Criticism that developers exploit a flawed planning system to minimise affordable housing provision reached a peak recently when Shelter published its report, “Slipping through the Loophole”, calling for a crackdown on developers’ use of viability assessments.
The study coincided with the close of consultation on the DCLG’s (Department for Communities and Local Government) “Planning for the right homes in the right places”, which welcomed views on proposed changes to the testing of viability.
The media response to the Shelter report condemned developers for using viability assessments to build fewer affordable homes to protect their profits, but inevitably the truth is more complicated than headlines suggest.
I have come across very sensible and logical viability appraisals that argue for a reduction in policy compliant levels of affordable housing on supportable grounds; yet I have also seen clear examples of “gaming”; the most frequent being the argument that the site’s current or alternative use value is higher than the value of the site for the development that the landowner is seeking planning permission for.
There is no easy answer to the viability issue. The simplest course of action could be to announce that after a two-year lead-in period, the provision of affordable housing – much like Community Infrastructure Levy – would be non-negotiable at a certain level.
Inevitably some sites would not come forward for housing under this type of proposal, but in my opinion these are likely to be few in number, but this is a difficult argument in the face of increasing housing need.
The DCLG’s consultation suggests that once viability has been tested at Local Plan level there should be no need to review viability on a site by site basis in anything other than exceptional circumstances – and this is the clearest indication of future approach.
Meanwhile, London Mayor Sadiq Khan’s “speedy boarding” approach to viability in his August 2017 Supplementary Planning Guidance (SPG), offers private developers a fast-track route to planning permission if they reach a minimum of 35% affordable housing provision. The SPG also seeks to deal with the most contentious issue relating to viability: benchmark land values, (this is the level of land value a landowner requires to release it for development as opposed to holding on to it).
The guidance says, depending on circumstances, an appropriate BLV could be the current use value of the site plus a premium between of 0% and 30% depending on circumstances. It will be interesting to see whether the DCLG consultation supports that perspective.
Currently there has been very little to lose by trying to argue viability and a lot to gain, but if landowners want to avoid development land tax scenarios they must recognise they are not entitled to all of the increase in value created through the grant of planning permission.