Viability assessments for affordable housing have long been a source of frustration for developers. This difficult element of the planning phase is often the cause for delays in getting a development to the point where works can start. There is hope on the horizon in respect of one aspect at least however: a recent ruling should lead to more certainty with regards to valuation methods for viability assessments. In turn, this may reduce the time spent arguing about viability. Ground breaking it may not be, but it may speed the way to breaking ground. It must also be noted that the newly gained certainty will be offset, as the benefit of post-consent gains are most likely to be shared between the developer and the affordable housing pot.

Mr Justice Holgate, a very experienced planning judge, dismissed Parkhurst Road’s challenge to their appeal decision in Islington last year. He came down firmly in favour of factoring in local planning policy when calculating site values and requiring late-stage viability reviews to maximise affordable housing provision. In a rare postscript, he took the opportunity to comment that it would be “opportune” for the RICS to revise their 2012 ‘Financial Viability in Planning’ guidance note, which the appellants had relied on in calculating their benchmark land value, in order to avoid a circular valuation issue. The RICS have responded saying that they are awaiting the review of the NPPF and will revise their viability guidance then but in the meantime will clarify the requirements for viability appraisals including making non-technical summaries.

The judgement will please the Mayor of London, who has adopted this approach himself and whose recent Housing SPG was aimed at embedding affordable housing requirements into land values. The adoption of such an approach ensures that initial appraisals on the purchase of a site factor in a 35% onsite provision. It is thought that the next revision of the London Plan, due in 2019, will continue in this direction and the SPG may even influence the emerging NPPF changes, thereby extending this approach nationwide. The eventual logical conclusion to this will be reduced land values but it may also mean that developers will turn to non-residential schemes instead, particularly in a market where sales prices are already slipping.