This advice note provides information to applicants as to the minimum level of detail required to begin discussions around viability.
This advice is intended to help applicants needing to commission or undertake viability assessment. By asking the right questions up front all the necessary calculations and supporting information can be provided to the planning authority first time. This will help to minimize delays in processing and determining planning applications.
Ideally, any such discussions would form part of pre-application discussions. It should be noted that this information is provided for guidance only. Each scheme will be considered on its merits.
It is the responsibility of the applicant to demonstrate that a scheme is unviable.
In most cases we expect the viability appraisal to follow the guidance on viability published alongside the new NPPF 2018 and be prepared by a suitably qualified person, such as a RICS surveyor. Larger more complex residential and mixed use schemes are likely to require more complex viability models. If you are proposing a more complex scheme please contact the Planning Team as early as possible for advice.
In terms of land value for any viability assessment, the PPG makes it clear that a benchmark land value should be calculated based on the existing use value of the land, plus a premium for the landowner (EUV+). This was the approach taken by the High Court in the recent Parkhurst case. In terms of the premium, this ‘… should reflect the minimum price at which it is considered a rational landowner would be willing to sell their land’.
Calculating Gross Development Values (GDV)
Development receipts are the money generated from completed scheme. Usually this will be the sum of anticipated sales of the completed units. These should be provided on a per unit basis.
These are the total of all costs incurred from initiation through to the construction phase of development project and then to final sale of the units. Costs fall within three categories, the first is construction costs including labour, ground works, infrastructure costs, contingency, abnormals i.e., pile foundations, contamination remediation, retaining walls and attenuation pounds etc, developers profit. The second is various fees associated with the development. These include Professional fees i.e., architects, QS and other professional consultants i.e. drainage engineers, ecologists etc. Legal fees associated with the purchase of the land and the conveyancing of the final units, finance fees, marketing and agent’s fees. The third costs is that of Developer Contributions, this includes s106 agreements (affordable housing, commuted sum, open space provision, education and highways) and Community Infrastructure Levy (CIL) contribution.
In accordance with the NPPF 2018 and the Council’s Planning Obligations SPD, information provided to support planning applications will be publically available and uploaded to the Council’s website.
Minimum Contents of A Viability Report
All Viability Appraisals should include a supporting report with any valuations and/or spreadsheets outputs included at the end explaining and interpreting the figures and calculations. The submission of figures and calculations alone is likely to result in the Council asking for further information therefore extending the decision making process and timescale.
In preparing this report it may be helpful to remember the purpose and audience of the document. Namely, that it is to help the applicant to demonstrate compliance with Strategy 34, which requires as much affordable housing as is viable if the proposal is not policy compliant.
Every appraisal should therefore provide a narrative about what the viability issue is, what has been done to address it, and what level of affordable housing is now being proposed with justification.
A clear explanation of the abnormal costs associated with the development should be provided. This ideally should be supported by a QS Cost Report. Please be aware we may request a QS cost report, to justify the figures given in the viability, if one is not provided.
The viability appraisal therefore needs to include the following as a minimum:
- A brief explanation of the background and history of the scheme and why viability is an issue;
- Work though the costs and values used in the appraisal including a clear explanation of the inputs and outputs;
- Clearly set out the findings of the appraisal and what level of affordable housing the scheme can support;
- If there have been revised appraisal(s), for example because the scheme has been redesigned and/or reflecting the passage of time, it will be necessary to explain this including what has changed between the earlier appraisals;
- It must also reach a clear conclusion on exactly what affordable housing is therefore being offered.