The Manchester Development Where Paying More Than £220K Endangers A £4.1M Profit
Backbench Labour members of Manchester City Council’s planning committee have stepped up their long campaign against what many of them regard as slender private sector financial contributions to the city’s affordable housing supply.
The latest developer to get burned is Far East Consortium. FEC might have hoped its long-term development partnership with the city council would protect it from a grilling. But its role in the council’s £1B Northern Gateway development provided no protection at all.
Councillors turned down an offer of a £220K contribution to affordable housing at the £24M, 80-unit Addington Street scheme on the northern edge of the city centre. After heated debate, they resolved to ask for more than twice as much, Manchester Evening News reported.
The rules require developers to provide affordable housing in 20% of the units at Addington Street, or pay to have affordable housing built elsewhere. The report reveals that FEC felt paying more than £220K would endanger the project’s viability, despite a projected £4.1M profit. The detailed viability assessment is available from the Manchester City Council website here.
The appraisal assumed units would sell at an average of £400 per SF, and that basic build costs would be around £200 per SF. The scheme would generate a 17% return to developers, within the 15% to 20% guideline proposed by the government. The city planning committee’s demand for a payment of £540K would reduce the assumed profit closer to the government’s minimum.
The viability report, prepared by Savills, concluded that the city fringe site posed greater risks to the developer, justifying higher returns. “We believe that a profit margin of 20% on GDV is a minimum acceptable level for the subject site in the context of the development and sales risk at the subject site as well as in the wider markets,” the report said.
You can see a webcast of the planning committee debate here.