Viability: circular game in Islington

The saga of the Parkhurst Road development continues.  I think that it is becoming the seminal case of Benchmark Land Value and the interpretation of viability guidance in London .  I’ve written before about the previous appeal decision here and here.  Islington BC have been pretty tenacious in fighting this case and a new appeal decision has been released recently.

During the appeal, we again (other developers have used this argument before) saw the altruistic developer offer

to provide 10% affordable housing (by unit), notwithstanding that this level of provision is said to make the scheme unviable in commercial terms.

Bless.  In contrast, the dastardly Council argued that

34% provision (by unit) is the maximum reasonable level of provision on this particular site.

Not surprisingly

Both parties have provided viability assessments to support their positions.

The Inspector dismissed the appeal.  There was a lot of discussion of the use of comparables in setting Benchmark Land Value (BLV).   In particular, the Inspector wasn’t too keen on the use of ‘raw’ comparables,

It seems to me that a purely market based approach to site valuation where there are no demonstrably comparable schemes available for benchmarking seeks to prioritise the third limb of paragraph 023 of the PPG dealing with viability. Such an approach simply allows for a comparison against other transacted bids which may or may not have had comparable attributes such as EUV, AUV or abnormal costs for example. Such an approach diminishes the importance of the first limb of the PPG guidance, which requires land value to be informed by policy. This position aligns with Paragraph 4.1.5 of the Mayor’s Housing SPG which states that a market value approach should only be accepted where it can be demonstrated to properly reflect policy requirements and take account of site specific circumstances.

The above will only make sense if you’re well informed about the viability debate.  The judgement also emphasised the emerging guidance in Islington’s SPG on viability and the Mayor’s Housing SPG.

The previous Inspector’s conclusion also pre-dated the clear guidance now contained in the Mayor’s Housing SPG and the Development Viability SPD that the EUV Plus method is usually most appropriate. Whilst neither document precludes other methodologies, in light of my considerations above I consider that the EUV Plus methodology is appropriate in this case and is to be preferred to a purely market value approach, allowing for value to have regard to the market as a consideration, rather than the determining factor.

This is a barely coded dismissal of the RICS guidance.  Basically, the Inspector seemed to be saying “if you are going to present land transaction prices as evidence for Benchmark Land Value, make sure that it is comparable in terms of sales prices, density, planning risk, abnormal costs AND planning obligations – especially affordable housing.  if it isn’t, then make appropriate adjustments”

The Inspector seemed to be influenced by BNP Paribas’ Anthony Lee’s evidence which effectively critiqued evidence from Gerald Eve and CBRE that presented market  comparables which weren’t very comparable to Parkhurst Road as the basis for setting the competitive return to the land owner

Given what’s at stake, this contest to set the rules of the viability game is likely to continue.  When you see local community groups producing videos like this, then you start to appreciate why it seems to matter so much.

 

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