Development viability assessment and the provision of affordable housing: a game of ‘pass the parcel’?

Abstract

This paper constructs a hypothetical case study based around the Benchmark Land Value assessments within the landmark Parkhurst Road, London case decided in the High Court in April 2018. It attempts to illustrate how developers were gaming the system and how the 2014 Planning Practice Guidance aided them to do that. The discussion centres on the extent to which new 2018 National Planning Guidance has addressed the identified flaws and what additional changes might be needed to that guidance to solve any outstanding problems.

What is a ‘competitive return’ to a landowner? Parkhurst Road and the new UK planning policy environment

“…The fact that this cannot be recognised within financial viability appraisals under the guidance is purely a function of the application of the wrong model. This mismatch between market pricing and viability modelling will produce inconsistencies between market evidence and model inputs and will cause the subsequent differences between the land price assessed by reference to land transaction evidence and that generated by a residual valuation model (Crosby, 2019).…”

Understanding the geography of affordable housing provided through land value capture: Evidence from England

“…In this regard some authors have pointed to the use of ‘viability assessments’ by developers in the negotiation process to argue that the inclusion of an affordable housing quota removes the prima facie business case for development (McAllister, 2017, 2019; McAllister et al, 2019). This negotiation practice has come to be understood as one of the ways in which the development industry may seek to ‘game’ the negotiation process and can be found in reporting of the ‘viability charade’ (Lord et al, 2019) and ‘pass the parcel’ (Crosby, 2019). Indeed, in this latter contribution Crosby (2019) dissects specific cases where the manner in which viability assessments have been computed and presented by developers has acted as a pretext to diminish the levels of affordable housing that have been delivered in practice.…”

“…This negotiation practice has come to be understood as one of the ways in which the development industry may seek to ‘game’ the negotiation process and can be found in reporting of the ‘viability charade’ (Lord et al, 2019) and ‘pass the parcel’ (Crosby, 2019). Indeed, in this latter contribution Crosby (2019) dissects specific cases where the manner in which viability assessments have been computed and presented by developers has acted as a pretext to diminish the levels of affordable housing that have been delivered in practice. A similar point is made by Wyatt (2017) in seeking to identify the circumstances under which developers might use the argument of compromised scheme viability to diminish contributions of S106-funded affordable housing on the grounds that this in-kind contribution has been ‘crowded out’ by the presence of a cash payment through CIL (p. 165):One of the key differences between CIL and planning obligations that was highlighted in the interviews was that CIL is a fixed levy and S106 is negotiable.…”

The financialisation of housing land supply in England

“…The effect of this calculative practice was to distribute betterment to the developer and landowner leaving little or nothing to pay for the increased public infrastructure costs and contributions to affordable housing (Crosby & Wyatt, 2016;McAllister, 2017). As a market device, development viability assessments are widely understood to have embedded the values and expectations of the speculative house-building industry in the statutory planning system, normalizing excessive profits for developers, and creating an expectation among landowners of extravagant uplift in land values consequent on the granting of residential planning permission (Crosby, 2019;McAllister, Street, & Wyatt, 2016).…”