Government set profit margins to blame for developers avoiding paying cash for local infra-structure and amenities in Fenland
Government policy over profit margins for developers wanting to build homes is seeing more and more applications being approved with either no or reduced payments for local amenities.
In an exclusive interview on the subject of Section 106 agreements - the deal struck between local authorities and developers over how much they should pay towards schools, roads, open space, health and other public services - Fenland's head of planning Nick Harding explained the current process.
Mr Harding, was speaking just a week after, the authority's planning committee approved an application to slash £10,000s off a section 106 agreement set up in 2015 when permission was given for controversial plans to build 30 homes on land north of Berryfield in March.
At that time the developer Mr S Harwin agreed that 25 per cent of the homes would be affordable and to make contributions totalling £77,720 towards public open space, libraries, lifelong learning and railway improvements, plus an additional contribution to education.
However, at January's planning meeting members were asked to reduce the contributions to just £10,000 for Estover Playing Field following the submission of a viability report by Mr Harwin.
This is not the first case of developers having their section 106 payments cut. In October 2018 Wisbech St Mary Parish Council issued a formal complaint after Fenland granted planning permission for 76 homes in the village without securing cash for amenities from the developer.
At the time the council said: "If the district council continues to approve new development on the basis that the benefits of new development outweigh the viability issues then pressures on, for example, roads, safety, transport, health and education must inevitably increase. This is against the backdrop of agencies responsible for delivering those services having to reduce budgets such that they are less able to respond to demand, an inevitable downward spiral."
Last December This Land Limited argued that paying section 106 money would make their proposed scheme for 19 homes on land west of Hereward Hall in County Road unviable.
Their viability report included in the application said calculations show that "significant and unjustifiable adjustments to the developer profit and build costs would be required to produce an output residual value approaching the calculated benchmark value of £122,500".
And added: "We therefore conclude that the application scheme is not sufficiently viable to make planning contributions in the form of affordable housing and Section 106 contributions."
However, while objectors to various schemes blame Fenland for failing to secure payments to help ease the pressure on over-stretched infra-structure and amenities Mr Harding explained the authority's hands are tied by government policy.
He said every council in the country is set a government target for house building, coupled with that there are strict guidelines on profit margins for developers.
These say developments must have a profit margin of between 17 and 20 per cent, any scheme where the developer can show viability will be below that level is therefore able to escape paying the normal section 106 contributions. They will either pay a reduced amount or no contribution depending on calculations contained in the required viability report.
Mr Harding said often developers apply for permission and sign up to section 106 agreements without having carried out a viability study, only to discover later down the line that their scheme will not make the requisite profit if the payments are made. That's when an application to vary the section 106 agreement is made - which is what happened in the recent Berryfield case.
He said the government's over-riding policy is for more homes to be built, and council's face censure if they fail to comply, and it also makes it easier for developers to gain permission for sites that would not normally be approved, if a council is not meeting its target.
In 2017 Fenland lost an appeal by cousins who wanted to build six homes in Christchurch. The planning inspector overturned the council's refusal and it was revealed Fenland did not have the five year supply of housing land required under government policy.
Mr Harding said Fenland is just weeks away from publishing its district wide viability plan which will "inform what will be attainable" when it comes to section 106 asks in the future.
He said: "It will not be looking at individual sites but will be looking at general viability of development in Fenland, taking into account the cost of buying the land, building and sale price."
More by this authorSarah Cliss