David Green, a director at Turley Associates, welcomes Birmimgham City Council’s attempts to reach out and help development industry.
As the property development industry continues to struggle through the economic recession, Birmingham City Council planners are responding with an offer of help for developers to kick-start schemes that may currently be stalled.
Many developments in the city are subject to obligations imposed at the time of the grant of planning permission which secure other community or infrastructure benefits in addition to the development itself.
These are known in the industry as Section 106 agreements. The obligations contained in such agreements range enormously but often include such things as money towards highway infrastructure or the provision of affordable housing and public open space as part of new housing developments.
At a time when the viability of many developments is either marginal or non-existent, any reductions or deferments in upfront costs could in some cases make the difference between a scheme proceeding or not.
A private report on the process of deferring the obligations contained in Section 106 agreements went to Birmingham City Council’s planning committee on July 9.
As the report was considered private it is not available to view and as yet no public announcement has been made by the council. However, the report was approved.
Details of the help to be offered are still sketchy but it is understood that the council has approved the principle of considering requests from developers to defer requirements within existing Section 106 agreements subject to the developer being able to provide evidence that they are unable to meet the Section 106 costs at the present time.
Our understanding is that the offer does not allow the value of such requirements to be reduced but purely that the costs could be deferred to a later date, potentially helping the cash flow of a scheme.
It is understood that this “lifeline” will last until the end of December 2010 when it will be reviewed, unless the market conditions improve in the meantime.
The council’s approach is timely as it coincides with the publication of a Good Practice Guide issued by the newly created government quango, the Homes and Communities Agency (HCA), on Investment and Planning Obligations.
Amongst other things, this guide provides advice for those seeking to kick-start new housing developments and the issue of how to deal with Section 106 agreement negotiations.
The approach being taken by the council is a practical and pragmatic response to current market conditions and should be welcomed.