The whip hand of development viability…

19 Feb 20

NPPF2 has the potential to be used by either developers or LPAs to put pressure on the other whether an overly optimistic commercial decision results in high land values or unrealistic, politically expedient plan making, prevents development.

.

As Local Plans progress in the NPPF2 world, post 2018, the impact on land values is beginning to catch out developers who are being stuck with undeliverable or unprofitable, planning consents. Increasingly the viability policies and review mechanisms, that started in London, are being adopted by Local Planning Authorities throughout the UK. Smaller sites that previously ducked planning obligations, are being targeted in higher value areas, like London.

Viability used to be a mechanism by which developers could maintain returns and defend land values. Planning obligations have also been used by some LPAs to de-risk decision making by creating an unrealisable wish list of obligations and affordable housing requirements, that enable schemes to be refused.

NPPF2 has the potential to be used by either developers or LPAs to put pressure on the other whether an overly optimistic commercial decision results in high land values or unrealistic, politically expedient plan making, prevents development.

There are some developers still applying the below thinking, which could be considered high risk:

Get planning permission for the site and then tackle the viability

This may have been successful prior to NPPF2, but viability is now dealt with as part of plan making, rather than decision taking, with all sites deemed viable to support policy compliant planning obligations, including affordable housing. Developers need to look at the emerging policy to determine the impact of planning obligations and affordable housing or whether the policy is challengeable. If the assessment is not made early, over bidding on sites is likely to occur. If the policy does not meet the tests of deliverability, then the ability to refuse any application for non compliance with planning obligations, will be limited with a risk that a failure of policy is likely to lead to a flood of applications.

Overpay for the site in the knowledge you can reduce planning contributions later

Price paid is expressly discounted from planning viability, but is required to be disclosed, so buying sites for a high price with a view to reducing planning obligations and affordable housing in negotiation, is now an increasingly high-risk strategy and is likely to be exposed in the process.

Stating high costs and low values will secure low levels of planning obligations

Simply asserting high costs and low values, that results in a low residual value and the ability to support planning obligations was seen by some as the way out of planning obligations. With viability consultants required to be objective under RICS rules; those that are not similarly qualified, are likely to use LPA viability assumptions which may be significantly different from the reality for a specific scheme. Objective, defendable evidence, such as our mechanism for accurately assessing site specific values, is key to addressing development risk. Non-scheme specific evidence in values and costs is likely to result in the LA adopting their own views on values and costs to determine applications. Once reported on to an LPA, it is often a difficult viability position to undo.

As ever, there are commercial calls to make on time and money being spent in the planning process and Iceni Delivery look to help balance those risks, in the context of the site and the scheme objectives, to deliver profitable, developable planning consents.

Related insights: