Guidance notes: commuted sums for off-site affordable housing

This guidance explains how to use the commuted sums calculator. It is based on a report produced for us by Bespoke Property Consultants.

The calculator should be used when either National Policy or adopted local plan policy says it is acceptable to take a commuted sum for off-site affordable housing.

These instances are as follows (or as agreed by the relevant case officer):

• within the Chilterns AONB all developments of between 6 and 9 dwellings and/or over 1,000 square metres residential floorspace (inclusive)

Although initially prepared for use in the area covered by the Wycombe District Local Plan WDLP (adopted in 2019), the calculator should also be used for all suitable applications within the area covered by the Vale of Aylesbury Local Plan - VALP (adopted in 2021).

Applications in the areas covered by the Chiltern and South Bucks development plans should use the appropriate guidance in that area until it is updated or revised/reviewed.

In order to use the correct information you should ensure the development is located in the correct legacy council area to use the appropriate local plan policy is applied. For clarity the relevant policies are:

• VALP (North area) - policy H1
• WDLP (West area) - policy DM24

You should not use the calculator in circumstances where full policy level affordable housing is not viable.

If you do use it under these circumstances, it will need to be accompanied by a full viability report.

The methodology behind the calculation of commuted sums for affordable housing must be:

1. Necessary to make the development acceptable in planning terms
2. Directly related to the development
3. Fairly and reasonably related in scale and kind to the development

The calculations on the pro-forma calculator:

• set out what subsidy a developer would have needed to contribute to provide the affordable housing on site. This is without any assistance from Social Housing Grant
• do not try to share in the uplift in values that will be achieved by putting affordable housing off-site, as this would not satisfy criteria 1. and 3. above
• are based on the formula below, which reflects the true cost to a developer had the affordable housing been delivered on site

Less: developer’s profit (inclusive of marketing costs)

Equals: cost of developing units on site (such as land + build + fees + finance)

Less: value of the units to a registered provider (capitalised rents, shared ownership sales)

Equals: cost to the developer of providing affordable housing

1. All cells coloured yellow are to be filled in by the applicant
2. Enter site name and date carrying out the calculation
3. Enter the Affordable Housing Threshold Percentage required to meet the appropriate Local Plan Policy and the tenure split
4. Enter the level of affordable housing as a percentage of the units on site to meet the appropriate Local Plan Policy
5. The number of Affordable Rented and Intermediate tenure units are automatically calculated based on an 80/20 percent tenure split
6. If any affordable rent or intermediate units are to be provided on site, enter into the appropriate cells
7. The net amount of affordable rented and shared ownership units should reflect that on the application site
8. The Open Market Value (OMV) of each unit should be input and should be the anticipated net achievable price, i.e. net of any discounts or marketing incentives. The values should be obtained from market research relevant to the subject site. Averages values across a wide area are not regarded as appropriate. Where a viability assessment has been submitted and agreed by the Council the same values should be used in the calculator
9. The profit level to be inputted for market housing should be the gross profit inclusive of marketing costs as these would not apply to affordable housing. The normal range of operating profit is 15% to 20% as set out in the NPPG. The profit level to be inputted for affordable housing should be a much lower figure in consideration of the delivery of affordable housing where this guarantees an end sale at a known value and reduces the risk as out in the NPPG
10. Affordable Rents – the rent level per week for each unit type are to be entered as per current Local Housing Allowance Rates for the “Broad Residential Market Area” in which the site sits as defined by the Valuation Office. This information is available on the valuation office website
11. The yield to capitalise the Affordable Rent has been set following consultation with the Registered Providers active in Buckinghamshire at a default value of 6%
12. Shared Ownership - The ‘equity rent‘, on the unsold portion of a shared ownership unit is to be and can be established by contacting a RP, but the value should not exceed 2.75% being the maximum allowed by Homes England. The yield to capitalise this rent is set at 5.5% unless evidence shows otherwise
13. The ‘initial tranche’ sale for shared ownership should be input. The percentage of equity sold will have to ensure that the units are affordable to the target market for this type of tenure and this will vary from ward to ward. Please check with the Housing Department about the acceptable level for your site. The former (Wycombe) District average is 35% and this should be used as the default in the absence of any evidence to the contrary
14. The calculator will calculate the affordable housing commuted sum taking into account all of the above inputs. The calculated Commuted Sum will appear at. All cells coloured yellow are to be filled in by the Applicant