NPS
Property Consultants (‘NPS’), specialist planning viability advisors with a local office in Kendal, have been commissioned to undertake viability testing of some of the allocated housing sites on behalf of the Yorkshire Dales National Park Authority.
The purpose is to inform its review of local housing policy. This is a summary of the work undertaken so far.
The testing has included discussion with landowners, land agents, developers and housing officer’s at South Lakeland and Craven district councils together with analysis of evidence from the local residential property market.
Initial findings
The following points were evident after speaking to stakeholders and consideration of relevant documentation:
 The terms of YDNPA’s current local occupancy criteria are restrictive, compared to the criteria used by other authorities


Most if not all lenders will now refuse to lend on properties subject to such conditions.
YDNPA’s current policy to restrict new build housing to an average of 90m2
 per unit across a site (typically equating to a modest sized three bedroomed house) does not accord with the greatest level of housing need which is from first time buyers and newly emerging households for typically one and two bedroomed properties (which are usually within the range of 45 to 80m2 per unit). This in effect means that current policy encourages properties to be larger, more unaffordable and therefore less viable than they should be.
Build costs at sites within the National Park will be higher than the regional average, due to the planning requirements of conforming to appropriate vernacular expectations. Costs for ‘deep rural’ sites are likely be to higher still
 due to the transport costs for labour and materials.
Registered Providers are not usually able to obtain government grant funding for sites where less than 100% of units comprise affordable housing (i.e.
YDNPA’s current policy position). Without public subsidy affordable housing units are unviable in their own right (i.
e. each unit costs more to build than it’s
 end value, even if the land is donated at nil value by the landowner).
Indicative values of properties subject to YDNPA’s current local occupancy criteria based on analysis of relevant local comparable evidence are typically expected to be 30-40% below open market value, assuming that a lender could be persuaded to lend on such properties. A value reduction of this magnitude, combined with the increased costs of building in the National
Park, also makes such units unviable in their own right.
 The issues above mean that there is no value in sites for landowners and developers cannot produce any profit from developing such sites even if the
 land is donated at nil value.
The fact that there are viable sites in the areas immediately outside the YDNP
– where the cost of building is less and properties can be sold at much higher

 sale values
– allow local developers to stay in business without having to develop sites within the National Park.
YDNPA’s current housing policy is therefore not meeting its objective of delivering new homes for local needs, particularly for younger households.
Viability Appraisal Scenarios
NPS has tested a range of viability scenarios against a 12 unit allocated site in the
National Park:
Scenarios Tested (12 unit site)
Scenario Number Description
1 100% affordable
Unit Breakdown
12 affordable units
2
3
3a
50% affordable / 50% local needs (YDNPA current policy)
50% affordable / 50% open market
6 affordable units / 6 local needs units
6 affordable units / 6 open market units
50% affordable / 50% open 6 affordable units / 6 market open market units
Note – Difference between Scenario 3a and Scenario
3 is that Affordable housing transfer values have been increased from South Lakeland DC - Maximum
Affordable Housing Prices (£95,000 per two bedroomed unit) to 60% of Open Market Value
(£136,000 per unit).
4
5
5a
5b
100% open market
33% affordable / 33% local needs / 33% open market
12 open market units
4 affordable units / 4 local needs units / 4 open market
33% affordable / 33% local needs / 33% open market
4 affordable units / 4 local needs units / 4 open market
Note – Difference between Scenario 5a and Scenario
5 is that Affordable housing transfer values have been increased from South Lakeland DC - Maximum
Affordable Housing Prices (£95,000 per two bedroomed unit) to 60% of Open Market Value
(£136,000 per unit).
33% affordable / 33% local 4 affordable units / 4 needs / 33% open market local needs units / 4 open market
Note – Difference between Scenario 5b and Scenario
5a is that 'local occupancy' definition has been widened from ‘narrow’ current policy definition to potential ‘widened’ definition including occupancy cascade to rest of District outside YDNP boundary. Floor areas of local occupancy units have also been reduced.

Scenarios Tested (5 unit site)
6
6a
100% local needs 5 local needs units
100% local needs 5 local needs units
Note
– Difference between Scenario 6a and Scenario
6 is that 'local occupancy' definition has been widened from ‘narrow’ current policy definition to potential
‘widened’ definition including occupancy cascade to rest of District outside YDNP boundary. Floor areas of local occupancy units have also been reduced.
Assumptions
Affordable housing transfer values
(scenario 1 - 100% affordable housing)
Affordable housing transfer values
(scenarios 2, 3 and 5)
Affordable housing transfer values
(scenario 3a, 5a and 5b)
Indicative values based on analysis of local comparable evidence from
Registered Providers in respect of
100% affordable housing sites - where HCA funding is available
South Lakeland DC - Maximum
Affordable Housing Prices (assuming a cap of £95k per unit (2 bed); £110k per unit (3 bed)). NB: these figures are in the region of 15% below the affordable housing transfer values used in scenario 1 (see above)
Taken to be at 60% of Open Market
Value. These figures are accepted by for example Eden District Council as being appropriate for intermediate
(below market value and for sale) tenure affordable housing.
Local needs housing sales values
(scenario 2, 5, 5a and 6) - in context of current 'narrow' definition of 'local occupancy'
Local needs housing sales values
(scenario 5b) - in context of potential widening of definition of 'local occupancy'
Indicative values based on analysis of relevant local comparable evidence and our professional opinion (typically
30-40% below open market value, but reluctance of lenders to provide loans on such properties makes such estimates of value problematic).
Indicative values based on analysis of relevant local comparable evidence
(within and outside the National Park) and our professional opinion
(potentially 15-20% below open market value).
Viability Appraisal Outcomes
Scenario Number Description Residue
(spreadsheet not included here)

1
2
100% affordable
50% affordable / 50% local needs (YDNPA current policy)
(minus £503,367)
(minus £473,816)
3
3a
50% affordable / 50% open market
50% affordable (values increased to 60% of Open
Market Value) / 50% open market
(minus £139,078)
(minus £1,618)
4
5
100% open market
33% affordable / 33% local needs / 33% open market
£290,089
(minus £216,333)
5a 33% affordable (values increased to 60% of Open
Market Value) / 33% local needs / 33% open market
(minus £78,393)
5b 33% affordable (values increased to 60% of Open
Market Value) / 33% local needs (widened’ definition including occupancy cascade to rest of District outside
YDNP boundary and reduced floor areas) / 33% open market
Scenarios Tested (5 unit site)
£20,030
6
6a
100% local needs
100% local needs ( widened’ definition including occupancy cascade to rest of District outside YDNP boundary and reduced floor areas)
(minus £118,229)
(minus £27,308)
Commentary and Conclusions
The testing of a range of viability scenarios appears to have reinforced the ‘initial findings’ stated above.
The significant negative residue (value less costs less profit) for Scenario 1 indicates that 100% affordable housing schemes are not viable without a sizeable grant (usually from government). Furthermore such schemes are dependent on the specific funding model of the Registered Provider concerned and will on occasions be ruled out by the Registered Provider due to the perceived un sustainable ‘deep rural’ location.
The effect on viability of changes between rented (which can be social or affordable rent) and intermediate (shared equity, shared ownership or discounted sale) tenure should be noted. How much the property is discounted below open market value for intermediate tenure properties can also have a big effect on viability.

For the purposes of this viability testing exercise the starting position has been that affordable housing prices will be capped at South Lakeland district council -
Maximum Affordable Housing Prices (£95,000 for a two bedroomed unit).
Scenario
2 leads to a significant negative residue where a site is developed in line with current
YDNPA policy, featuring 50% of units as affordable housing of this type with the remaining 50% of units comprising local needs as per the current ‘narrow’ policy definition. Even though the site being tested assumes abnormal costs of
£80,000 the negative residue is almost £500,000. This strongly suggests the current YDNPA policy is far from being viable and it is therefore not surprising that few sites subject to this policy have been developed in recent years.
Scenario 3 again assumes that affordable housing prices will be capped at South
Lakeland DC - Maximum Affordable Housing Prices. Even with 50% of units being amended to open market from local needs (‘narrow’ policy definition), as per the previous scenario, the res ult is again a negative residue of almost £150,000.
Scenario 3a tests the effect of changing the Affordable housing transfer values of
Scenario 3 (£95,000 per two bedroomed unit) to 60% of Open Market Value
(£136,000 per unit). The result this time is a very modest negative residue of less than £2,000. This we would suggest indicates such a scheme would be viable with slight flexibility from landowner on land price and the developer on return.
Scenario 4 assumes that all units would be developed as open market housing. Not surprisingly a significant positive residue results. In effect this appraisal indicates that the site under this scenario would have a land value of around £750,000
(£62,500 per plot) (i.e. assumed site value plus residue).
Scenario 5 is similar to Scenario 2, with the difference being that two affordable and two local needs units (current ‘narrow’ policy definition) have been replaced with four open market units.
The negative residue falls from the almost £500,000 of Scenario
2 to a little over £200,000, still leaving this scenario significantly unviable.
Scenario 5a tests the effect of changing the Affordable housing transfer values of
Scenario 5 (£95,000 per two bedroomed unit) to 60% of Open Market Value
(£136,000 per unit). The result is a reduction in the negative residue to in the region of £80,000. The removal of site-specific abnormals (£80,000) indicates that this scenario could be marginally viable on some sites.
Scenario 5b tests the effect of widening the ‘narrow’ current policy definition of
Scenario 5a to a potential ‘widened’ definition featuring an occupancy cascade to the rest of a District outside YDNP boundary. The floor areas of local occupancy units have also been reduced.
The result is a moderately positive residue which, when site-specific abnormals are discounted, indicates that for the majority of allocated sites within the YDNP this scenario would be viable.
Scenarios 6 and 6a reflect the changes to the S106 thresholds announced by
Central Government in November 2014.
The result is that with a potential ‘widened’ definition of occupancy to the rest of a District outside the YDNP boundary, when

site-specific abnormals are discounted, five unit sites with the YDNP could apparently viably support development.
NPS Property Consultants (Kendal)
March 2015