Viability Assessments: When Developers Challenge Planning Contributions

Viability assessments can reduce or eliminate affordable housing requirements. Here's how they work and why they're controversial.

Viability assessments are one of the most contentious aspects of the planning system. They allow developers to argue that a scheme can't afford to deliver the full policy requirements - typically affordable housing - and remain financially viable. Understanding how they work is essential whether you're a developer, a community group, or a planning professional.

What Is a Viability Assessment?

A viability assessment compares the costs of a development (land, construction, fees, profit) against the expected revenue (sales values). If the residual land value (revenue minus all costs) falls below a benchmark land value, the scheme is deemed "unviable" at full policy compliance.

The result is usually a reduction in affordable housing or other Section 106 contributions.

When Are They Used?

Plan-making - councils must viability-test their Local Plan policies to ensure they're deliverable
Decision-making - developers can submit a viability assessment with a planning application to argue for reduced contributions
Review mechanisms - some permissions include review clauses that reassess viability if the scheme isn't started within a certain period

The Key Inputs

Gross Development Value (GDV)

The total revenue from selling or renting the completed development. Based on comparable evidence and market analysis.

Build Costs

Construction costs, usually benchmarked against BCIS data (Building Cost Information Service). Includes prelims, contractor's overheads, and contingency.

Developer Profit

Usually 15-20% of GDV for market housing and 6% for affordable housing. This is one of the most debated inputs - too high and it squeezes out affordable homes; too low and the scheme won't attract investment.

Benchmark Land Value

The price at which a willing landowner would sell. The NPPF says this should be based on existing use value plus a premium - not on hoped-for development values. This is the single most argued-over number in any viability assessment.

Why They're Controversial

Opacity - many viability assessments have historically been confidential, preventing public scrutiny
Assumptions can be manipulated - small changes to profit margins, build costs, or land value can swing the result significantly
Affordable housing impact - viability arguments have reduced affordable housing delivery across England
Recent reforms - the NPPF now states that viability should be assessed at the plan-making stage, and decisions on individual applications should assume that allocated sites are viable at policy-compliant levels

For Developers

If you genuinely can't deliver full policy compliance:

Commission a viability assessment from a recognised firm (RICS-qualified)
Be transparent - councils increasingly require public disclosure
Expect scrutiny - the council will have the assessment independently reviewed
Consider review mechanisms - councils may accept lower contributions now if you agree to reassess viability later

For Communities

If a development in your area is proposing reduced affordable housing on viability grounds:

Request that the viability assessment is made public (councils can require this)
Challenge unreasonable assumptions through your local councillor or in consultation responses
Look at the benchmark land value - if it's based on speculative "hope value" rather than existing use, that's worth challenging