Viability and clawback

As I’ve noted in previous posts, a theme from recent events on viability modelling in the planning system has been the importance of including provisions in s106 agreements that allow for further planning obligations upon completion or partial completion of a scheme which was not policy compliant. Basically, if at application it is accepted that a scheme is unviable based on projected revenues, costs and the level of policy planning obligations, any ‘underpayment’ of planning obligations can be recovered from the developer if profit levels are higher than projected at completion.

However, Peter Wyatt has pointed out to me a major weakness in this approach. His argument is that this type of provision can enable developers to pay more for the land in the bidding process. Let’s say that a developer bases their bid for a site on non-policy compliant assumptions regarding the level of affordable housing. This then enables them to bid more for the land and produces a direct transfer of the financial uplift ‘released’ by planning permission from the community to the land owner. As a result, unless there are unexpected financial uplifts, there is nothing to clawback upon completion of the scheme.

Ultimately, it comes back yet again to the definition of a ‘competitive return’ to the land owner. If prices paid are the benchmark in viability modelling and prices paid for other sites or the actual site reflect policy non-compliant projects, then policy compliant schemes are unlikely to be viable in the planning context.

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