We consider this further in the 3 sections below: House prices, development costs, and land values.

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1 Understanding Affordable Housing Viability in Coventry As identified the Council s Affordable Housing Economic Viability Assessment (AHEVA) was undertaken in 2012 by GL Hearn Planning Consultants. Since its completion, the Council have continued to manage an understanding of affordable housing delivery, development viability and the implications of changes to costs and values. We have considered a review of the evidence linked in part to the development of our Community Infrastructure Levy but at this time have not felt it appropriate. The principle reason for this is the broad consistency shown across the City in terms of build cost and property value growth and that if anything the increase in house prices has been stronger suggesting improvements in viability are more likely to exist. We consider this further in the 3 sections below: House prices, development costs, and land values. Development Costs As a starting point the build costs for residential development identified in the AHEVA are 2012 values. In the AHEVA, GL Hearn applied base build costs of 970/sq.m ( 90/sq.ft) for flats and 860/sq.m ( 80/sq.ft) for houses, which were assessed using BCIS (adjusted for location). These costs are quoted as being between the medium and upper quartile banding to reflect a good quality of development in order to meet Code for Sustainable Homes Level 4. The table below clarifies those build costs and also shows the range of other cost assumptions that were built into the AHEVA analysis. Table 1 - Residential Build Costs Cost Areas Build Cost per sq.m (gross) (flats) Build Cost per sq.m (gross) (houses) Value in or % of Build Cost 970 ( 90/sq.ft) 860 ( 80/sq.ft) Site Preparation 15% Contingencies 5% Professional Fees 12.50% Legal Fees 1% Agent Fees 1.50% Finance Marketing Costs 7% APR 2,000 per private dwelling S106 2,000 per dwelling Developer Profit (Market Homes) 20% Developer Profit (Affordable Homes) 8% Source Coventry AHEVA 2012 Since 2012 we know from BCIS records that the cost of house building has increased. Indeed the cost of development at Q had increased to 110/sq.ft for flats and 92/sq.ft for houses. This represents an uplift of 22% and 15% respectively. In terms of other costs we consider these to remain broadly consistent, although we do highlight potential improvements in 2 of these areas, most notably developer profit and finance. We are aware from our understanding of current market conditions that accessibility to finance is now easier and less risky than it was in 2012, especially in relation to the development of houses and

2 self-contained student accommodation. This has been supported by historically low interest rates, an improving and relatively stable property market, ever increasing demand and need and recent government initiatives and incentives. This means the 7% figure utilised in the AHEVA is likely to have decreased factoring in an improvement to the viability position. We are also aware of cases across the city where development has been brought forward at lower profit margins than those assumed in the AHEVA (namely 20% for market homes or a 17.5% blended profit). This again reflects improving market conditions and a less risky development outlook. Development Values The AHEVA highlighted a hierarchy of locations within the City broadly running from the South and West (most popular), to the East, with the North of the City being the least popular. The AHEVA then utilised the results of property market research to inform a range of Value Points which represent the breadth of the typical local new build market. The Value Points were intended to group areas of similar values and allow the results of this analysis to be used independently of location and, more usefully, by approximate development value. Value Point 4 for example reflects what was considered to be the highest achievable values in the City. Value Point 1 reflects the lower end of the market with a further 2 interim Value Points modelled also. These are highlighted in the table below: Table 2: AHEVA Value Points (2012) Source Coventry AHEVA 2012 Notwithstanding, we can apply our own understanding and local knowledge of the city to identify links between specific schemes and different value areas, especially building upon the south to north value geography. We can also relate this to the sites considered through the AHEVA. This allows us to consider changes in the value of new homes relative to the values assumed in the AHEVA. To support our thought process we can highlight a number of key examples New stoke Village. This is a large brownfield regeneration site which has been delivering new homes since It is now approaching completion and totals in excess of 1,100 homes. The AHEVA considered a rage of property types and values, with sale values ranging from /sq.ft in 2012 and properties selling at asking price. In summer 2015 we

3 revisited this site and identified a range of properties selling at between 173 and 204/sq.ft with apartments marketed at 225/sq.ft. The flats in particular demonstrated a marked increase with sale prices for similar products having increased from 88,000 in 2012 to 105,000 in 2015 (19% increase). To support this note we have revisited this site at May 2016 and are now able to make a direct comparison between one of the lower value house types on the site. We take the Dunsmore as an example a 4 bed property where values at 2015 equalled 176/sq.ft. In May 2016 these have increased 6% to 187/sq.ft. New Century Park. This is another brownfield development on a former employment site and is situated in very close proximity to New Stoke Village. This site was not being developed at the time of the AHEVA so cannot be directly comparable, however due to its proximity we would expect values to have been in line with those at New Stoke Village. In summer 2015 however we found a range of 3 an 4 bed properties being marketed at /sq.ft with sale values in the region of ,000. At May 2016, we have recorded 4 bed properties now being advertised in the region of 320,000. ( 243/sq.ft). These values exceed even the highest values identified in the AHEVA and reflect a clear uplift in the Coventry market. Beake Avenue. This site represents an initial phase of the Whitmore Park allocation in the draft Local Plan (site H2:4) and is for 130 homes on a former employment site. Again, the site was not being developed at the time of the AHEVA, but is situated to the north of the city in a mid-value part of Coventry. In summer 2015 we made inquiries to the site and found properties marketed between /sq.ft. We have revisited this site at May 2016 and found properties now being advertised at a similar range. Of particular interest though is the Kentdale property type, which has increased by 6% in value between summer 2015 and May 2016, with asking prices now in excess of 285,000 for a 4 bed home. These values exceed even the highest values identified in the AHEVA and reflect a clear uplift in the Coventry market. Canley regeneration Area. The first phase of this development has commenced in the last 2 years but is situated in a predominantly lower value part of the city. Although it benefits from close proximity to Warwick University and the strategic highway, the site adjoins and is accessed through a large housing estate which suffers from high levels of deprivation. As such, the area is identified as a regeneration programme with new homes and community facilities planned and actively being developed. Notwithstanding, new homes on this site were being marketed at between /sq.ft in the summer of Although the range of values has remained stable in May 2016 we can consider the type specific values at the Flatford and Ingleton which have increased by 7% and 15% respectively. The Flatford is now marketed at 260/sq.ft. To place this in context, the site is in fairly close proximity to the Bannerbrook and Willow Croft developments that were considered in the AHEVA. At the time the AHEVA was written these sites would have been considered higher value options relative to the site at Canley. The AHEVA identified achieved values between /sq.ft. In comparison this suggests around 30% uplift in values of some new build properties in this area since To support the data collected on site specific examples we also considered average house price changes across Coventry. This allowed us to undertake an update of Figure 11 in the AHEVA. The charts below highlight the trend in average house prices between March 2012 and March 2016.

4 Over this time average property prices have increased by approximately 19%. It is important to note however that these price changes are dependent upon the number and type of properties that are bought and sold and also take into account older properties not just new builds. Figure 1: Average House Price Trends March , , , , , ,000 50,000 Average Price (Detached) Average Price (Semi- Detached) Average Price (Terraced) Average Price (Flats) 0 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Source: HM Land Registry In this context though we were comfortable that at Summer 2015 we had a broad understanding of how both build costs and new build values were increasing across Coventry in relation to the assumptions made in the 2012 AHEVA. It is important to note however that these values represent a snap shot in time and are based on advertised prices. They have been recorded from live developer webpages and other correspondence. We accept therefore that an advertised price may not necessarily represent the achieved sale price, although there are examples across Coventry where advertised prices are achieved. Even if we made allowances for a slight reduction in the marketed prices (to estimate achieved prices) we remain comfortable that the growth in values are compensating for the uplift in build cost. We also felt that the likely changes in profit margins and finance rates would also support continued development viability. Furthermore, we have continued to see year on year increases in new build completion across Coventry with sites, previously considered marginal gaining planning permission and delivering homes. In terms of affordable housing delivery we have continued to see regular deliver at the required policy contribution. Indeed we are only aware of 3 cases since 2012 that have been granted planning permission with an affordable element below the standard policy requirement. These include: OUT/2013/0041 Acetate Site: 20% affordable housing due to viability issues and provision of employment land on mixed use site.

5 OUT/2014/2538 Paragon Park: A minimum of 4% affordable housing due to viability issues relating to extensive decontamination and noise attenuation measures. The development is phased though and viability is to be reconsidered at each phase. FUL/2015/2868 Lythalls Lane: 10%affordable housing due to viability issues around site specific abnormal costs. This provides a clear market signal of demand and viability across Coventry. Our review of like for like sales on a number of sites in May 2016 (compared to summer 2015) again only serves to convince us that uplift in property prices across Coventry are continuing to improve and support viable development. There is evidence to suggest that price rises per annum are around 3-4%. Having regard to the above it is clear that property values have increased in Coventry. It is also clear that values are now exceeding those of the highest value category in the AHEVA, and that such values are being achieved in areas previously associated with lower value parts of the city. The lack of development in the traditionally higher value parts of the city means it s not possible to directly compare the highest value allowed in the AHEVA, however looking at the mid-range values in particular there are signs that values have increased in the region of 20-30% since Land Values The third aspect of development viability that we have taken into account is land values. Across Coventry the value of land varies significantly from low risk greenfield sites to contaminated brownfield land. Through the draft Local Plan we are also bringing forward a type of land that has not been released in Coventry for several decades Green Belt land, which offers prime opportunities for significant uplift in value. For the purposes of comparison though we had regard to the approach used in the AHEVA and how these values may have changed since The AHEVA in 2012 highlighted that it s important to compare the base residual land values against values which could be achieved from existing and alternative uses. Where the residual land value generated through development is lower than the alternative permitted uses, development is unlikely to come forward as it would not provide any incentive for the landowner to proceed. As such the AHEVA considered the type of land expected to be delivered in Coventry, and noted a focus on former industrial land. As such viability was benchmarked against typical land values for industrial land. This drew on VOA data for the West Midlands suggesting values of between ,000/acre, with the lower end of this value used in the AHEVA. This reflects that higher value sites are unlikely to come forward for alternative uses due to their value as employment land. Although we are not able to identify a direct update of this figure, other anecdotal evidence from the VOA suggests that industrial land values in Coventry have stayed broadly stable. This reflects our own market intelligence and knowledge which suggests an average industrial land value in the region of 350,000/acre remains a suitable and justified benchmark when considering viability modelling for new residential development. Indeed with uplift in costs and values being broadly in balance it is unsurprising to see land values remaining stable. The other type of land that will contribute towards meeting the city s housing needs is land released form the Green Belt and other pockets of green space. This was not an area considered in detail by

6 the AHEVA as values are traditionally much lower than previously developed sites due to their more agricultural nature. By way of a guide though, we have continued to monitor the Savills Annual Agricultural Land Market Survey. This contains a graph which is copied below and shows average agricultural land values. This shows that values have grown significantly in the West Midlands in recent years but that figures still remain at around 10,000/acre. Due to the lower values in general this is broadly consistent with the VOA data published by DCLG which suggest average national values were in the region of 12,000/acre. Figure 2: Agricultural Land Values Source: Conclusions Having regard to the above information we find a local housing market in Coventry that is strong and broadly stable. Since 2012, there is evidence to suggest both build costs and property values have grown in the region of 20%, whilst land values have remained broadly stable. There are also macroeconomic signals around lower profit margins, improved finance terms and national incentives. Coupled with ever increasing housing need and demand therefore, if anything we see clear signs of an improving housing market and improving development viability. It is for this reason that we have not as yet felt the need to update our AHEVA and remain comfortable that the policy position proposed off the back of this study remains suitable and deliverable.