Viability
Land shouldn't bear all obligations

6 March 2018

Land shouldn’t bear all planning obligations  

Proposed changes to the NPPF, the way in which developer contributions are calculated, and guidance on assessing development viability follow politically motivated claims that developers are gaming the planning system. But they’re a step backwards.

The current consultation on revisions to the NPPF and the reform of the ways in which developers contribute have been trailed as a way in which much needed housing delivery will be achieved. But the proposals set out in the consultation risk causing a massive backwards step if they are adopted in their entirety.

 

Absence of viability at heart of plan-making

Development viability sits at the heart of the current NPPF. Paragraph 173 identifies that in order for development to happen, it needs to involve willing landowners and willing developers. In order for these parties to be “willing” they must be capable of generating competitive returns sufficient for them to participate in the development process. It sets out what constitutes viability: competitive returns for both landowners and developers. This is needed to demonstrate that without a willing seller and willing buyer, land for development will not be traded and the delivery of housing will be badly affected.

There is no equivalent paragraph 173 in the proposed revised NPPF. The removal of the concept of “competitive returns” is a retrograde move, and makes planning one step further away from the real word in which the market operates. Hence there is an absence of viability at the heart of plan-making and decision-taking.

 

Silent on landholder incentivisation

Whilst there has been much rhetoric from the pollical class regarding making sure land is available for development, the thrust in the consultation documents is on making sure that Local Planning Authorities’ allocate and consent sufficient land for housing.

Regrettably the draft is silent on how landowners can be incentivised to bring it forward.

The approach seeks to rewrite and recast the land market as they - the policy mandarins - see fit rather than from an informed evidence-based position of understanding.

 

Concerns around developer contributions

The Developer Contributions guidance adds to our concerns.  If the test for planning gain is that it needs to be reasonable, proportionate and necessary to mitigate the effects of development, it clearly cannot be a means of sharing a potentially unlimited uplift in land value as the draft proposals seem to suggest. Any development contributions sought should continue to be proportionate to the requirement to mitigate the effects of development.

The proposal to allow the charging of a single CIL rate on mixed use sites where more than 80% is one use potentially fails this test. For example, a residential-led mixed use scheme could be required to pay  residential CIL rates on non-residential uses. This would not be proportionate, necessary or indeed fair.

In many cases, the level of developer contributions will have no effect on the profitability of developers. The costs will simply be accounted for in paying a reduced price for the land. If the level of burden of developer contributions is excessive, and therefore creating an unacceptably low price for land, landowners will not bring land forward for development.

It’s simply an unrealistic view that land should bear all planning policy requirements for planning obligations and where relevant the community infrastructure levy, and the landowner will be grateful for what is left. Landowners who can will simply hold on to their land until the policy and legal framework improves, rather than realise an otherwise lower value for their land.

 

Standardisation of assessment of viability

New viability guidance seeks to clarify the process of assessing development viability in the context of planning applications following politically motivated claims that developers are gaming the planning system. But it’s a step backwards.

Much of the content of the guidance has been set out previously in Local Planning Authorities’ own guidance, and most notably the London Mayor’s recent SPG on affordable housing and viability. It is an accepted principle that each viability case must be considered on its own merits to reflect the unique characteristics of the scheme. The proposals to standardise inputs means that poorer planning decisions will be made. The draft proposals include the assumption that every viability assessment will be made public. This has been anticipated, but doubtless will continue to resisted for commercial reasons.

The proposals, on the whole, seem short-sighted and detached from how the market works. It is clear that better understanding of viability and the market context is needed by all those involved in creating policy and determining planning applications. Without this, it is our view that delivery of development will be constrained. It is only by working with the market that the Government’s growth objectives will be achieved.

 

Strategic levy could fund CaMKox infrastructure

It is notable that commentary includes the potential for introduction of a ‘strategic infrastructure levy’ which is derived from the Crossrail Levy in London.  If deliverable, this could be channelled towards infrastructure projects associated with the significant scale of development along the Cambridge-Milton Keynes-Oxford corridor and elsewhere.

It is always worth remembering that schemes do not become more viable when additional planning gain burden is placed on them. Look at the fall in s106 affordable housing following the introduction of CIL. The cake remains the same size, but the sizes of the slices change.

 

Profit standardisation will prevent delivery

Brian Buckingham, Bidwells Head of Residential Development, said:

The draft changes to the NPPF, ways in which developer contributions are sought and new guidance on viability is a step backwards.  If adopted, rather than delivering a sufficient supply of homes, the proposals contained in the consultation draft will have precisely the opposite effect.

 

To be kept abreast of policy changes and their impact on developments around the UK sign up for our Planning Alerts. 

BACK TO OUR VIEW ON THE NPPF

Help us find an exact match for your search. Do you mean?

    or close this panel to search again