RICS draft guidance note - Assessing financial viability in planning under the National Planning Policy Framework for England, 1st edition.

Background

In July 2018, the government published its revised planning policy and practice guidance for England in the National Planning Policy Framework (NPPF) 2018 and the Planning Practice Guidance (PPG) 2018. Further revisions were made to the PPG in May 2019. One of the areas in which the government changed its policy and practice advice is in relation to the assessment of viability in planning. As a result, the RICS guidance note Financial viability in planning (2012) is no longer applicable.

The purpose of this draft guidance note is to enable practitioners to consistently apply the government’s NPPF/PPG 2018/19 on viability. The purpose of this consultation is to obtain feedback from consultees on how well the draft guidance note gives effect to the provisions of the NPPF/PPG 2018/19.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

The government consulted on two occasions before publishing the NPPF/PPG 2018. To clarify, RICS is not responsible for national planning policy, and as such is not inviting comments on changes to government policy or practice guidance.

This draft guidance note has been produced by a working group drawn from a wide range of professional bodies and organisations with expertise in the area.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

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 assessment was a material part of planning decision making. 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 intentions for viability assessment

Based on its experience with the previous policy and guidance, government is seeking to achieve a number of outcomes in relation to viability that require changes in the way viability assessments are conducted:

    1. Achieve delivery of sustainable development as set out in the local plan.
    2. Ensure that the development plan is at the heart of the planning system, and that plans should set out the contributions required from development.
    3. Ensure that the role of viability is primarily at the plan-making stage. Planning applications that fully comply with up-to-date policies, as set out in the plan, should be assumed to be viable.
    4. Prevent the under-delivery of infrastructure and affordable housing that result from the use of inappropriately adjusted market transaction evidence in viability assessments (the circularity issue referred to by Mr J Holgate).
    5. Ensure that market evidence should be used only as a cross-check.
    6. Reduce the number of viability assessments being conducted at the planning application stage.
    7. Ensure that the price paid for land is not a relevant justification for failing to accord with the relevant policies in the plan, and that landowners and site purchasers should consider this when agreeing land transactions.

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, this work 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.

Please read our guidance before commenting

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Commenting effectively:

When commenting on this RICS consultation draft, please make sure you:

Comment only on the individual section to which your comment refers, rather than inserting all comments into one section. As responses are collated through an automated system, this will help us to present all comments to the working group in chronological order avoid leaving comments that do not reflect a point of view (e.g. inserting 'okay' across a number of sections); and keep comments as brief and to the point as possible.

If you require further assistance or information please contact kandrews@rics.org

This consultation will close on Sunday 9th February 2020.

Timeline

  • Opened
    13 Dec 2019 at 09:00
  • Closes
    9 Feb 2020 at 23:59

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