Updated Guidance on Viability
With the arrival of the newly published National Planning Policy Framework last week, the Ministry of Housing, Communities & Local Government have updated their guidance on viability and we have put together a brief summary of what we think are the key points:
Viability and Plan Making
- Viability assessments are now to form a more significant part of plan making. Plans should clearly set out the expected contributions from allocated sites including the levels of affordable housing and infrastructure requirements, so that the obligations can be accurately accounted for in the cost of land.
- The aim of conducting viability assessments at the plan making stage is to ensure that sustainable development is not compromised. Policies should be realistic so that the total cumulative cost of all obligations will not undermine deliverability of the plan. This means that policy requirements – particularly affordable housing – should be based on the actual need for affordable housing and infrastructure connected to certain types of sites.
- As the viability reports will not be site specific, the Government have decided to employ a typology approach grouping allocated sites depending on shared characterises e.g. location, greenfield or brownfield, size, current or proposed use, type of development. Average costs will then be applied to estimate the viability of each type of site and how it will be affected by relevant policies. Only strategic sites that are crucial for delivering an LPA's housing supply will be allowed to have a site specific viability assessment.
- The responsibility to engage in the plan making stage lies with the site promotors.
- Review mechanisms are to be set out at plan level so that all parties are clear when viability should be reassessed during the lifetime of a development and how viability is to be reassessed.
The Value of Land
- The new guidance repeatedly refers to the fact that 'under no circumstances will the price paid for land be a relevant justification for failing to accord with policies in the plan.' This move is clearly intended to prevent instances like in the case of Parkhurst Road Ltd v Secretary of State for Communities and Local Government and London Borough of Islington in which the former territorial army centre on Parkhurst Road was acquired for £13.25 million and the developer claimed that it not viable to provide the amount of affordable housing required by policy instead insisting that it could not provide more than 10%. Islington Council countered that the cost of the land should have been no more than £6.75 million and if that figure was input into the viability calculation the developer would have been able to build more affordable housing. The Council were successful at the High Court but, after years of litigation, the site has remained empty and much needed housing supply has not come forward.
- Further clarity is added by the new guidance as to how Benchmark Land Value (BLV) should be calculated. It should be based on:
Existing Use Value- this is the value of land in existing use together with the right to implement any development for which there are policy requirement extant planning consents, including realistic deemed consent.
Premium to landowners- this is intended to reflect the minimum return at which a landowner would be willing to sell land.
Abnormal costs that are site specific.
Market evidence but the price paid for land cannot be included in this.
Transparency within Planning
- Following the High Court decision in 2002 concerning the Arsenal Football Stadium, viability assessments submitted by developers to planning authorities have been treated as confidential. Leading to some local authorities even restricting the assessments from view of the planning committee members. This practice became hugely controversial, an example of which is the Heygate Estate, which saw the demolition of 1,000 socially rented homes to be replaced with just 74, plus intermediate housing, fuelled public anger.
In response, the new Guidance now states that viability assessments must be publicly available.
Where an LPA is satisfied that a viability report contains information that is commercially sensitive, such as information connected to negotiations over purchasing the land are still underway, the full report will not need to be made publicly available but an executive summary will need to be produced instead.
The above is just a brief overview of what the team of Planning Law solicitors at Holmes & Hills believe are the important points arising from the guidance. For further detail, we recommend reading the guidance document in full.