Not enough profit to be affordable?

A developer with permission for 70 homes in Long Sutton has claimed there is no cash for affordable homes within the plan.

South Holland District Council’s requirement is that 25 per cent of developments over 11 homes should be affordable.
But an application has been submitted by Stinders Homes (SPV2 Ltd) which says rocketing prices mean the expected 17 affordable homes would not be viable.
It has commissioned a specialist company to compile a report outlining why the request cannot be met.
“The particular justification for this site-specific viability assessment is that significant economic changes have occurred since the [local] plan was brought into force,” says the document.
The company already has permission to build the homes as the first phase of a development on the edge of Long Sutton, off Lime Walk.
A separate application for 56 homes on an adjacent site was rejected by South Holland District Council earlier this month with ‘over-development’ among the reasons behind the rejection. The land had been allocated for 34 in the Local Plan.
Permission for 70 homes on the neighbouring site has already been granted, and now the company says it cannot afford to allocate the 17 homes.
“Current inflationary pressures are expected to keep labour costs resulting in increases in costs and tenders,” says the report.
The benchmark developer profit is 17.5 per cent, but the return on the sales as it stands would be 6.5 per cent.
Developers have to ‘provide sound evidence’ as to why on-site provision cannot be achieved.
The developer would be expected: “To make equivalent off-site provision or a financial contribution to enable the need to be met elsewhere,” says the South East Lincolnshire Local Plan.
The site will have six detached, 52 semi-detached and 12 terraced houses. Prices will range from £195,000 to £525,000.
Soaring energy costs, the rising price of materials and labour are all blamed for the increased investment.
Planning fees are put at £20,000 and the developer has ‘had to pay £200,00 in interest payments due to the delay with access over drainage board land,’ says the document submitted to the district council.
The 17.5 per cent profit is a national figure with as much as 25 per cent on ‘risky developments,’ says the report.
As it stands, the return would be ‘significantly less’ than the 17.5 per cent profit target and closer to seven per cent at £1.313m.
Sales are predicted at £18.9m with construction costs put at £10.8m and other costs eating into the profit margin along with marketing, finance and land costs.