I spoke recently at a development viability seminar organised by the Improvement Service. The large turnout was testament to planners’ enthusiasm to learn more about this topic.
Viability arises in the development management process as a reason for reducing affordable housing or infrastructure contributions from levels specified by planning policy.
It can also be part of the consideration of deliverability when allocating sites in local development plans. The seminar referred to research for the Scottish Government (yet to be published) which discusses potential approaches to the assessment of viability at this stage.
There is specific planning guidance in England on viability.
Financial viability assessments
Planners will generally have to rely on financial viability assessments prepared by other professionals. The RICS has just issued a professional statement “Financial viability in planning: conduct and reporting“. This sets out mandatory requirements on what must be included within financial viability assessments and how the process must be conducted.
Case law has recognised that values and costs are not precise figures but may fall within a tolerance. Valuation and costing inputs would therefore not normally be at a level at either end of a possible range but must reflect a practitioner’s professional viability judgement, having regard to such matters as the risks of development. The same consideration should be applied to resultant outputs to reach a rational, reasonable and realistic conclusion.
The planner has to decide the weight to apply to financial viability assessments. The Parkhurst Road, Islington appeal case illustrates the difficulties for the planner.
The parties agreed that the site specific circumstances meant that it was not appropriate to provide the 50% affordable housing required by policy. The Council believed that 34% should be provided. The Inspector decided the 10% offered by the developer was not the maximum reasonable level of affordable housing.
The Inspector highlighted the amount of professional judgment underpinning the viability assessments:
However, there was a striking lack of truly comparable sites available in evidence and the number of adjustments suggested by the parties to allow such a comparison was vast.
The Inspector had to decide the Benchmark Land Value. That is not necessarily the purchase price for the site, which might be inflated by aspirations for avoiding provision of affordable housing. Although the site had been purchased for £13.25M, the Inspector agreed with the Council that the BLV was £6.75M.
Although this appeal decision is based on the guidance in England, it shows whenever financial viability is an issue, the planning decision needs to take account of the amount of professional judgment involved in viability assessment.