One Public Estate: Brownfield Land Release Fund (BLRF2) Round 1 details: July 2022

A project’s value for money(VfM) is determined using the technical annex.   Applications must achieve a “low/acceptable” value for money category. This is when a project is consistent with a benefit cost ratio (BCR) of 1.0 or above, after both the benefit cost ratio (BCR) and non-monetised impacts (NMIs) are taken into account. There is no minimum BCR score for this assessment. Under BLRF2, this metric is a gateway criterion, where achieving this minimum value for money score allows a project to pass to the next stage of assessment.  

Value for money is assessed through a combination of impacts that are monetised (and estimate a BCR) and a NMI assessment. The BCR will be based on land value uplift and health/distributional benefits related to the provision of any additional affordable housing. This will provide an initial value for money category. NMIs are those impacts that are not monetised in the BCR but may still impact the application’s value for money. Applicants will need to provide information about the impacts applicable to a project; the scale of these impacts, and a proportional amount of evidence to support them. The collective impact of NMIs alongside the BCR score can change the final value for money category and this will be assessed upon submission.

The value for money assessment is undertaken using the published technical annex to be completed as part of the application, and will follow the principles set out in the Treasury five case green book (as amended 2022) and the DCLG Appraisal Guide, 2016. 

Economic appraisal part 1: Benefit Cost Ratio (BCR) 

Part 1 of the economic appraisal will be based on the present value economic benefits of a project, divided by its present value costs to central government. This will generate a benefit cost ratio.

The BLRF2 is targeted at releasing council-owned brownfield land suitable for housing development. The economic benefits of releasing this land will primarily be monetised using land value uplift, which represents the economic benefits of converting land to a more productive use. Land value uplift is calculated by the difference between the value of the land in its new use, minus the value in its previous use. Health and distributional impacts around the provision of any additional affordable housing will also be monetised. 

It is then necessary to estimate how much of this economic benefit is additional: that is, how much development would have occurred in the absence of the intervention. The application should include evidence to support applicants’ responses to the additionality assessment within the technical annex where relevant, such as: 

• demonstration of clear site-specific market failures, including, where relevant, evidence that the works would not have been undertaken by the private sector
• demonstration that the viability/funding gap could not be solved by reasonable changes to the specification of the project that would be acceptable to the council
• details of existing landowners that might complicate land assembly.
• details of how delivery will be accelerated by this funding.

We only take into account any pre-development costs to government when appraising costs. This will reflect both spending through the BLRF2, and any other funding that is required from central government for the project to go ahead. This will not reflect the council’s own investment.

Economic appraisal part 2: Non-Monetised Impacts (NMIs)

Part 2 of the economic appraisal will be based on the NMIs that can be attributed to the project. NMIs are economic impacts that have not been monetised in Part 1 of the economic appraisal (BCR) because it was not possible or considered proportionate to do so.

Further guidance on NMIs can be found as a downloadable document in the how to apply webpage. 

NMIs should not double count those included in the BCR i.e. land value uplift. They must demonstrate the impact is likely to be additional, that is, would not happen on the site anyway, or displace activity from elsewhere. Applicants should consider the NMIs of the project when completing the technical annex and must ensure they are compliant with Treasury five case green book methodology (as amended 2022). 

NMIs should be described as clearly as possible when completing the technical annex, as the assessment will focus on the scale of the impact and evidence applicable to your application. Please refer to the NMI guidance for examples of a NMI and further information on what is expected from applicants.

BLRF2 provides grant funding where viability issues have prevented the release of council-owned brownfield land. Funding is available to unlock a site where market failures are preventing housing from being delivered. Evidence of market failure would include a viability gap, that is to say where the costs associated with unlocking a site are more expensive than the value it generates. The fund cannot be used to support viable projects.

The BLRF2 application should provide evidence of site-specific market failures, including, where relevant, evidence that the site in the present condition would not be delivered by the private sector without public sector funding support. Previous unsuccessful marketing exercises or soft market testing results can be used to support the case. The application should make clear how the funding will address the identified market failures and how, with the funding, these can be mitigated.

Proportionate evidence should be submitted to justify why the project requires government financial support. Ideally, especially for larger projects, a Royal Institute of Chartered Surveyors (RICS) compliant development appraisal should be submitted as part of the application to show the project is currently unviable. Smaller projects could provide alternative evidence of market failure. We recognise that the collation of such evidence can be both time consuming and add additional costs to a project, so we stress that the level of evidence should be proportionate to the size and nature of the project. 

This evidence may include:

• current estimated site value and a short narrative on how this was calculated.
• estimated remediation/abnormal/other costs and a short narrative of how this was reached. This could include direct quotes for work if available, comparable costs for similar works or estimations using standard data sources.  
• estimated site value following BLRF2 funded works and a short narrative on how that figure was reached. The estimated value should be based on a “clean site” with no further costs. The narrative should also state what the planning status of the site will be when sold.    
• for projects over 100 homes and/or requesting more than £750,000 we would normally expect a RICS compliant appraisal. If that cannot be provided, we would need other evidence to understand why that site was not viable.

Where any viability/funding gap could be met by reasonable changes to the specification of the scheme the appraisal should set out how those changes have been considered and why they have been disregarded. Such reasoning would include compliance with a range of council policies and commitments. 

The appraisal should confirm how the total viability gap will be met. If this is to be fully funded by BLRF2 grant funding this should be clearly outlined. If it is to be partially funded by BLRF2, details are required to confirm where the remaining gap funding will come from, whether it has already been secured, and outline details of associated conditions/timescales.

Risks associated with unlocking the site, market failures, viability and development appraisal assumptions should be identified and appropriate mitigation measures included.

Applicants are expected to demonstrate that the land will be released by 31 March 2026. Contracts for works should be signed by 31 March 2023 and evidence of this should be returned to OPE by 14 April 2023. The following delivery aspects should be fully addressed within the application. 

Planning permission

BLRF2 applications must include a short planning statement outlining the planning policy position and planning history for the site. The statement should identify the key planning considerations to be addressed in delivering the BLRF2 funded project.

If the site already has planning permission for the intended BLRF2 project, a copy of the decision notice and s106 agreement is required. If there are conditions still to be discharged or s106 agreements to be signed post decision, timescales for securing planning permission need to be included.

If the proposed route to market is to sell or transfer the site with full or outline planning permission, then the planning statement should specify details of how that consent will be achieved. We would expect to see a project plan for achieving planning permission, including:

1. any pre-application submission work timescale
2. planning submission date
3. determination period
4. estimated decision/committee date
5. planning permission secured date.

The risks associated with securing a timely and deliverable planning consent should be identified and appropriate mitigation measures included.   
We would expect the information around planning to be proportionate to the size and nature of the proposal. 

Works

The BLRF2 funding will provide upfront capital investment in order to create a viable project and can cover abnormal costs that may include:

• site levelling, groundworks, demolition, remediation
• small-scale infrastructure
• highways and access works
• environmental constraints which may include off site works or mitigation.

The funding cannot be used for resource spend (e.g. officer time) or planning application fees and associated costs. BLRF2 covers capital costs for abnormal works that address the defined market failures and will unlock the site for development within the specified timescales. 

Evidence of the cost and duration of works to be covered by BLRF2 should be provided. For larger projects delivering significant on site or off-site infrastructure, quotes for the work with any supporting information would be helpful. If this information is currently unavailable, indicative budgets should be supported by evidence of comparable works or information from other recognised data sources to justify these assumptions.  

The application must specify the way the works are to be procured and the associated timescales for procurement, leading to entering a contract for the works, and when the land will be released for development and construction/completion of the homes to accord with BLRF2 timescales. This may include details on whether the applicant has already procured a contractor; whether they will use a procured contractor panel; or proceed with a full works procurement process. The procurement should be conducted in line with the council's procurement policy.  Applicants should recognise the potential for cost inflation between the date of application and the delivery of works and should base cost estimates on the projected delivery period. The BLRF2 programme will not cover cost overruns.  

The application should also include a project plan (Gantt chart or similar) outlining the procurement process and delivery of the works, as well as how this relates to the marketing and disposal of the site in order to release it for development. We draw applicants' attention to the wording in the example grant funding agreement, which is attached to the prospectus with respect to required timelines for spending the grant.

The risks associated with undertaking the timely and effective procurement and delivery of the works should be identified, and appropriate mitigation measures included. 

Disposal

The project must undertake capital works on council-owned brownfield land. If possible, a copy of the title documents confirming the land is owned by the council should be submitted, together with information on any title issues that require resolution ahead of the site being marketed. 

The funding must enable the release of the land within BLRF2 timescales, or earlier, and address the original market failures. Where a copy of title is not available in order to proceed with the application, a senior council official, such as the S151 officer, is required to confirm the site is in the councils’ ownership.

We would draw councils’ attention to the fact that the Land Registry is currently experiencing delays in registering sites. Should a title need to be registered in order for land to be transferred, even to a wholly council-owned development vehicle, this should be factored into the overall project plan and undertaken early in the project process.   
 
An initial outline of how the council is proposing to market the site and select their delivery partner should be submitted. This should include an indication of the associated timescales for the disposal. 

For applications submitted by 2022/23 assessment point one (19 August 2022), funding must enable the release of the land for housing by 31 March 2026, or earlier. 

Land is released when either:

a) an unconditional contract, development agreement or building licence with a private sector partner is signed or land transfer takes place (whichever is sooner), or;
b) it has transferred to a development vehicle owned, or partly owned, by the council. This could be a council wholly owned housing delivery vehicle or a public–private joint venture, or;
c) if either of the requirements above have not happened, the point at which development begins on site.
d) in the case of self and custom-build, if (a), (b) or (c) do not apply, land is released when contracts are exchanged on the first plot.

Risks associated with disposal of the site in a timely and effective manner should be identified and appropriate mitigation measures included.

Place based metrics carry 50 per cent of the overall weighting.

Both deprivation and productivity data will be used to provide a place based metric score, which will be automatically applied to the application. Applicants are not required to provide evidence to support this element of the application. 

Further details of how this will be calculated are provided below:

• Deprivation: the proportion of lower super output areas in a council that are in the 10 per cent most deprived lower super output areas nationally as per the Index of Multiple Deprivation 2019 – a widely used way of measuring deprivation. This enables the identification of areas with particularly concentrated deprivation that will benefit from holistic regeneration to address complex problems and provide a new economic purpose.
• Productivity: Gross Value Added (GVA) per hour worked (2019), a widely used labour productivity measure. This enables the identification of areas that are performing less well economically than other parts of the country, and which will benefit from regeneration that creates spaces fit for the modern economy.
  
  These two metrics have been weighted 75:25 per cent in favour of the Index of Multiple Deprivation and ranked. Subsequently, this ranked list was used to calculate the below corresponding score between 0 – 50. The Place based list can be found in the How to apply area

The strategic case carries 35 per cent of the overall weighting, which will be assessed against the opportunity and links to local and national government priorities.

Projects should articulate how, and the degree to which they will: 

• contribute to the delivery of the council’s housing strategy, demonstrate how the proposals meet the up to date local plan objectives including regeneration, design and density and/or meet other relevant council strategies  
• contribute to the delivery of the council’s housing strategy and local plan aspirations, including regeneration, design and density
• support economic recovery
• provide skills and apprenticeships opportunities
• commit to local employment and reduce unemployment
• commit to local suppliers
• meet a particular need e.g. key worker or affordable housing, a mix of tenures, for older people, or projects that will benefit ex-service personnel, homeless or ex-offenders.

Evidence

In assessing the strategic case for a project, to demonstrate a good strategic fit, we would seek evidence of a clear connection between the project and relevant policy/objectives across several key policy areas/objectives such as housing regeneration and economic development.  Project outcomes would clearly contribute to monitored policy goals/outcomes, such as those that support affordable housing. 

Furthermore, supporting documentation would have gone through a process of external consultation and/or scrutiny before becoming official council policy by an appropriate democratic  process. Documents should be as up to date as possible and reflect wider relevant national policy and guidance. For example, where a project meets the requirements of a number of housing and regeneration policies/objectives in an adopted Local Plan, the Local Transport Plan and the council’s Housing Strategy then we would anticipate that such evidence would support a strong strategic fit. 

Evidence needs to be as precise and focused as possible referencing exact policies and objectives rather than broad policy areas/sections or whole documents. Ideally a description of policy names/numbers, a page reference to the document, plus a brief reasoning why they are relevant to the project should be provided.  

Applicants are asked to demonstrate through the Strategic Case that their proposals strongly align with up to date local plan objectives.  The highest possible score for the strategic case will  be awarded to authorities that:

• have an up-to-date Local Plan in place (adopted within the last five years); or
• have completed their Local Plan Review within the 5-year window and determined that their plan remains in date; or 
• who have submitted their Local Plan for independent examination.

And that the project outcomes for each application clearly align with these policies.

Innovation carries 10 per cent of the overall weighting.

Projects will be assessed based on innovative models of delivery. Within this, all projects should articulate how they will demonstrate positive local economic impact where possible maximising the involvement of SMEs. Other areas of innovation could include: 

• proposals to take forward development at pace
• proposals to work with private developers who are taking forward modern methods of construction/innovative design
• joint ventures
• joining-up across local authority boundaries
• a commitment to net-zero carbon opportunities
• self and custom build.

The public sector equality duty carries five per cent of the overall weighting.

Projects that guarantee ownership or tenure for people who share one or more protected characteristics (as defined in the Equality Act 2010) in the local area, who struggle to attain appropriate housing, will be given a five per cent increase to their overall score. Examples could include guaranteed ownership or tenure:

• in areas where those sharing one or more protected characteristics have disproportionately low home ownership; and/or 
• in areas where those sharing one or more protected characteristics suffer disproportionately from overcrowding.