The government’s Planning Reform White Paper signals the end of viability to negotiate Affordable Housing and Section 106 contributions. The viability “dog” has been terminally ill for a while and, before it is finally put out of its misery, I though it would be a good time to take a nostalgic wander down Memory Lane and remember the good times. Times when we could tell clients with some certainty what the outcome of a viability negotiation would be.
I find it depressing to see how a simple and effective solution to unlocking financially stalled development morphed into an interminable wade through a waist-deep treacle of political interference, theory and interpretation. But hey – that’s what politics is best at!
Viability became a “thing” during the financial crisis of 2007/8. Policies for developer contributions drawn up in the heady days before the crash, required increasingly onerous payments for everything from schools to police (to deal with disturbances at schools) and health (to treat those hurt in the disturbances at schools). Developers were also required to pay for and/or provide more affordable housing. The government couldn’t afford to as they were paying for wars in the middle east.
Initially it was simple enough to demonstrate that, unless policy required contributions were reduced, development would not happen. Both officers and politicians could see the the logic and policies were re-drawn to cater for contributions being subject to viability.
Bizarrely, during this unprecedented turmoil in the development market, the Labour government of the day under the hugely successful Gordon Brown, decided the time was right to introduce a mandatory, non-negotiable tax on development known as the Community Infrastructure Levy (CIL). Although it did not pass into law until 2011 under the Conservative/Lib Dem coalition government , it did not do much to improve the financial prospects of delivering development.
But viability did work in that it unlocked stalled development. It became increasingly difficult to persuade local politicians, but there we have a clash of cultures in that developers can count and politicians can’t (unless we’re talking votes).
As it was working so well, the government decided to interfere and launched the NPPF 2012, requiring that local plans set developer contributions at a sustainable level. Good idea! Except that this required all 343 local authorities in England to assess the land value, build costs and gross development value of every development site in their area. I do admire ambition but really?!
The waters were severely muddied by NPPF 2012, but it did at least contain a specific definition to the effect that any developer contributions should allow competitive returns for both land owners and developers to allow development to be deliverable. This was of enormous benefit in getting viability issues resolved.
But still, politicians considered that developers were making too much profit and not contributing their “fair” share. Behind the scenes, interest groups were re-defining “competitive returns” and in particular looking to capture more of the uplift in land value generated by the grant of planning permission. Surveyors with doctorates got involved and generated some arcane and fantastical arguments about the key aspects of viability. As these generally resulted in increased contributions, these fantasies gained traction with local authorities and politicians with two key outcomes:
- Viability conferences (once essential for practitioners) became hallucinogenic experiences. They made Disneyland look real.
- Settling viability became tortuous – it wasn’t always – really.
All of this came to a head with the 2018 revision to the NPPF and its many iterations since. From a viability point, the fantasy concept of Benchmark Land Value was introduced along with preposterous but completely incomprehensible instructions on how to calculate it.
Viability has been variously described over the years as “opaque”, the “dark arts” or “smoke and mirrors”. However, even the high priests of this magical practice failed to understand BLV, and when policy becomes that far removed from reality, it is time to act.
And the government has – with the Planning Reform White Paper and the brand-spanking, all-singing and dancing Infrastructure Levy.
Which is the subject of my next piece………