4th June 2018

The changing world of Development Viability

The revised draft National Planning Policy Framework published in March 2018 sets out the Government’s recommended approach to viability assessment for planning. 

It proposes the following changes:

• Viability assessment to be at the plan-making rather than decision-making stage. 
• Assessments at decision-making stage should only be required for unallocated sites or where there are significant changes in the circumstances of the site.
• Introduction of standardised inputs into viability assessment.
• Benchmark Land Value to be calculated on the basis of Existing Use Value (plus a Premium) rather than market led.
• Viability Assessment should be made public.
• Introduction of a Review Mechanism or Clawback on large or phased development.

The most significant change is adopting an Existing Use Value (plus) approach against the Market Value approach.  This involves valuing the land excluding an element for development potential.  Only where a site has an implementable planning consent in place can this be used as the Benchmark Land Value. 

The detail of the Government’s recommended approach will require careful consideration to ensure all landowners are treated fairly and there is consistency in the valuation methodology adopted. 

The Government and planning authorities are offering a carrot to developers providing some affordable housing (threshold approach) and a stick to those that don’t.

Bristol City Council has followed Sadiq Khan’s approach in London by utilising the threshold approach when at least 20% of affordable housing is offered in designated areas of the city.  This will not be subject to viability testing if the schemes are commenced within 18 months of planning permission being granted.  We expect other authorities to adopt this approach.

Time will tell if these positive initiatives translate into the provision of more affordable housing.

Our Development Viability team provides specialist advice to clients including McCarthy & Stone, Churchill Retirement Living, Swindon Borough Council, Wiltshire Council and West Berkshire Council. 

CGI image above courtesy of McCarthy & Stone.