The price of units transferred to local authorities under Part V primarily reflects the costs negotiated, in accordance with the relevant legislation, between authorities and developers. These costs are based on the sum of the site costs, calculated at existing use value, actual construction costs as agreed between the local authority and the developer, plus reasonable profit on those costs.
Where authorities consider it appropriate, in the context of reduced open market prices and the continuing need to ensure value for money outcomes, they have the option to further reduce the sale price of any affordable house by further subsidisation utilising Part V monies, clawback or other internal capital receipts on hands. Local authorities are best positioned to make judgments in this regard based on local circumstances.
The current market value is used to calculate the level of clawback due and, where the gap between the sale price and market value has narrowed, the clawback reduces which ultimately is to the benefit of the purchaser.