Viability: conspiracy and cock-up

Land owners and developers seem to be getting the benefit of all the doubt in the struggle over how viability should be estimated when negotiating over planning obligations (usually affordable housing). As ever, the central issue has been the definition of threshold or benchmark land value.  Why planning inspectors are making these decisions in the first place is beyond me?  The terms of land value capture on behalf of the community to provide affordable housing and other good stuff is too important a public policy issue to be left to the vagaries of individual planning inspectors.

The central government guidance on threshold land value is either a crafty piece of ambiguity or reflects muddled thinking. It asks viability assessors to estimate threshold land value reflecting emerging policy requirements AND comparable, market-based evidence.  But – what if ‘the market’ i.e. developers are buying land assuming that they won’t have to comply with emerging policy requirements? Here’s the relevant part of the guidance in all its equivocality.

Central to the consideration of viability is the assessment of land or site value. The most appropriate way to assess land or site value will vary but there are common principles which should be reflected.

In all cases, estimated land or site value should:

  •  reflect emerging policy requirements and planning obligations and, where applicable, any Community Infrastructure Levy charge;
  • provide a competitive return to willing developers and land owners (including equity resulting from those building their own homes); and
  • be informed by comparable, market-based evidence wherever possible. Where transacted bids are significantly above the market norm, they should not be used as part of this exercise.

 

If you’re interested, I normally assume cock-up but I’d go for crafty conspiracy in this instance. Given the broader political and planning policy context, I think that it would be a rationalist’s fantasy to ignore the power strategies and micro-politics involved. Networks of government ministers, civil servants, policy advisors, political parties, party donors, lobbying groups, corporations, professional bodies, think-tanks, activists etc. constitute the policy venues or deliberative arenas which, even to insiders, are often only partially visible and who have been trying to shape how viability calculations are produced.  Developers and land owners have been better resourced than local authorities and, I think, have had a more sympathetic hearing from a Government that has been eager to stimulate the private housing market.  The equivocality surrounding the concept of Threshold Land Value provides a striking illustration of ambiguity that has been constructive from the perspective of land owners and destructive from anyone who needs affordable housing.

It’s difficult to know why planning inspectors can’t/won’t see where this leads. It boils down to the fact that sites will trade for different amounts depending on the amount of affordable housing that has to be provided.  Let’s say that…

Site A with planning permission for residential development and no affordable housing sells at £10 million.

Site B is pretty much identical. The land owner submits a viability assessment (on a confidential basis) assuming that the threshold land value is £10 million (after all that’s perfect “comparable, market-based evidence”) and (surprise, surprise) no affordable housing is demonstrated to be deliverable despite an emerging policy requirement for more than zero affordable homes.

To add insult to injury, the inspector might find that zero affordable homes is policy compliant!  This may be an extreme example but it’s precisely the logic that some planning inspectors have been taking.   It would almost be funny if there wasn’t such a shortage of affordable homes.

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