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RICS draft guidance note: assessing financial viability in planning

RICS draft guidance note: assessing financial viability in planning

RICS guidance note Financial viability in planning (2012) is currently being updated and a draft guidance note entitled ‘Assessing financial viability in planning under the National Planning Policy Framework for England’ has now been issued for consultation until 9th February 2020.

The purpose of this draft guidance note is to enable practitioners to consistently apply government’s NPPF/PPG 2018/19 on viability. The consultation is to obtain feedback on how well the draft guidance gives effect to the provisions of the NPPF/PPG 2018/19. We are also seeking feedback on whether our guidance enables the assessment of viability in a proportionate way, consistent with the delivery of effective public administration, in response to Mr J Holgate’s High Court comments on this.

This draft guidance note has been produced by a working group drawn from a wide range of professional bodies and organisations with expertise in the area. The consultation document is intended to elicit views from stakeholders on how practitioners can best apply government policy and practice guidance.

Important public policy

Assessment of financial viability is an area in which the professional opinion of chartered surveyors is centrally positioned in the delivery of public policy objectives. This is the case because the government seeks to deliver planning obligations, including affordable housing, through the planning system. It is a multidisciplinary area where planners, surveyors, engineers, lawyers, public administrators, local officials, elected members and community representatives are closely engaged.

Under the government’s previous NPPF 2012/PPG 2014, viability was principally assessed at the development management stage and had an important role in determining the level of planning obligations, including affordable housing. Under the NPPF/PPG 2018/19, viability is to be assessed earlier in the process – at the plan-making stage – so that landowners and developers take full account of the level of planning obligations and affordable housing in establishing land prices. Only in justifiable circumstances will viability issues be given weight at the development management stage.

Government approach to assessing viability through the PPG

The government has provided a framework for practitioners to generate the evidence base required to assess the viability of the local plan and the circumstances in which a viability appraisal of development proposals at the decision-making stage may be justified. The framework requires that viability is considered under standardised inputs:

1. identifies the preferred method for assessment of viability

2. defines benchmark land value as existing use value plus a premium to the land owner

3. describes the preferred data and information inputs

4. states the preferred timing for conducting viability assessments, and

5. prescribes what ‘policy-compliant’ means.

Consultation responses

The government’s viability assessment framework adopts approaches, methodologies and data sources that are different to those relied upon in conventional valuation methods. In the context of RICS Red Book Global (RICS Valuation – Global Standards) requirements, it falls into the category of ‘authoritative requirements’ (PS 1 section 6.3). Red Book Global clearly states that compliance with ‘authoritative requirements’ takes precedence over RICS requirements set out in the Red Book.

We are not seeking comments contrasting the government framework with a market-based appraisal. Comments should focus on whether our draft guidance gives effect to government policy and practice guidance, in an administratively efficient way, in order to deliver the objectives of the NPPF.

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