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National Planning Policy Framework (NPPF): Viability Raises its Profile

Victoria Charlesson

Associate Solicitor Victoria Charlesson, in our Planning & Environmental team, discusses the recently revised National Planning Policy Framework and updated Planning Practice Guidance.

The revised National Planning Policy Framework (NPPF) was finally published on 24 July 2018, along with the updated Planning Practice Guidance (PPG). The revised NPPF was widely anticipated and whilst there may not have been that many significant changes from the draft consultation document, the adoption of the new viability guidance is should be of interest to anyone involved in the development industry.

Viability has for some time now been moving steadily from being at the fringes of the discussion between the applicant and Local Planning Authority, to now occupying a significant proportion of application and s106 discussions. Developers, Local Planning Authorities and the Planning Inspectorate have been grappling with a series of issues including transparency, methodology, timing of viability reports for the most part without any guidance on what should be the standard approach. However, now the NPPF has come along…does it break any new ground?

Viability: At Plan Making Stage.

The NPPF at paragraph 34 states that “plans should set out the contributions expected from development”. This includes levels and types of affordable housing provisions required. The published PPG (para 002) further emphasises the importance of viability being “primarily at plan making stage”, placing the responsibility on all parties (plan makers, local community, developers and other stakeholders) “ to create realistic, deliverable policies”.

Reading this in conjunction with paragraph 57 which states that “it is up to the applicant to demonstrate whether particular circumstances justify the need for a viability assessment at the application stage, it seems to be clear, that unless site promoters, developers and landowners have undertaken the necessary engagement at the plan making stage, it will be more difficult to be able to demonstrate that a new viability assessment is needed at the decision making stage. Indeed paragraph 8 of the PPG specifically states that a viability assessment submitted accompanying a planning application “should be based on and refer back to the viability assessment that informed the plan and the applicant should provide evidence on what has changed since then”.

 Naturally, whilst some site specific viability appraisals will be undertaken- most likely for those strategic sites- it will be the smaller site typologies where site promoters, developers and landowners, will need to stay aware and keep engaged to try to ensure that as far possible that policies are deliverable.

Transparency

The NPPF requires viability assessments to be published in full. This was widely anticipated, and indeed some Local Planning Authorities had already begun to insist on fully transparent viability assessments some months ago. Whilst of course there will be some instances where the viability reports will contain commercially sensitive information and the guidance does allow for “redaction in exceptional circumstances", the majority do not. This seems a sensible approach to adopt, and whether or not any parties were adopting inconsistent reports or not, this sensible approach will stop the accusation.

Methodology

Much has been made of the methodology for determining the viability of sites, however whilst there were previously many different approaches being adopted, these have, in recent months, being streamlined into the existing use value ‘plus’ method. This is the approach that the PPG now takes, however, there appears to be fertile ground for disagreement as to what the “reasonable premium to the landowner” ( i.e. the ‘plus’ in the above method) may be.

Less flexibility has been given in respect of the developers return, which has been set by the PGG for plan making purposes at 15-20% of gross development value- a figure which will disappoint many no doubt when the draft suggested 20%.

Review Mechanisms

Naturally moving viability forward to the plan making stage further increases the risk of viability assessments becoming woefully out of date as time progresses or economic conditions change during the lifetime of a project.

Some Local Planning Authorities have already sought to address some of these issues by adopting claw back style affordable housing contributions in Section 106 Agreements, so that should the development outcome not be as bleak as the viability report initially suggested, the Local Planning Authority can claw back some of the money that should have been put towards Affordable Housing in the first instance. Such mechanisms, as long as they contain appropriate incentives for the developer to encourage efficiency, seem to be a sensible approach.

However, such mechanisms do not work where economic conditions take a turn for the worse. Whilst the PPG makes clear that the ‘realisation of risk does not in itself necessitate further viability assessment or trigger a review mechanism’ clearly there are circumstances where review mechanisms may be appropriate and should be included within the plan making stage. After all, it would be better to receive a lower percentage of something, than 100% of nothing.

For more information, please contact a member of our Planning and Environmental Law team.

This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.