we would anticipate for new build residential development. In our experience, we would anticipate that the two-bedroom houses would comprise an average of approximately 69 sq m (750 sq ft); three-bedroom dwellings would comprise approximately 88 sq m (950 sq ft), and four-bedroom dwellings would comprise an average of 116 sq m (1,250 sq ft). We are broadly comfortable with the assumed sizes of the one and two-bedroom apartments applied by AV.
• Aspinall Verdi Black Country Housing Zones (Figure 6.5) - Paragraph 6.31 sets out new build achieved sales values that AV have researched, presenting them in 'Heat Map' format at Figure 6.2. Figure 6.2 demonstrates that the Former Ketley Quarry site falls within the 'middle' value range of £2,369 to £2,641 per sq m, with very few sites/areas in the Black Country achieving the highest new build sales values of £2,912 per sq m to £3,184 per sq m (which are typically located in Stourbridge and in dark green on AV's Heat Map at Figure 6.2). Notwithstanding this, the Ketley Quarry site is included in a 'Higher Value Zone' by Aspinall Verdi in Figure 5 (which is included in draft Policy HOU3 to define the value areas and hence affordable housing requirements).
Paragraph 3.2 of AV's report also highlights that in areas such as Aldridge, Blackheath and Stourbridge, some of the highest average achieved values were recorded ranging from £2,641- £3,184 per sq m. This casts further doubt on the Ketley Quarry site being situated in a Higher Value Area. This is also supported by AV's Figure 6.4 which sets out the Index of Multiple Depravation Map. Again, Ketley Quarry is situated in an area where the Index of Multiple Depravation is much higher (i.e. brown/orange shading) when compared to the rest of neighboring Kingswinford (which is in either light or dark green shading, i.e. a lower Index of Multiple Depravation). At Paragraph 6.37, AV acknowledge that although the Index is not a direct comparison to housing values, it is a very good proxy, and that in their experience, values are lower in areas where there is the greatest depravation.
Finally, Figures 3.1, 3.2 and 3.3 of AV's report set out the residential CIL Charging Zones across the Black Country. The most recent version of the CIL Charging Schedule for Dudley is dated July 2020. Figures 3.1 and 3.2 show that the Zone 1 Charging Area for CIL is inconsistent with the value areas now proposed by the draft BCP. For example, in relation to Ketley Quarry, the site is situated within residential Zone 1- the lowest value area in Dudley and hence no CIL applies. However, for informing AV's viability study, the site sits within the Higher Value Zone. Whilst we acknowledge that AV state that the value area plans can never be perfect, this is clearly an inconsistency which casts a doubt on the analysis of Higher Value Zones that AV have undertaken.
Figure 6.5 should therefore be more carefully considered by AV to ensure that it is more in line with their own evidence at Figures 6.2 and 6.4 of their report, and the associated plan in draft Policy HOU3 (i.e. Figure 5 of the draft BCP) should be updated accordingly
• 'Absolute Market Values Applied -- When considering Ketley Quarry, we would anticipate that the 'absolute market values' that AV have applied for the Medium Value Zone are more in line with those that are likely to be achievable. The Higher Value Zone values (which we assume that the confidential report testing KLSs has applied) are significantly in excess of those that are achievable in this location.
Appendix 3 of AV's report entitled 'Residential Market Paper' provides further detail on the residential market analysis that AV have undertaken, which is extensive, and includes a range of evidence, including an analysis of new build sales values.
The nearest comparable new build development to Ketley Quarry reviewed by AV is 'Catesby View' undertaken by Taylor Wimpey. This development is approximately 1 mile to the north-east of the subject site; however, AV's analysis identifies it as being within the 'Middle Value Zone'. AV have collected sales evidence from this development as follows:
o Three-bedroom dwellings - ranging from £236,950 to £241,000; and o Four-Bedroom Dwellings - £306,950 to £316,500 for four bedroom detached dwellings.
There is no other evidence for two-bedroom dwellings or apartments.
It should be noted that the capital values for this nearby development fall more in line with those that AV have applied in Middle Value Zones of £250,000 for a three• bedroom house and £310,000 for a four-bedroom house. This indicates that new build sales values achievable in the area are more in line, if not slightly below, the values applied for the Medium Value Zone area, and hence it is unrealistic to include Ketley Quarry within a Higher Value Zone area.
Turning to AV's analysis of new build sales values for Higher Value Zones, it should be noted that only three new build comparable developments have been considered by AV. One includes 'The Langlands', Bowling Green Road, Stourbridge, but no comparable evidence is quoted for this scheme being undertaken by Persimmon. Accordingly, comparable information for only two new build schemes in High Value Zone areas for the whole of the Black Country area are quoted, namely 'Sunnyside View' by Owl Homes in Walsall Wood (one of the more well regarded residential locations in Walsall) which comprises 62 homes. Only two com parables are provided for this scheme which range between £305,000 to £310,000 capital value for four-bedroom homes. Again, these values are more akin to the values AV have assumed for Medium Value Zones, and are significantly below those that they have applied for High Value Zones. The final scheme quoted by AV for Higher Value Zones is 'Stencil Gardens' developed by Kendrick Homes, again in a better part of Walsall, which comprises only 12 homes (i.e. below the current threshold for affordable housing). The values on this site are significant, representing the small-scale nature of the scheme. This limited new build sales value evidence for High Value Zone areas calls into question the values that AV have applied for Higher Value Zone areas, as there is very limited new build evidence to substantiate the values that AV have applied.
Finally, we would also comment that the apartment values proposed throughout all of AV's value areas are very high, at approximately £120,000 for a one-bedroom apartment and £140,000 for a two-bedroom apartment. As stated above, apartments are not a popular product throughout the Black Country, particularly in non-town centre (i.e. suburban locations), and the values achievable are constrained by the value of secondary housing stock which typically provides larger and more cost effective two bedroom accommodation (typically with driveways and gardens).

• Residential delivery rates - Paragraph ES16 of AV's report confirms that for large sites of greater than 500 units with a single sales outlet, AV have assumed a residential delivery rate of 100 dwellings per annum.
Whilst we broadly agree with all of the other delivery rates that AV have adopted, we believe that for larger sites, AV's assessment of the delivery rates is too high. AV have assumed that sites of over 500 units with a single outlet will achieve a delivery rate of 100 dwellings per annum. However, where there may be two or more sales outlets, AV have assumed 200 dwellings per annum.
It is unclear from AV's evidence as to whether these delivery rates include market dwellings only, or whether they also include affordable dwellings. However, later on in AV's report, the evidence provided by Black Country case studies shows that across all four Local Authorities, a delivery rate exceeding 50 units per annum is rarely exceeded.
Therefore, we would propose that a delivery rate of 4 market dwellings per month is assumed for the larger sites (48 market dwellings per annum). The delivery of affordable dwellings will be in addition to this figure.
It may be possible to exceed this level where there are two outlets of sale for larger sites; however, in our experience, it is unlikely that over 100 market dwellings per annum will be achievable and indeed this is demonstrated by AV's own evidence having regard to all the Black Country Case Studies they quote at Paragraphs 4.38 4.47 of their report.
• Affordable Housing Transfer Values -- Transfer values for affordable rented affordable housing of between 60% and 67.5% have been assumed by AV (reference Table 6.7 of their report). For affordable rented dwellings, we would usually anticipate transfer values of 55% - 60% of Market Value. Therefore, the assumptions applied for affordable rented in both Wolverhampton and Sandwell are above the market values we would anticipate. The assumption applied for affordable rented accommodation in Dudley is at the higher end of the range that we would anticipate at 60% of Market Value.
• Construction and Abnormal Costs - Paragraph 6.54 of the AV report sets out the construction cost assumptions for residential typologies, along with the abnormal costs assumed. Site clearance, demolition and remediation has been included at a '£54,000 per acre' baseline assumption. This is low in our experience in the Black Country, albeit that we recognise that AV have undertaken sensitivity tests of up to £1.26 million per hectare (£510,000 per acre).
We are unable to comment further in relation to the KLS (such as the Former Ketley Quarry), given that the results of the viability and sensitivity testing of abnormal costs has not been provided as part of the BCP evidence base.
In terms of construction costs, AV have utilised the 'lower quartile' BCIS cost of £990 per sq m (£91.97 per sq ft) for all sites, but a slightly higher rate for sites of 60 units or less of £1,116 per sq m (£103.68 per sq ft). We would caution AV's reliance on the use of 'lower quartile' BCIS costs, as this is unlikely to be achievable even on the most 'standard' developments even with the largest house builders.
AV's lower quartile BCIS build cost equates to a total construction cost of £105.77 psf (including their allowance for externals). In our experience, many housebuilders of typical sites across the Black Country are unable to achieve this level (and are unable to achieve costs below approximately £115 per sq ft). Further, this situation has become more acute during 2021, with the shortage of materials that has been seen in the first half of the year and the consequent rise in construction prices(etc.).
AV's use of the lower quartile BCIS cost is also inconsistent with the draft BCP's desire/requirement to achieve 'high quality' design as required by draft Policy ENV9- Design Quality of the draft BCP, Limb 2 of which states that: 'Development’ will be designed to the highest possible standards, creating a strong sense of place.'
The use of the 'lower quartile' BCIS build cost will therefore paint an over-optimistic picture of viability across all sites across the four local authorities.
• Professional Fees - Paragraph 6.55 confirms that AV have applied professional fees at 6.5% of construction costs. In our experience, a 6.5% allowance for professional fees will be insufficient to adequately cover the professional fees that will be incurred to develop sites across the Black Country (particularly given that the construction costs are already based on the lower quartile BCIS costs, and hence the allowance for professional fees will be lower). We would propose a more prudent assumption of 8% for professional fees for all sites throughout the Black Country.
• Marketing Fees -- AV have allowed 3% for sales discounts and incentives, with a further 1% for Sales Agent's fees and 0.25% for Legal Fees (with a separate figure for affordable housing). We would comment that a 3% allowance is unlikely to be sufficient to cover all marketing activities if this is to also account for sales discounts and incentives. This should be clarified by AV, as in our experience, sales prices are usually inputted into the appraisal net of sales values and discounts/incentives, with a separate allowance for marketing costs ranging from 1-2% of Gross Development Value (GDV).
• Developer's Return for Risk (profit)- It is noted that AV's viability testing sensitivity tested a 15% profit on GDV, noting at Paragraph 6.58 that the 20% profit on GDV that they have assumed is at the 'top end' of the range. We welcome AV's approach to apply 20% profit on GDV on the market housing and 6% for the affordable element, as it is in line with our experience and reflects the risk of delivering sites throughout the Black Country area (which typically involves complex brownfield sites etc.). Developer's/house builders are unlikely to target a profit of 15% on GDV throughout the majority of the Black Country in our experience, given the nature of sites and the risks involved.
• Residential Land Value Assumptions (i.e. AV's Benchmark Land Values, BLV) • Table 6.12 sets out AV's BLV assumptions. It should be noted that it appears that all of the residential Key Large Sites (KLS) are assumed to be in greenfield locations regardless of the value area tested, for the purposes of arriving at the BLV. We are therefore confused as to the approach to BLV that has been applied for the KLS sites, in the absence of having sight of AV's confidential report, given that Appendix 2 'Residential Typologies Matrix' of AV's report also highlights that some of the specific KLS's viability tested are situated in brownfield, rather than greenfield, locations.
In terms of Greenfield sites, whilst we broadly agree with the £200,000 per acre assumption that AV have applied for greenfield sites (rising to £250,000 in higher value locations), in reality, the actual land value AV have applied is much lower than this, as a net to gross area of 50% is assumed, and the £200,000 to £250,000 per acre applied by AV in calculated on the 'net' rather than the 'gross' area.
Therefore, AVs gross land value will range between £100,000 and £125,000 per gross acre. In our experience, this is a very low benchmark for greenfield land, and is unlikely to provide land-owners with a reasonable return in order to for them to bring greenfield land forward for development. Landowners will need to release all of the site area, not merely that which is developable for residential (as the areas of the site which are outside the net developable area still need to be sold in order to facilitate the development - perhaps providing infrastructure, open space etc.).
AV's approach therefore reflects no value on these significant areas of land for greenfield sites.
In respect of brownfield sites, we understand that no such adjustment for net to gross land area is applied, and consequently, the Existing Use Value (EUV) of such uses applies to 100% of the site area. We agree with this approach, and broadly agree with the EUV rate per acre that AV have applied of between £200,000 and £300,000 per acre.
However, we are concerned that the uplift/multiplier AV have applied for brownfield land is low, ranging between 5% and 10% of the EUV. This means that a landowner would generate a return of only £10,000 per acre for a brownfield site in a low value area, rising up to £30,000 per acre uplift for a brownfield site in a high value area.
The percentage uplifts AV have applied are significantly below the minimum levels required in order for brownfield land to be released throughout the Black Country, which typically are in the order of 20% and 30% minimum above the EUV throughout the Black Country. AV's assumption therefore leaves very little (if any) incentive for a prudent landowner of brownfield land to promote and release their land for development over and above its EUV. This is likely to significantly constrain the amount of land coming forward for residential development over the plan period.
• AV's Conclusions and Recommendations - Paragraph ES30 of AV's report states that AV's recommendations in the Higher Value Zone are that for greenfield sites, affordable housing could increase to 40% affordable housing and a CIL Charge of up to £200 per sq m (excluding strategic sites). For brownfield land, AV conclude that the affordable housing provision can be increased to 30%, with CIL of up to £120 per sq m (albeit that this appears to exclude strategic sites). These are significant affordable and CIL requirements even for Higher Value Zone areas in the Black Country. Hence, it will be necessary to ensure that there is flexibility in draft Policy HOU3 to ensure that the level of affordable housing can be adjusted downwards based upon site specific viability circumstances.
Paragraph 6.68 of AV's report confirms that only the results of the viability appraisals for the residential typologies (excluding the KLS which are the subject of a separate confidential report) are included in the report. Therefore, all of the viability testing for the KLSs is confidential, and does not form part of the draft BCP evidence base, contrary to the requirements of Paragraph 58 of the NPPF.
However, it is worth noting that the largest site typology tested in Dudley of 300 dwellings is anticipated to be viable in Higher Value Zone areas. However, where the same site typology is tested in a Medium Value Zone, Table 6.13 states that larger schemes in medium value areas 'become viable when reducing to 0% affordable housing and £10 per sq m CIL'.
This therefore indicates that the sales values are very important to the deliverability of these large sites, and hence it will be particularly important to ensure that the sales values have been appraised correctly, particularly for the KLS sites. For example, if KLS's are included in a High Value Area but those values cannot be achieved (i.e. the values are more in line with the Medium Value Zone), this will have a significant impact on viability and hence the KLS's ability to deliver the 30% affordable housing requirement. This is also echoed in Paragraph 6.14 of AV's report for greenfield sites, as AV anticipate that they would only become viable by reducing affordable housing to 10% and CIL to £40 per sq m.
Finally, Paragraph 10.19 of the AV report states that: 'It is not considered appropriate to recommend setting affordable housing or CIL to the margins of viability due to the limitations of an area wide viability study. However, in the case of the Black Country the margins are much 'tighter' than many LA areas due to the values and abnormal site costs. The figures set out below are considered to be more realistically deliverable and achievable across the Black Country Authorities.' This demonstrates the continued need for values to be accurate and draft Policy HOU3 to be subject to the viability test.
• Grant Funding - Paragraph ES36 - ES39 states that in order for the Black Country to achieve its housing targets, it is likely that grant funding will be required to facilitate development (particularly on brownfield sites with an industrial legacy to overcome and/or in low value market areas). Whilst this analysis is interesting, in our experience, grant funding is only available for some key sites, and hence it is therefore unlikely to assist in securing the deliverability of a significant amount of affordable housing across the Black Country at the scale identified by AV.
Summary and Conclusions
The above sets out our strategic review of the viability evidence base that AV has prepared to inform the BLP, alongside our comments regarding the specific assumptions that have been utilised by AV in order to inform their viability testing.
The key issue that we have identified with the viability evidence base is that it does not include AV's viability analysis of KLSs across the Black Country, as this is contained in a 'confidential report'. This is contrary to Paragraph 58 of the NPPF, which requires all viability assessments, including those undertaken at the plan making stage, to be publicly available. In the absence of this information being published, we are unable to interrogate the extent of viability testing that has been undertaken for the KLSs; the nature of the assumptions adopted by AV; or their findings/conclusions as to the viability and deliverability of these key sites.
We would therefore respectfully request that the BCLA's publish this information as a matter of urgency, in order to ensure that the draft BCP is compliant with the NPPF and the full range of evidence underpinning the BCP can be reviewed by both site promoters and the public.
I trust that this is the information you require and enables you to complete your submissions to the Regulation 18 consultation for the BCP. However, if you have any queries, please do not hesitate to contact me on the details set out above.
Yours sincerely,