We refer to our terms of engagement dated 7 August 2023. We have undertaken the requested exercise and we are pleased to report to you as follows.
The Client is Brighton & Hove City Council (BHCC).
We understand that in conjunction with BHCC’s City Plan Policy CP20, BHCC require a schedule of commuted sum payments for use in relation to smaller residential schemes of 5 to 14 units in size. We understand the values we advise will be published in BHCC's Guidance Note for Commuted Payments.
The Council have asked us to provide:
This instruction is an update of the work to our previous report (dated 12 May 2022), with similar methodology. The above is provided for the three value Zones (1, 2 and 3). These zones match those used by BHCC in its’ CIL Charging Schedule.
In order to provide you with the above, we have undertaken research and analysis of new-build comparable residential evidence across the City, which we have compared with current asking prices. We have included in this report details of the methodology and working information that we have had regard to in order to arrive at the figures above.
The date of valuation is 1 September 2023.
The valuations supplied to you have not been prepared in full accordance with the Royal Institution of Chartered Surveyors (RICS) Valuation - Global Standards and RICS UK National Supplement, commonly known together as the Red Book.
Compliance with the RICS professional standards and valuation practice statements gives assurance also of compliance with the International Valuations Standards (IVS).
Where compliance with the above standards does not limit the usefulness of the report to you, we have complied with the standards as they represent best practice, but for the avoidance of doubt this report to you does not constitute a formal Red Book report and valuation.
Regard will be had to applicable RICS Guidance Notes:
RICS GN ‘Comparable Evidence in Real Estate Valuation’
Measurements stated will be in accordance with the RICS Professional Statement 'RICS Property Measurement' (2nd Edition) and, where relevant, the RICS Code of Measuring Practice (6th Edition).
As agreed by you, the residential property present has been reported upon using a measurement standard other than IPMS, and specifically Gross Internal Area has been used. Such a measurement is an agreed departure from ‘RICS Property Measurement (2nd Edition)’.
This variation is adopted due to the reliance on comparable evidence which is all in this measurement standard and is common and accepted practice in the construction /planning industry, and it has been both necessary and expedient to analyse the comparable data on a like with like basis.
Checks have been undertaken in accordance with the requirements of the RICS standards and have revealed no conflict of interest. DVS has previous involvement with this exercise in 2016, 2017, 2021 and 2022, but we do not consider this is a conflict of interest.
We have assumed that all information provided by, or on behalf of you, in connection with this instruction is correct without further verification.
We have undertaken a search for market transactions using property websites, our internal database and SDLT returns.
We have undertaken an analysis of residential values in the area of BHCC administration. This has included Portslade and Hove to the West, Ovingdean, Rottingdean and Woodingdean to the East, as well as the central districts of Brighton and the more rural areas to the north of the A27.
We have sorted the comparable evidence into the low, medium and high Zones adopted by BHCC. These areas are as follows:
These areas are indicated on the map below:
We have had regard to comparable evidence in the City and in particular:
We have also applied some weight to previous work DVS has undertaken for BHCC, and the levels of value in these cases. We have also made reference to Land Registry House Price Indices and average values.
In order to establish a unit price, we have had regard to average unit sizes, which we have not amended from the 2017, 2021 and 2022 exercise. Adopting an average unit value, as opposed to an average price per square metre prevents an additional element of calculation on a development by development basis. The areas that have been adopted are:
The above areas are calculated as Gross Internal Area (GIA). The adoption of this measurement basis is a departure from IPMS, outlined in the RICS Professional Statement RICS Property Measurement (2nd edition). This is to maintain consistency with our earlier advice.
Having compiled a schedule containing the above information, we have sorted the comparable evidence into the three identified Zones. Then, by bedroom number and type (such as house or flat), unit size, achieved or asking value and postcode in order to establish a notional average Market Value for the notional average sized units in each Zone.
Within this 'average' area, there are higher and lower value areas which fall within the range, and therefore with any exercise of establishing an average, there will be perceived to be some 'winners' and 'losers'.
Our opinion of the average Market Value of Private units, as at 1 September 2023 is as follows:
| 1 bedroom flat | 2 bedroom flat | 3 bedroom flat | |
|---|---|---|---|
|
Zone 1
|
£390,000 | £550,000 | £620,000 |
|
Zone 2
|
£340,000 | £435,000 | £540,000 |
|
Zone 3
|
£250,000 | £270,000 | £345,000 |
| 2 bedroom house | 3 bedroom house | 4 bedroom house | |
|---|---|---|---|
|
Zone 1
|
£560,000 | £685,000 | £790,000 |
|
Zone 2
|
£540,000 | £575,000 | £625,000 |
|
Zone 3
|
£350,000 | £455,000 | £540,000 |
Our opinion of the market value of affordable rent units, as at 1 September 2023 is as follows:
| Zone | 1 bedroom flat | 2 bedroom flat | 3 bedroom flat |
|---|---|---|---|
| Zone 1 | £155,000 | £220,000 | £250,000 |
| Zone 2 | £135,000 | £175,000 | £215,000 |
| Zone 3 | £100,000 | £110,000 | £140,000 |
| Zone | 2 bedroom house | 3 bedroom house | 4 bedroom house |
|---|---|---|---|
| Zone 1 | £225,000 | £275,000 | £315,000 |
| Zone 2 | £215,000 | £230,000 | £250,000 |
| Zone 3 | £140,000 | £180,000 | £215,000 |
For affordable rent units, the rent is capped at a maximum of 80% of market rent. A Registered Provider’s bid in this high value location typically ranges from 40 to 55% of Market Value for this tenure of affordable housing. As agreed, we have adopted 40% of Market Value, we have then rounded to the nearest £5,000.
We have benchmarked this approach and the percentage deducted with development viability assessments we have undertaken on behalf of Brighton & Hove City Council, as well as some other neighbouring boroughs.
The approach of calculating a percentage of private market values has been adopted by a number of different agents and we therefore consider it is appropriate. We tend to see the percentage of private values being lower in the higher value areas, to seek to maintain the overall affordability where there are high house values. We consider for consistency, as well as to maintain a simple approach, applying 40% to all three value areas is appropriate.
Our opinion of the market value of shared ownership units, as at 1 September 2023 is as follows:
| Zone | 1 bedroom flat | 2 bedroom flat | 3 bedroom flat |
|---|---|---|---|
| Zone 1 | £255,000 | £360,000 | £405,000 |
| Zone 2 | £220,000 | £285,000 | £350,000 |
| Zone 3 | £165,000 | £175,000 | £225,000 |
| Zone | 2 bedroom house | 3 bedroom house | 4 bedroom house |
|---|---|---|---|
| Zone 1 | £365,000 | £445,000 | £515,000 |
| Zone 2 | £350,000 | £375,000 | £405,000 |
| Zone 3 | £230,000 | £295,000 | £350,000 |
To arrive at our opinion of value for Shared Ownership, we have assumed 35% of the property would be bought outright (typically with a mortgage), and a gross rent would be paid on the remainder of the outstanding value.
After an adjustment for management costs, we have capitalised using a based on our market experience.
Together these values equate to around 65% of the full Market Value of the units, which is within a reasonable range based on experience of other schemes we have assessed. We have then rounded to the nearest £5,000.
Our opinion of the market value of first home units, as at 1 September 2023, is as follows:
| Zone | 1 bedroom flat | 2 bedroom flat | 3 bedroom flat |
|---|---|---|---|
| Zone 1 | £273,000 | £385,000 | £434,000 |
| Zone 2 | £238,000 | £304,500 | £378,000 |
| Zone 3 | £175,000 | £189,000 | £241,000 |
| Zone | 2 bedroom house | 3 bedroom house | 4 bedroom house |
|---|---|---|---|
| Zone 1 | £392,000 | £479,500 | £553,000 |
| Zone 2 | £378,000 | £402,500 | £437,500 |
| Zone 3 | £245,000 | £318,500 | £378,000 |
To arrive at our opinion of value for first homes we have taken an average of 70% of the full Market Value of the units, which is within a reasonable range based on experience of other schemes we have assessed. 70% is the minimum and 80% is what we typically see.
With reference to the adopted values of Affordable Rent, Shared Ownership and First Homes units above, we have calculated an overall average for the Affordable Housing.
This is a weighted average based on the BHCC guidance stating a desired tenure split of 55% Affordable Rent, 25% First Homes and 20% other Affordable Housing tenures such as first homes.
For the purposes of this exercise, we have assumed the remaining 20% would be Shared Ownership.
This results in an overall weight average for an Affordable Housing unit as follows:
| Zone | 1 bedroom flat | 2 bedroom flat | 3 bedroom flat |
|---|---|---|---|
| Zone 1 | £204,500 | £289,300 | £327,000 |
| Zone 2 | £177,800 | £229,400 | £282,800 |
| Zone 3 | £131,800 | £142,800 | £182,400 |
| Zone | 2 bedroom house | 3 bedroom house | 4 bedroom house |
|---|---|---|---|
| Zone 1 | £294,800 | £360,100 | £414,500 |
| Zone 2 | £282,800 | £302,100 | £327,900 |
| Zone 3 | £184,300 | £237,600 | £282,800 |
In undertaking the above exercise, we have endeavoured to strike a balance between seeking a reasonable payment in lieu for BHCC, without discouraging wider development.
We have considered the impact if the adopted values are too onerous, which could create time delays in the planning application process if applicants seek to challenge the above values, as well as additional time spent by planning officers. We therefore have not sought to adopt the highest values in the range of comparable evidence but have adopted what we consider is an average value within the range.
Whilst we consider the above approach to be simple, clear and consistent, we also highlight that for specific schemes the difference between a GDV assessment undertaken on a policy compliant scheme versus an all private scheme may not equate to the exact same commuted sum figure, due to average values, rounding and the variations in proportions of affordable housing tenures in the formula compared to the specific scheme.
All prices or values are stated in pounds sterling.
The Land Registry House Price Index (HPI) shows that the values in BHCC have risen since the previous exercise. House prices have increased more than flat values and this is reflected in the achieved values we have analysed. This would also reflect the desire for more space given the increase in working from home and hybrid working.
We have adopted the same methodology used to calculate commuted sums used in the 2022 report. This is based on the following assumed proportion of affordable housing contributions:
It is confirmed that the valuations have been carried out by a RICS Registered Valuer, acting in the capacity of an external valuer, who has the appropriate knowledge and skills and understanding necessary to undertake the valuation competently, and is in a position to provide an objective and unbiased valuation.
You may wish to consider whether this report contains Exempt Information within the terms of paragraph 9 of Schedule 12A to the Local Government Act 1972 (section 1 and Part 1 of Schedule 1 to the Local Government (Access to Information Act 1985) as amended by the Local Government (access to Information) (Variation) Order 2006.
We are aware that the schedule of commuted sum payments will be published as part of BHCC's guidance on Commuted Sum Payments, as part of planning guidance CP20 - Affordable Housing. A separate redacted version of this report will be issued to you.
The report should only be used for the stated purpose and for the sole use of your organisation and your professional advisers. No responsibility whatsoever is accepted to any Third Party who may seek to rely on the content of the report unless previously agreed.
The reported values remain valid for twelve (12) months from its date unless market circumstances change or further or better information comes to light, which would cause us to revise our opinion.
We are aware you seek to rely on these values in your policy documents for one year. Please be aware that values change over time, and as such, they are unlikely to remain reflective of market evidence beyond this period.
We have attached to our report a number of schedules which we have devised in order to arrive at the commuted sum payments. A schedule summarising the suggested commuted sum payment per unit is as follows:
| 1 bedroom flat | 2 bedroom flat | 3 bedroom flat | |
|---|---|---|---|
|
Zone 1
|
£185,500 | £260,700 | £293,000 |
|
Zone 2
|
£162,200 | £205,600 | £257,200 |
|
Zone 3
|
£118,200 | £127,200 | £162,600 |
| 2 bedroom house | 3 bedroom house | 4 bedroom house | |
|---|---|---|---|
|
Zone 1
|
£265,200 | £324,900 | £375,500 |
|
Zone 2
|
£257,200 | £272,900 | £297,100 |
|
Zone 3
|
£165,700 | £217,400 | £257,200 |
This commuted sum payment is based on the difference between the Market Value of the Private units and the weighted average value for the Affordable units. This is a notional value for each area type and unit size and may differ from site specific values.