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London Sets the Viability Agenda

17th August 2017

Viability is a mess. A hotch-potch of policy, guidance, case law and interpretation. Benchmarks, inputs, outputs and appraisal. Report, submission, review and appeal. Argument, counter-argument and compromise.

The purpose is to tax the uplift in value of land when planning permission is granted. A simple tax would do that but it’s been tried a few times and always failed. And why would you tax something you need more of?

The correct political answer is to create a system with the opacity of a black hole to determine how much affordable housing a scheme can give. Full of absolutes like “reasonable”, “competitive” and “review”.  Its like wading through waist-high treacle in ski boots. The planning system doesn’t need any further complication but viability is becoming a real problem.

And it’s not working. So in steps the London Mayor with his “Homes for Londoners Affordable Housing and Viability SPG”. Oh great!

The key message is that if you provide policy level affordable housing you can have a “fast-track planning permission”. Oxymoron is such an apt word.

But if you can’t provide policy affordable you will be sent down the “Viability Tested Route” which sounds like a road to nowhere. Even if you get through that you will be subject to “comprehensive early and late stage review mechanisms”. That should delight your funders.

Although this only applies to London Boroughs, you can be sure that authorities outside the capital will cherry pick some of the other measures including:

  • Increasing the level of affordable housing from 35% up to 50%
  • Demonstrable deliverability. A scheme showing a loss is not deliverable.
  • Use of the HCA’s benchmark land value – that is existing use plus a premium. Market value will only be considered in exceptional circumstances.
  • A standardised approach to assessing viability (to be welcomed).
  • Measuring affordable housing by habitable rooms
  • The end of Vacant Building Credit.

So the London Mayor sets the agenda for the future of viability.  The SPG grasps a few viability nettles but still leaves too many unanswered questions to provide certainty to developers.

And be sure that similar policies will be coming to a borough near you very soon.

If you haven’t yet got a copy of the new SPG give us a call and we’ll send one over.

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