Viability Assessment

What is an Affordable Housing Viability Assessment?

An affordable housing viability assessment is an appraisal of the costs, values and profitability anticipated with delivering a proposed development. One is normally carried out for the purpose of providing a Local Planning Authority with an opinion on the viable level of affordable housing contribution or on-site provision which can be funded from the subject scheme (or the amount which can be provided below a Policy set objective, whilst still earning a reasonable profit).

The key components of a viability assessment are:

• the existing land value (what is the site currently worth?);
• the gross development value (GDV) (what will the development be worth when it’s completed?); and,
• the build costs.

In order to determine whether a scheme is viable, the costs (including the land value) are deducted from the GDV. If there is an identified surplus (after accounting for a suitable level of developer’s profit), then this is the financial contribution which can be afforded towards affordable housing provision in the Borough. If the result is negative, then the proposed development cannot reasonably be expected to contribute towards Affordable Housing.

When do you need an Affordable Housing Viability Assessment?

Paragraph 63 of the National Planning Policy Framework (NPPF) states that ‘Provision of affordable housing should not be sought for residential developments that are not major developments (10 or more dwellings for residential schemes), other than in designated rural areas (where policies may set out a lower threshold of 5 units or fewer).

There are, however, exceptions with a number of councils, particularly in London or other large Towns and Cities adopting a much lower threshold. In some areas, an affordable housing contribution is required for any new development. It is, therefore, always worth checking with a Planning specialist to see if an affordable housing contribution is likely to be required from your development as part of your due diligence and valuation before purchasing a site.

We would also always advise considering the provision of affordable housing viability at the start of a project. Not only will you gain a deeper understanding of the scheme’s finances and tolerances, but you will also be saving future delays with any subsequent planning application. If viability is considered at the pre-planning stage, you will also be able to design your development to maximise your profit. Further if you know there will be a requirement for ‘on-site’ affordable housing, you may want to make some design changes to the scheme to accommodate the requirements a Registered Social Landlord (RSL) might desire (particularly around ease of maintenance, and unit sizes) if they were to agree to purchase those units.

More resources on Affordable Housing Viability Assessments

As well as contacting ET Planning for guidance and support, there are other resources available to help understand more about the viability process and affordable housing. The Government guidance on Viability can be found here. This sets out the key principles in understanding viability in the development plan making process and, how it should be considered when Local Planning Authorities (LPAs) are making decisions on applications with viability arguments.

All of ET planning’s viability assessments follow the methodology set out in the Royal institute of Chartered Surveyors (RICS) best practice guidance. To find out what this entails, you can visit the RICS Guidance pages.

Different LPAs will often also have different localised guidance on the methodology to be used for valuation and calculating contributions (commuted sums), when they can be used in lieu of onsite affordable housing provisions, and also the total units when on-site provision is to be provided. These are sometimes direct in the development plan policy, or the requirements will be expanded upon in a Supplementary Planning Document. Sometimes, although rarely, an LPA will also have executive decisions to vary the way older local policies which are still in use are worded or used, to bring them in to compliance with National Guidance. The LPA should publish all of this information on their website, but it is sometimes not easy to find. Because it can be so hard to find the local standards, it is advisable to take professional advice on affordable housing and viability as early as possible in the site conception to help inform the design brief.

How ET Planning can help with Affordable Housing Viability Assessments

ET Planning have considerable experience in all things affordable housing. With in-house viability experts with experience in both the private and public sector , we are well placed to understand the nuances of the process and find the best solutions to come to swift and successful outcomes.

We are able to carry out cost effective initial high level viability appraisals, at design concept or pre-planning stage in order to assess the optimum amount and type of development which should be proposed in order to result in more profit in your pocket, whilst satisfying policy requirements for Affordable Housing.

Equally, we are very happy to work collaboratively with other consultants if instructed during the planning process, when viability is often the last hurdle in securing a consent. We pride ourselves on taking a fair and reasonable approach that aims to quickly find the appropriate middle ground with an LPA, and our experience has shown that this fresh reasonable perspective on a process (considered by many as a ‘dark art’) allows us to agree reduced or removed affordable housing provisions without the lengthy and drawn-out negotiations usually associated with this process. This can often result in a positive decision months earlier than would usually be possible, thus saving £££s in holding and finance costs, and meaning profits are realised sooner in the development cycle.

If you’d like more professional support in assisting you with any affordable housing enquiry and preparing a strategy on how best to move forward, please don’t hesitate to get in touch or complete the contact form below to see how ET Planning can help you or call us on 01856 506265!

Find out if there is a reasonable prospect of reducing your Affordable Housing Contributions!