To unravel the hysterics lets just go back to basics.
Planning consents for developments over 100 square meters attract Community Infrastructure levy’s , Tower hamlets had released a revised charging rate up from 2015’s £200 per sqm to £280 per sq m, the charge is not a new thing and the potential increase is also effected by planning guidance on application of the charges weighed against the Affordable housing and other social and commercial benefits any particular Scheme offers to the community in which it is proposed.
7.2 The methodology underpinning a residual valuation is a relatively simple concept. In short, the gross value of the completed development is assessed, including, amongst others, the aggregated value of any residential properties, commercial income, car parking income and ground rents. Secondly, the cost of building the development is deducted along with professional fees, finance costs and developer’s profit. This is illustrated below in Table 3. Table 5 – Residual valuation methodology 7.3 The output is the Residual Land Value (RLV). Simply, if the RLV produced by a scheme is lower than the benchmark land value, then the scheme is deemed to be unviable and is therefore unlikely to come forward for development, unless the level of affordable housing and /or planning obligations can be reduced. If the RLV is higher than the benchmark then the scheme can, in theory, provide additional affordable housing and /or other planning obligations. 7.4 Alternatively, the benchmark land value can be inserted into the appraisal as a fixed cost and the level of profit generated by the scheme becomes the output by which viability is measured. If a sufficient level of developer’s profit is generated the scheme is deemed to be viable. This is the approach that has been adopted within the FVA. 7.5 The topic of what is an appropriate benchmark is covered in more detail within the FVA, but in summary it is a benchmark land value that incentivises the site to come forward for development whilst optimising the maximum reasonable amount of affordable housing and other planning obligations. The approach is in accordance with the NPPF and London Plan in that it seeks to encourage rather than restrain development.