We've done bits and pieces with commuted sums. There was one very large commuted sum (in those days) of about £700k that was used to grant-fund a 28-unit office block conversion but that wasn't part of any policy - it was more a matter of politics. We wouldn't do anything like that today because we are normally looking for on-site provision because our Members feel strongly that is what they want.

But on the tariff, I would have thought that you must have some kind of "tariff" going wherever you have affordable housing on-site. In our case we might be negotiating a sale from the developer to an RSL at 45% of TCI, or at some fixed sum such as £75,000. It should be possible to work back from that to establish what the developer contribution is. For example if a 3-bed house worth £180,000 is being sold to an RSL at £75,000 then the developer contribution is £180,000 - £75,000 or £105,000. That's how much commuted sum you should ask for if the affordable housing is going to be off-site (I assume your grant process does end up with an affordable home, otherwise the planning ground is a bit shakey!).

You should ask for as much as possible. Developers will love to do the affordable housing off site if they can and if they are building really expensive stuff like luxury flats the gain to them of not having any affordable housing on site is enormous. Don't overlook the "double whammy" here if you allow them to do it off-site. For example, if you look at the example above - suppose it is a 20-unit site and you have a 25% affordable housing requirement. That's 5 homes. So if you look above and see it should be £105,000 per home, it comes out at £525,000. However, it ain't quite that simple. They were expecting to sell 15 market homes and the proceeds of those had to cover the 5 on-site affordable homes. But doing it this way they will have 20 market homes giving them a significantly bigger gross profit (a third). So they can afford to pay more. You can look it at it that the 20 market homes represents 75% of the overall number of homes in the scheme (where thhe scheme includes both the on-site and off-site units), which means the total number of homes is 26.67 - so they should give you a commuted sum based on 6.67 times your tariff not 5 times your tariff.

Hope that is of some value.

David Gibbens
Housing Enabling Manager, Exeter City Council

We are looking at using some S.106 monies on a refurb scheme with an RSL - this S.106 cash, which  is approaching the 'end of its shelf life' is tied to a specific area.

 However, there may well be a potentially much bigger issue : that of the future of S.106 payments, as a source of income.

It runs like this :

IF  the government introduce the Barker proposals in the way in which they are saying they will, much of what is covered S.106 funds will end up as Planning Gain Supplement (PGS).  New S106 agreements will be scaled back to deal with direct impact :  EG housing mix, internal access roads and tenure etc. The 'social benefit' element would be collected as PGS.

PGS funds will be passed to a 'third party' - either government or a quango - with the majority of the funds being re-distributed to the local authority, for them to 'spend as they think fit', the balance being applied to the delivery of strategic infrastructure.

The real problem for developers is the issue of :

pre-commencement /pre-occupation requirements & the ability to discharge these if they involve infrastructure which are covered by PGS and to be delivered by a third party, as there will be no privity of contract between the 'Chargeable Person' and the local authority - therefore no direct, contractual ability for the developer to secure the delivery of any necessary infrastructure required by pre-commencement and/or pre-occupation conditions.

Likely result : initial chaos and potentially sterilisation of sites.

Likely knock-on effect : a real  reduction in the amount of S.106 cash avilable to be directed into the area of Empty Homes.

There is also the prospect of a period of 'double whammy' - whereby developers could be caught for the current level of S106 payment being written into their consent, but the reserved matters not being sorted until after the magic date (yet to be disclosed by the government - but due to be 'not before 2008'), so that they would then be facing the PGS (smart money says it is likely to be set at 20% of the enhancement in the land/property value as a result of the consent) as well as having to pay the full S.106 charge.

Possible result : stalemate on some development proposals - with applications being held back until the transition arrangements have become clearer and developers can see what they are likely to be in for.

 Possible knock-on effect : a slow-down in the receipt of S106 income in relation to larger development proposals. 

 Some food for thought!