The Government has ordered Registered Providers to cut affordable rents over the four years from April 2016. The implications for private developers are now becoming clear as Registered Providers are hastily revising offers in light of reduced revenue streams.
One implication for home builders is the need to review their own development site bids in light of assumed affordable receipts. If currently in negotiation of a land contract – particularly one that is subject to planning - now is the time to seek further protection of project viability.
Conditional on Planning Deal
A standard subject to planning agreement will be framed by reference to a Satisfactory Planning Permission which in turn is usually based on an agreed list of Onerous Conditions. Under such a definition a developer could look at:
- capturing a minimum affordable land receipt in addition to a square footage area and or tenure mix;
- defining any designation of the affordable tenure mix as an onerous condition so as to give itself the opportunity to renegotiate a financially viable mix for the onward sale.