Financial Viability Appraisal in Planning Decisions

Important insights into the operation of development viability appraisal (DVA) in planning.

Viability has been a constant issue in the desire to deliver more housing in the wake of the recession.

RICS has been a central participant in the production of guidance to elaborate government’s National Planning Policy Framework on planning and viability publishing the guidance note Financial Viability in Planning in 2012 with a focus on site viability. A number of other guidance contributions have been made by the sector principally the Local Housing Delivery Group whose work focused on area wide viability in preparation for the introduction of the community infrastructure levy (CIL).

The research conducted by Professors Neil Crosby and Peter Wyatt of University of Reading focuses on site specific evaluation and is based on planning appeal documentation and decisions made since 2007. The aim of the research is to formulate consistent approaches to land valuation within site-specific DVA based on a critical evaluation of the theory and practice of appraisal.

A key concern of the research is to expand the critical evaluation of the methods that identify threshold land value within DVA in a site specific context. The research identifies the determination and role of land value in development viability assessment as the key battleground within appeals. The main issue centres on whether a policy compliant level of planning obligations can be supported by the scheme whilst ensuring an acceptable return to the landowner.

The residual method of appraisal comes in for criticism in relation to the sensitivity of the residual output to changes brought about by input uncertainty and time. The report also questions whether modelling in development appraisal has kept pace with the challenges being presented. As assessments of viability become more embedded in the institutional framework of planning, questions are also raised about whether the sector has cultivated and employed the appropriate levels of expertise to draw consistent conclusions about viability.

Comments (1)

  1. The view from RICS

    This is an important contribution to the field of development viability appraisal and is timely in the light of RICS’s preparation of an addendum to our aforementioned guidance and the review of VIP 12 ‘The Valuation of Development Land’. As government continues to review the role of planning in development and the need to capture some of the uplift in land value to fund infrastructure, this research provides a valuable interrogation of recent experience.

    Tony Mulhall MRICS

    Tony Mulhall MRICS, RICS Associate Director Land Professional Group 20 April 2015 20 at 14:23PM

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