Developers urged to bring affordable housing forward in Chelmsford as building costs plummet

Developers have been called on to speed up their affordable housing plans as new figures show development costs have been significantly lower than anticipated.

An agreement known as a Section 106 struck in 2014 committed developers led by Countryside to provide 27 per cent of the Beaulieu development in Chelmsford as affordable housing.

They said at the time that that condition would generate a significant deficit of £40.3million, relative to the benchmark profit set down in the S106.

Developers added that it was important to note that this is not the same as saying that the scheme was presented as “unviable”.

The deficit is measured relative to a benchmark level of profit that a developer might reasonably hope to make.

It is not measured relative to the absolute minimum level of profit necessary to allow the scheme to go ahead.

Nonetheless a report compiled on behalf of Chelmsford City Council into the ongoing viability and progress of the development to provide a total of 3,600 homes concluded that a deficit of £40.3million relative to the agreed benchmark therefore has a significant impact on the profitability of the scheme, but it does not leave it in danger of collapse.

The S106 makes different allowances for the profit levels on different elements of the scheme – 20 per cent of revenue for market housing and commercial uses, six per cent of revenue on the affordable housing element.

Taken together, this amounts to a blended profit target of 18.7 per cent of overall revenue. However, the developer claims that development of the scheme will not achieve that target in full – resulting in a deficit of £40.3million relative to the benchmark.

On that basis, the actual profit would be reduced to a blended rate of 14.8 per cent, which the report concludes is “not ideal for the developer perhaps but certainly not so low as to threaten the solvency and viability of development”.

However, changes to overheads have reduced the overall cost of development by £36.3million – thereby eliminating around 90 per cent of the identified deficit.

The report makes it clear that “nonetheless, it is critical to note that we are not suggesting that Countryside or their advisors deliberately overstated costs in order to artificially reduce the overall level of affordable housing provided”.

Cllr Stephen Robinson, leader of Chelmsford City Council, said he is keen given the current climate for the affordable housing quota to be pushed forward, while acknowledging the deal for 27 per cent is something the council is stuck with.

He said: “We certainly hope we can have ongoing discussions with Countryside and would encourage them particularly at the moment to bring forward their affordable housing plans because we recognise market housing will be more difficult to sell at the moment.

“And Chelmsford Council and most others want to get on with building affordable housing.

“The housing associations are not directly affected by the housing market in the same way as the commercial side of the development so we hope that housing association properties on all development sites will continue and indeed might come forward.”

A spokesperson for Countryside Zest said: “We’re committed to working with Chelmsford City Council to ensure a successful delivery on our development and ensuring that Beaulieu is an inclusive community, which provides homes in a range of tenures that people can afford.

“We’re proud that all of our phases which are currently on site will provide affordable homes to help meet local need.

“The Arbour at Beaulieu, being built by L&Q, will deliver 300 homes – 100 per cent of which will be affordable with a mix of affordable rent and shared ownership. This is over and above the affordable housing provision required by the planning consent.

“Meanwhile, Countryside Zest is currently on site building three phases which will deliver 111 affordable homes, with a further two phases due to launch early next year. CALA Homes is also building 145 homes, of which 39 will be affordable.

“In addition to these new homes, Beaulieu has unlocked significant investment in the area, which will benefit the whole community – with new schools, publicly accessible green spaces and community facilities, and major infrastructure improvements including a new bypass and future railway station.”


Piers Meyler

Local Democracy Reporter