I came across this piece - Letter at link here - when reading through my e copy of 'Planning' today (Please note that this is about the system south of the border but it is interesting nonetheless):
"I read with interest the views of Bob Colenutt with regard to the consideration of viability as a valid issue for planning authorities when considering development projects (Planning 27th July).
My observations are based on experience as a former director of a development company, as a former planning officer and as a planning consultant advising developers.
Development companies are clearly not charities they require to give a market return to their shareholders. If following detailed appraisal the projected returns of a proposed development do not meet that required by the company, development will not proceed. Contrary to public opinion development is a high risk business profits are not easily come by. Land owners in particular farming landowners are not philanthropists. Where their land may be required for development they will only sell it at a level which allows them to invest elsewhere. If the increase in value is not sufficient the land will not be sold and maybe held back for the next generation.
As matters stand in many cases a problem arises because developers entered into deals with landowners when land was at its highest value prior to the bubble bursting in 2008. Many of those deals are now unworkable. Terms will have to be renegotiated and until those deals are reviewed no development will take place. Just as car manufacturers construct cars for a market equally housebuilders build houses for people that need them.
Bob Colenutt seems to suggest that developers are the villains of the piece. I think it is unhelpful for those views to be expressed. In many areas development is flat on its back and in some areas there is no sign of improvement.
It used to be the case that land would be allocated development, the housebuilders would build houses and the service agencies and public utilities would provide the support services for those houses. In Scotland the section 50 agreement came along. This initially and helpfully dealt with issues which could not be dealt with by a planning condition.
Planning authorities started to use these agreements as a means of bargaining to achieve objectives beyond those matters necessarily required for development, despite this being contrary to government advice. Now it is common for developments to be encumbered by a wide variety of requirements, affordable housing education subsidies public art and so on. The local authority shopping list is extensive. It is invariably suggested that it is the developer who will pay for these things. Of course that is not the case.
Development companies are clearly not charities they require to give a market return to their shareholders. If following detailed appraisal the projected returns of a proposed development do not meet that required by the company, development will not proceed. Contrary to public opinion development is a high risk business profits are not easily come by. Land owners in particular farming landowners are not philanthropists. Where their land may be required for development they will only sell it at a level which allows them to invest elsewhere. If the increase in value is not sufficient the land will not be sold and maybe held back for the next generation.
As matters stand in many cases a problem arises because developers entered into deals with landowners when land was at its highest value prior to the bubble bursting in 2008. Many of those deals are now unworkable. Terms will have to be renegotiated and until those deals are reviewed no development will take place. Just as car manufacturers construct cars for a market equally housebuilders build houses for people that need them.
Bob Colenutt seems to suggest that developers are the villains of the piece. I think it is unhelpful for those views to be expressed. In many areas development is flat on its back and in some areas there is no sign of improvement.
It used to be the case that land would be allocated development, the housebuilders would build houses and the service agencies and public utilities would provide the support services for those houses. In Scotland the section 50 agreement came along. This initially and helpfully dealt with issues which could not be dealt with by a planning condition.
Planning authorities started to use these agreements as a means of bargaining to achieve objectives beyond those matters necessarily required for development, despite this being contrary to government advice. Now it is common for developments to be encumbered by a wide variety of requirements, affordable housing education subsidies public art and so on. The local authority shopping list is extensive. It is invariably suggested that it is the developer who will pay for these things. Of course that is not the case.
Either the consumer, the purchaser of the house will pay or the cost of providing these extra facilities will be taken from the value of the land. If the effect on land value is to great then the landowner will not sell.
Possibly the only way to solve this conundrum is for the local authority to buy development land compulsorily and to set the costs for servicing against the subsequent value of land for sale. This would leave developers to get on with the job of building houses rather than having to bargain with councils over what facilities should be paid for by the developer. Nothing new there, that is what happened under new towns legislation.
Of course viability is an issue. The planners job is to make sure that sufficient land is available for development in the right place and that the right time. Part of that process requires that the planning authority are sufficiently aware of the economic circumstances prevailing. No amount of colouring on a plan can make land viable for development if there are overriding circumstances which dictate otherwise.
Yours sincerely
Des Montgomery FRTPI"
Possibly the only way to solve this conundrum is for the local authority to buy development land compulsorily and to set the costs for servicing against the subsequent value of land for sale. This would leave developers to get on with the job of building houses rather than having to bargain with councils over what facilities should be paid for by the developer. Nothing new there, that is what happened under new towns legislation.
Of course viability is an issue. The planners job is to make sure that sufficient land is available for development in the right place and that the right time. Part of that process requires that the planning authority are sufficiently aware of the economic circumstances prevailing. No amount of colouring on a plan can make land viable for development if there are overriding circumstances which dictate otherwise.
Yours sincerely
Des Montgomery FRTPI"
(Please note that I have a limited access to e items on this Planning newsletter since my subscription to Planning has sadly lapsed, but, I have managed to source the item by Bob Colenutt on the Internet - Link here. )
"The government's requirement for viability testing appears to prioritise the interests of developers and landowners above the public's, writes Bob Colenutt.
One of the most alarming aspects of the coalition policy on planning is the introduction of a requirement for "viability assessments" of plans and development proposals.
Under existing planning legislation, viability is a relevant planning issue but is weighed sensibly against a range of other planning factors including environmental impact, sustainability, design, employment implications and so on. In other words, strict economic viability is not the prevailing test of good planning or of a good application.
Under pressure from the development industry, this has now changed and the government has inserted strict conditions on viability into its National Planning Policy Framework (NPPF). This means that unless a local plan, a planning condition, a section 106 agreement or a Community Infrastructure Levy scheme are deemed viable they can be rejected as unsound and illegal.
Good plans in terms of design, protection of the environment or levels of affordable housing or housing mix can be thrown out because they are "not viable", as defined by the competitive returns sought by developers and landowners.
Last year, the government commissioned a report from the Local Housing Delivery Group, led by former chairman of government advisory body the Environment Agency, Sir John Harman, and comprising both house builders and local government representatives.
The report, published last month (Planning, 29 June, p8), concludes that, whatever the policies of local government and communities, the test of viability will be the return to the developer and landowner. Plans and permissions will depend on whether the development "generates land value sufficient to persuade the landowner to sell the land for the development proposed".
The complaint about planning threatening viability has always been a major preoccupation of the development industry. But planners have been able to use policy, or development charges, to secure what they want from development. Now councils will be required to mount their own viability assessments to counter those of the development industry.
The industry will argue that the recession has reduced profit margins and they will employ top surveyors at great expense to make their case. Many councils will feel they cannot afford to contest these cases, nor can they risk the costs of a planning appeal arising from refusing a development which breaches policy but where the applicant says he cannot deliver the policy for "viability" reasons.
The viability controversy must be seen against a background of nondisclosure about landowner and developer costs. There is no legal requirement for an 'open book' process, yet, unless local authorities and communities have access to accurate figures on the cost of land acquired by developers or other so-called sensitive information, they cannot effectively challenge viability claims.
A further problem is that the definition of viability coming from the government is narrow and valuation based - "competitive returns to a willing landowner and willing developer to enable the development to be deliverable.". Such a definition does not reflect the complexity of long-term social, environmental and economic concerns about land and property development. Nor does it recognise that viability can change as quickly as market conditions change.
In effect, viability assessments mean the government has decided that landowners and developers can dictate local plans and planning decisions, while Harman's report shows that the house builders have run rings around local government.
Viability testing calls into question the very purpose of planning, which is to think mediumto long-term in the public interest and not in the short term private interest of landowners and developers.
Planning as a service for the public good and local democratic control of the environment are both at risk from this crude viability testing. The planning profession and communities must say no.
The steering group report is available via
Key NPPF sections on viability
"Pursuing sustainable development requires careful attention to viability and costs in plan-making and decision-taking. Plans should be deliverable. Therefore, the sites and the scale of development identified in the plan should not be subject to such a scale of obligations and policy burdens that their ability to be developed viably is threatened ...
The costs of any requirements likely to be applied to development, such as requirements for affordable housing, standards, infrastructure contributions or other requirements should, when taking account of the normal cost of development and mitigation, provide competitive returns to a willing landowner and willing developer."
Bob Colenutt Head of research, Northampton Institute for Urban Affairs.
And what about the situation in Scotland re development viability? Well I have touched on this before, (the first two links have appeared on the blog before):
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