Greater London Authority, Transport for London, Wandsworth Council and Lambeth Council Vauxhall Nine Elms Battersea Development Infrastructure Funding Study Final report October 2010 ROGER TYM & PARTNERS Fairfax House 15 Fulwood Place London WC1V 6HU t (020) 7831 2711 f (020) 7831 7653 e [email protected] w www.tymconsult.com This document is formatted for double-sided printing. Disclaimer This document has been prepared by Roger Tym & Partners (RTP), Peter Brett Associates and GVA Grimley. The project has been led by RTP. RTP accepts no responsibility or liability for the consequence of this document being used for a purpose other than the purposes for which it was commissioned. Any person using or relying on the document for such other purpose agrees, and will by such use or reliance be taken to confirm his agreement to indemnify RTP for all loss or damage resulting there from. It has been necessary to base much of this analysis on data collected by third parties. This has been independently checked whenever possible. RTP, Peter Brett Associates and GVA Grimley accepts no liability for any loss or damage suffered by clients or others, whether contractual or tortious, stemming from any conclusions based on data supplied by parties other than RTP, Peter Brett Associates and GVA Grimley used in preparing this report. Author/Amended by: Authorised by Date: Version: A.Clarke/ team C Howick 14 Oct VNEB final 141010.docx P2024 CONTENTS 1 INTRODUCTION .................................................................................................................. 1 2 OUR SCOPE AND APPROACH ........................................................................................... 3 Introduction ................................................................................................................................ 3 The area and sites we are covering ........................................................................................... 3 The types of infrastructure we are looking at ............................................................................. 4 Understanding the categories of infrastructure which are outside our scope ........................... 5 Requirements: our approach to estimating the requirements of infrastructure for growth ....... 6 Costs: our approach to estimating the costs of infrastructure for growth .................................. 9 Funding: our approach to estimating the funding for infrastructure for growth ........................ 10 Our approach to prioritisation ................................................................................................... 13 There are important caveats to be attached to this work ......................................................... 14 3 PLANNED DEVELOPMENT IN THE OPPORTUNITY AREA .............................................. 17 Introduction .............................................................................................................................. 17 Development proposed ............................................................................................................ 17 Testing Revised Scenario 5 (RS5) proposed development .................................................... 18 How much development is deliverable in the plan period - Office ........................................... 19 How much development is deliverable in the plan period – Retail ........................................... 23 How much development is deliverable in the plan period – Residential .................................. 27 The assumed trajectory ........................................................................................................... 29 4 HOW CAN DEVELOPER CONTRIBUTIONS ARISING FROM GROWTH BE BEST CAPTURED? ...................................................................................................................... 33 Introduction .............................................................................................................................. 33 What is the policy context? ...................................................................................................... 33 What are the potential contribution structures at VNEB? ........................................................ 35 The preferred contribution structure for VNEB ........................................................................ 38 Deciding whether infrastructure items are included in a tariff or left to individual Section 106 negotiations .............................................................................................................................. 39 5 HOW A VNEB TARIFF AND WIDER DELIVERY MECHANISMS WOULD WORK .............. 43 Introduction .............................................................................................................................. 43 The legal tests of planning obligations ..................................................................................... 43 Offsets ...................................................................................................................................... 43 The initial operating framework for tariff/CIL ............................................................................ 44 6 TOWARDS SETTING A TARIFF LEVEL FOR DEVELOPMENT ......................................... 47 Introduction .............................................................................................................................. 47 Important caveat ...................................................................................................................... 47 Property market assessment ................................................................................................... 47 Method and approach .............................................................................................................. 48 Scenarios ................................................................................................................................. 51 Setting benchmark land values ................................................................................................ 52 How many tariff areas should there be? .................................................................................. 55 Summary of viable tariff contributions ...................................................................................... 56 Pulling together the overall developer contribution ................................................................. 60 The factors influencing tariff contributions ............................................................................... 63 Converting this Section 106 Tariff to a CIL .............................................................................. 64 7 OTHER FUNDING SOURCES ........................................................................................... 67 Introduction .............................................................................................................................. 67 Our approach ........................................................................................................................... 67 Tax Increment Financing ......................................................................................................... 67 User charges and securitised user charges ............................................................................ 68 A comprehensive approach to affordable housing .................................................................. 69 Private Finance Initiative .......................................................................................................... 71 Local Asset Backed Vehicle ..................................................................................................... 71 Government grants .................................................................................................................. 72 Government loans .................................................................................................................... 73 Local Authority Bonds .............................................................................................................. 75 The New Homes Bonus Scheme ............................................................................................. 75 Local authority prudential borrowing ........................................................................................ 76 EU JESSICA ............................................................................................................................ 77 Conclusion ............................................................................................................................... 78 8 TRANSPORT ..................................................................................................................... 79 Introduction .............................................................................................................................. 79 Method ..................................................................................................................................... 79 Transport context ..................................................................................................................... 79 What are the infrastructure requirements arising from development? What are the costs? .. 81 How can infrastructure be funded? .........................................................................................