Six months on, the dust has settled and we have just about got to grips with the revised National Planning Policy Framework (NPPF). So, what’s changed, and how has the new framework impacted viability assessments?
What is the NPPF?
To meet its manifesto ambition of building 300,000 homes annually by the mid-2020s, the Government is committed to increasing the supply of housing through a plan-led system. The revised NPPF and its accompanying documents, namely the Planning Practice Guidance (PPG), aims to support this by strengthening plan-making and housing delivery.
Significant focus has been made on building the ‘right’ number of homes and placing responsibility and accountability on local planning authorities to deliver more housing.
Whilst in theory this is likely to speed up the decision-making process, through the reduction of ad-hoc viability assessments, the knock-on effect for Local Plans could be significant.
The NPPF incorporates changes in how contributions are assessed, with the intention to help improve the deliverability of affordable homes and increase supply.
Planning decision-makers now have the power to decide how much weight to give an assessment, which in theory should allow local authorities to resist developments coming forward with limited affordable housing.
A standard methodology is imposed, and assessments must now be made publicly available. This seeks to reduce the use of complex, bespoke and confidential assessments alongside individual applications, which previously negotiated down contributions, increasing landowner returns and house builder profits – a subjective point.
The standardised approach is significant. Plan-makers may now use site typologies to determine viability for sites with shared characteristics, such as location, size, land use type, etc. A gross development return of 15% to 20% should be assumed – a range which opens up debate on its own.
By using average values and cost assumptions planning applications will subsequently be measured against the viability assessment which informed the plan. Costs should be assessed at the plan-making stage and be based on evidence which reflects local market conditions – somewhat more difficult in practice.
A benchmark land value should be calculated based on the existing use value, plus a ‘premium’ for the landowner (EUV+). The use of comparable market evidence is encouraged, so long as it is clear that such evidence is based on developments which are compliant with development plan policies, including for affordable housing, and the market evidence does not use historic benchmark land values of non-policy compliant developments.
The ‘premium’ should be defined in a particular way. It should reflect the minimum return at which it is considered a reasonable landowner would be willing to sell at, and must provide a reasonable incentive for a landowner to bring forward land for development, while allowing a sufficient contribution to comply with policy requirements. This approach relies on a transparent market, whereas in reality, site-specific detail is difficult to obtain.
Unsurprisingly, significant debate as to what a ‘premium’ constitutes has already begun, particularly given the wide-ranging circumstances for landowners to release their land for development.
So, what’s changed?
Historically, methods employed to calculate contributions have varied significantly across the country, resulting in significant time and cost burdens for local planning authorities. They have fundamental flaws that impede housing deliverability and attempts at mitigating these are welcome.
Some initiatives are proving to be more successful than others. Standardised inputs, in some areas, have allowed assessments to become clear and transparent. However, the ‘premium’, has created a grey area and causes drawn out negotiations. Developers are beginning to find it more difficult to justify divergence from planning contributions and they need to take full account of expected contributions when acquiring land.
The impact of the assessments being public limits the quantum of information available, and therefore standard assumptions based on market evidence have increased, which can work favourably for a developer, or significantly impact deliverability.
Given the inconsistent progress under the original NPPF, the new framework and guidance reforms are much needed, although they do seem to increase the burden on our counterparts in local authorities at a time when they are already struggling to keep up with existing demand. Local planning authorities need to ensure they have undertaken the necessary consultation with developers, site promoters and other stakeholders at the outset.
It is still too early to tell if the revised NPPF has delivered more housing, in particular affordable housing, but there has certainly been more clarity around the process, despite a number of grey areas remaining. Time will tell whether these changes will, on balance, quicken or stall the process – the initial signs are positive.