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Guide to economic viability re-launched by the HCA

Online guidance to help local authorities and developers establish the economic viability of housing and mixed-use regeneration schemes has been updated and re-issued today, by the Homes and Communities Agency (HCA).

The Economic Appraisal Tool (EAT) allows local authorities to establish effective but realistic affordable housing targets in order to meet national planning policy requirements, based on a calculation of residual land value.  The tool is designed to be site specific, but can also be used to inform viability modelling to test affordable housing targets in Local Development Frameworks.

The HCA encourages bids for grant funding to be accompanied by an EAT submission, which it then uses to help determine grant levels, as well as demonstrate the added value social housing grant can bring to a scheme.  Local authorities are able to estimate a saleable value for land as well as negotiate s106 and other planning obligation agreements; and developers can use the EAT to estimate how much they should pay for land as well as to inform their own s106 negotiations.

Richard Hill, director of investment and renewal at the HCA, said: “This is a really useful planning tool which we’re re-launching at a time when the economic viability of schemes has been brought more sharply into focus because of current market conditions. 

“It’s online and easy to use and complements our guidance on negotiating s106 agreements in the downturn, where we made it clear that at the HCA we consider partnership working and upfront planning to be the early keys to successful delivery. 

“Every partner needs to know what the other can bring to a development opportunity, and crucially, what they intend to take away.  Our EAT will help in that transparent process.”

The EAT bases a calculation of residual land value on the value of a completed development, minus the cost of development and profit.  By entering data on a series of variables – split into two sections for ease of use, housing only and mixed use – a summary sheet reviews the key output figures in the model, including:

  • Residential and non-residential values (affordable and open market housing, office, retail and industrial buildings)
  • Building costs
  • Professional fees
  • Section 106 costs
  • Site Abnormals
  • Finance and acquisition cost
  • Developer return for risk and profit.

The latest version builds on the original model launched by the Housing Corporation in 2006 and has been developed by GVA Grimley and the Bespoke Property Group.  It should be read in conjunction with the HCA’s recently published good practice note HCA Investment and Planning Obligations: Responding to the Downturn, which seeks to encourage a collaborative and transparent approach to establishing the viability of schemes. The document can be downloaded from the Economic Appraisal Tool page.

Ends

For more media information contact Helen Stoddart in the HCA press office, 020 7881 1615 / helen.stoddart@hca.gsx.gov.uk.

Notes to editors:

The Homes and Communities Agency is the single, national housing and regeneration agency for England.

Our vision is about creating opportunity for people to live in homes they can afford, in places they want to live and for local authorities and communities to deliver the ambition they have for their own areas.
 
This will be achieved by:

  • Acting as the bridge between national targets and local ambitions, with a strong regional presence
  • Through a process of 'single conversations' with local authorities, RDAs and sub regional partnerships
  • Working effectively with the market, housebuilders, investors and other stakeholders
  • Understanding the needs and aspirations of people and communities.

The HCA brings together English Partnerships, investment functions of the Housing Corporation, and the Academy for Sustainable Communities, with major delivery programmes of Communities and Local Government.