PLANNING chiefs are recommending a developer pays half the previously agreed contribution to help make a ‘stalled’ five-storey apartment scheme viable.

Tiger Developments seeks a cut in the Section 106 money it must pay to City of York Council by around £1m, as the scheme has been delayed 14 months, which has fuelled increased costs.

Early in 2020, Tiger Developments received approval to build 62 flats off Eboracum Way, York, with an agreement for it to pay £2,058,92 Section 106 money, including £1,984,032 as a contribution towards affordable housing.

A report prepared for a meeting of the council’s planning committee next Wednesday (October 5) says the scheme is back before the committee “due to viability issues in delivering the scheme.”

Work has begun on the site but construction is ‘stalled’, with delays due to a lack of agreement on how to build the flats using the land to the north. This has increased ‘abnormal costs’ so much the scheme is ‘no longer viable.’

The developer is willing and able to pay £1m towards planning obligations, which the District Valuer says is ‘reasonable.’

The report says talks over viability began in late 2020 as the developer could enter the site at its north, so only the highway and the site itself could be used for construction.

This led to a 14-month delay in construction and subsequently higher costs. Without any further delays, completion of 'City Gate' could be in May 2023.

The report noted material costs have increased, two major sub-contractors went into liquidation, with renegotiations with others also increasing costs. Costs also increased due to a dispute between the developer and main contractor.

In addition to these ‘significant’ extra costs, other extra costs came from unexpected contamination and consultation fees, plus costs associated with a boundary wall and a car park scheme harming its viability.

It meant ‘abnormal’ or extra costs of £3m compared to expected, costs incurred and evidenced by the developer.

Government guidance accepts developers make a 15-20% profit on the gross development value of the scheme, but the extra costs now give a return of 8%, even with a £1m developer contribution.

Previously, before the extra costs, the scheme was shown to produce a reasonable 17.5% profit.

The planners recommend a cut in the developer contribution to £881,381 for affordable housing (a decrease of £1,058,921) with other contributions continuing.

The report added: “The risk associated with not proceeding with the S106 variation is that the residential development scheme stalls for an unknown period of time. The banks would likely repossess the site and pursue a more profitable scheme i.e. student accommodation or an apartment type hotel (which would fit within the approved building envelope).

“ This scenario has been confirmed by the applicant. These alternatives would not make the same contribution to local housing need and would incorporate zero affordable housing contribution.”