By Chris Wheaton, Senior Director, Pegasus Group
The new NPPF makes pragmatic changes to the consultation draft with respect to viability. These reflect the issues raised within representations by Pegasus Group and others: the prescriptive and inflexible nature of the consultation draft would simply have made many sites unviable, undermining the Government’s aims to boost housing delivery.
Whilst the final draft offers greater opportunities for site-specific consideration of viability when necessary, it retains the broad emphasis on setting viable plan policies and adhering to these. As we noted at consultation stage, industry – and local authorities in particular – will need to commit more time and expertise to properly explore viability issues, as part of the local plan process and setting realistic policies. It will be interesting to see the first plans examined under the new system and how inspectors deal with complex viability issues, which now take on a new importance.
The final draft has dropped contentious suggestions of standardised viability inputs, profit levels, and multiples of agricultural land value for benchmark land values. The Government notes that more thinking and engagement is needed to inform new viability planning practice guidance, to be published “as soon as possible”. It will be critical that industry continues to engage on this issue to ensure the eventual approach is deliverable.
How does the new NPPF change Viability Assessments in the Application Stage?
Policy DM5 continues to anticipate that the role for viability is primarily at plan making stage, and that site-specific viability assessments should not generally be required.
However, the revised draft includes greater flexibility, acknowledging circumstances where it may not be viable to deliver policy targets for affordable housing and other planning obligations. The circumstances in which viability will be expected are also expanded and now include instances where:
- The development is materially different to typologies considered in the viability assessment informing the local plan.
- The site characteristics are materially different to those which informed the plan.
- The development is demonstrably burdened by costs which were not accounted for in the plan stage viability assessment.
- A recession or similar economic change has occurred.
Overall, the changes are pragmatic, particularly in the current viability climate where a majority of schemes are not viably able to meet policy aspirations for affordable housing. Whilst this is helpful, the emphasis on engagement at plan-making stage remains. Both developers and councils will likely need to spend more time ensuring that the viability underpinning local plans is realistic.
How does the NPPF affect the Golden Rules for development within the Green Belt?
The Golden Rules at policy GB8 broadly retain the position that development on land within the Green Belt (or released from it) will typically deliver 50% affordable homes, unless a viability tested local policy has set an alternative level.
However, similar to policy DM5, the circumstances in which site-specific viability will be acceptable are widened and now include:
- Development on previously developed land which is burdened by costs not accounted for at plan stage viability assessment
- Delivery of strategic sites (now identified as typically having capacity for at least 1,500 homes)
- Development of a different type to that considered at plan stage
In the above cases, a reduced level of affordable homes can be acceptable, subject to suitable viability evidence being provided.
Further guidance on viability including standardised inputs
The earlier NPPF consultation sought views on a range of more prescriptive policy, including setting standardised benchmark land values, profit inputs and requirements for growth testing. None of these have been carried forward to the final draft, meaning that existing guidance remains the key reference point and all inputs should be evidenced and justified.
The position for vacant buildings has been clarified from the consultation draft, with government noting that the previous removal of this policy was an error. The new draft confirms that where vacant buildings are reused or redeveloped, affordable housing requirements should only apply to the uplift in floorspace. The provision does not apply to abandoned buildings or those within major development on land released from the Green Belt.
The move away from attempts to standardise points such as profit and land value is a sensible one. This reflects the impossibility of achieving the perfect fixed inputs, which would neither make large amounts of development unviable nor fail to secure the maximum level of affordable homes.
Further guidance on viability, including review mechanisms, is to be published soon via PPG.
