Last edited 14 Apr 2016

Viability test

The National Planning Policy Framework (NPPF) sets out government planning policy for England. It was published by the Department for Communities and Local Government on 27 March 2012 and replaced a wide range of previous planning policy statements and planning policy guidance.

The NPPF introduced a viability test for local plans and for decision making. Local plans set out a framework for the future development of an area, and are also the starting-point for considering whether planning applications should be approved.

The NPPF states that ‘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. To ensure viability, 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 land owner and willing developer to enable the development to be deliverable.’

It suggests that:

  • The cumulative costs of local and national standards and policies should be assessed to ensure they facilitate development and do not put implementation of the plan at risk.
  • Community infrastructure levy charges should be worked up and tested alongside the local plan to ensure they support and incentivise new development.
  • Planning conditions and obligations should be justified and kept to a minimum so that development is not inhibited unnecessarily.
  • Local planning authorities should understand district-wide development costs and assess affordable housing or local standards requirements at the time local plans are drawn up.

National Planning Practice Guidance (NPPG) is a government website described as ‘the home of the National Planning Policy Framework for England and supporting national planning practice guidance’.

NPPG suggests that understanding Local Plan viability is critical to the overall assessment of deliverability, stating, ‘…plans should be deliverable and …sites and 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…. Local Plans should present visions for an area in the context of an understanding of local economic conditions and market realities. This should not undermine ambition for high quality design and wider social and environmental benefit but such ambition should be tested against the realistic likelihood of delivery.’

In relation to decision taking, it suggests that, ‘Decision-taking on individual schemes does not normally require an assessment of viability. However viability can be important where planning obligations or other costs are being introduced. In these cases decisions must be underpinned by an understanding of viability, ensuring realistic decisions are made to support development and promote economic growth. Where the viability of a development is in question, local planning authorities should look to be flexible in applying policy requirements wherever possible.’

The introduction of the viability test was intended to prevent local authorities from adopting policies that prevented developments from proceeding or prevented developers from making returns on their investment. However, opponents suggest that it has simply allowed developers to challenge obligations imposed on them, such as the provision of affordable housing, and that it has enabled them to ‘run rings around local authorities’. The result, it has been argued, has been poorly-designed development and less affordable housing.

In a report published by the Association for Public Service Excellence (APSE) and the Town and Country Planning Association (TCPA) in June 2015, Housing the Nation: Ensuring councils can deliver more and better homes, a survey found that 53 per cent of English local planning authorities said the policy had negatively impacted on their ability to deliver affordable and social homes, compared with just 14% who felt the viability test helped. The report suggested that the government should reframe the viability test in a more balance way, allowing for ‘…the consideration of economic data on the cost and benefits to the public sector and the wider economy of new social and affordable housing....’

In April 2016, the Department for Communities and Local Government (DCLG) confirmed that sections 106BA, 106BB and 106BC of the Town and Country Planning Act 1990 would be repealed at the end of 30 April 2016. This removes the mechanism allowing developers to change or waive affordable housing requirements on the grounds of scheme viability. A DCLG press officer said “Local authorities and developers have other options for re-negotiating planning obligations related to affordable housing, including by mutual agreement or under section 106A of the Town and Country Planning Act 1990.”

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