Using Viability Appraisals in Planning
This Guidance Note has been prepared to explain how viability appraisals submitted with planning applications will be used to inform negotiations.
When should Viability Discussions take place?
Ideally, viability negotiations should form part of pre-application discussions. Reviewing information submitted to identify potential viability issues at an early stage, allows the greatest scope for resolving the issues, helping to minimise delays in processing and determining your subsequent planning application(s).
What is a Residual Land Valuation (RLV)?
An RLV is a process for valuing land with development potential. RLV can be used in several ways:
- By calculating the potential receipts (known as Gross Development ValueGDV) from the development, less the development costs (including planning contributions, interest payment and the minimal level of profit required), RLV can be used to calculate what price could be paid for the land.
- By calculating the potential receipts (GDV) from the development, less the development costs (including planning contributions, the cost of the site and interest payment), a RLV can be used to calculate the level of profit that the scheme would generate.
- By calculating potential receipts (GDV), less development costs (including the cost of the site, interest payments) and the required level of profit, a RLV can be used to calculate the amount of money available in the scheme to make planning contributions. For the purpose of discussions around the viability of a housing scheme, this way of setting out an RLV is likely to be most useful: Total Development Value (TDV) of the site MINUS All the Development Costs (including a return for the developer and the cost of land) LEAVES The amount available to pay for Section 106 Planning Obligations (and Community Infrastructure Levy) contributions
Viability and the wider Policy Context
It is important to remember that viability discussions do not take place in isolation.
As a planning authority we have to deliver sustainable development, and consider any applications in line with the policies in the adopted plan and any other material considerations. The policies in the plan need to be taken together and the plan must be read as a whole. The policies in the plan have been through various stages of consultation and a public examination by a Planning Inspector.
The policies https://www.southribble.gov.uk/sites/default/files/Viability Guidance.docx are supported by evidence, and this evidence, and the policies it supports, has been scrutinised through the plan-making process. In terms of viability, it is important to note that the policies and supporting evidence already:
- assume a reasonable level of profit for the developer
- assume a reasonable return for the landowner
- understand and allow for consideration of risk
- include buffers and allowances for uncertainty
- are mindful of the economic cycle
- have taken account of financing costs
- assumes no grant is available
- reflect local circumstances
Therefore, as the National Planning Practice Guidance acknowledges "Decision-taking on individual applications does not normally require consideration of viability."
What happens once I have provided my RLV?
Once an RLV and the supporting information are submitted, the costs, values and outputs in the RLV will be reviewed.
They will be tested to ensure they are clearly evidenced and reasonable. Areas where further clarification is needed may be identified and further information may be requested.
If the viability assessment and supporting information is submitted as part of pre-application discussions, any issues can be picked up and discussed during the pre-application meeting. At this meeting a way forward will be agreed, including a timetable for further written information if needed. If these discussions take place when an application has already been submitted, feedback will be in written form.
It is for the applicant to satisfactorily demonstrate that the scheme is unviable. Incomplete, inaccurate or confusing information is unlikely to be able to do this. For larger or more complex schemes, advice may be sought from the District Valuer. This will be at the applicant's expense.