Viability still under the spotlight

Print Friendly, PDF & Email

The Growth and Infrastructure Act 2013 amended the Section 106 regime to allow developers to challenge affordable housing obligations on viability grounds. The first wave of decisions contains some pointers on how the system is shaping up.

Planning For Growth

Affordable housing is under pressure as grant funding, planning policy and land values pull in different directions. Planning obligations under section 106 of the Town and Country Planning Act 1990 are often wrongly seen as a safer bet than conditions to secure essential affordable provision. To date, obligations have given planning authorities more control; they must no longer serve a “useful planning purpose” and until recently could not be appealed for at least five years.

The new Section 106BA, which gives developers a right to ask councils to review housing obligations, and Section 106BC, which gives developers a right to appeal against review outcomes, came into force on 25 April 2013. Where a scheme is judged not to be economically viable, the planning authority must modify affordable housing obligations so that it becomes so. Crucially, the process is a numerical exercise; there is no scope to reopen the planning merits.

Five Things We’ve Learned

1.  Inspectors are following The direction in the government’s statutory guidance that actual land costs should be used in appraisals – discounting overbids against market value.

2.  Care is needed on the viability information submitted and accepted during the initial planning stages.  It will set a benchmark for reviews and appeals.  For some schemes, no viability information at the planning stage will be the best approach.

3. Authorities are finding it hard to respond robustly to appeals within the 28 days allowed by the legislation. Many of the appeal decisions are soft targets.

4. Any modifications made to obligations must ensure that schemes “become viable” at the date of the decision. The Statutory Guidance emphasises that this means at today’s costs and values. The approach to uncertainty over future values is causing difficulties.

5. Few authorities have taken the initiative by proposing different modifications put forward by developers. A more adventurous approach is needed from councils, using the powers available.

This is a shortened version of the article that appeared in Planning magazine, 29 August 2014 – click here for the full version with reference to recent appeal decisions.