Development Viability Assessment and the Provision of Affordable Housing. A Game of ‘Pass the Parcel’?

Development Viability Assessment is now a central plank in UK national planning policy and the residual property valuation model is used by landowners, developers and the local authorities to determine the level of planning obligations that can be sought from the developers/landowners in exchange for the grant of permission to develop. The Government requires that local planning authorities do not ask for contributions that will stifle development and that LPAs should ensure that developers and landowners get a ‘competitive return’.

There is now a body of academic and other comment that the viability assessment regime has acted to ensure that not only do landowners and developers get a competitive return, the system allows them to receive more than that at the expense of the LPA. This paper briefly reviews this literature and constructs a hypothetical case study to examine the process; specifically the impact of Planning Practice Guidance (PPG) on two specific inputs into the development appraisal/viability model.

The paper illustrates that the two aspects – ignoring changes in values and costs over the development period coupled with instructions that comparable evidence is proof of policy compliant land prices – are fundamentally flawed and a major cause of the reduction in the delivery of planning obligations. Government needs to change the wording of its PPG to remove the flaws.

Keywords
development viability assessment, UK government, planning practice guidance, threshold land