From Allocation to Delivery: Why Viability Testing Matters in Local Plans

James Sorrentino, Director of Landcycle.com

“Is it time for a new consideration called ‘Land Economics’ to become a prerequisite for housing allocations?“

It has been widely reported that planning departments are under-resourced, a situation compounded by increasing legal complexity, expanded consultation requirements and the need for planning officers to respond to changes in government policy. This is therefore not a criticism of planning departments but an observation about what should underpin the site allocation process.

For those unfamiliar with the site selection and housing allocation process, it is protracted, complex and subject to public scrutiny and involvement.

It involves multiple stages, with sites discounted through a process of checks and balances that often examine planning constraints, geographical restrictions and sustainability in considerable detail. However, it is my opinion that this process rarely gives proper consideration to the economic or legal background of a particular site or to whether economic forces may render housing delivery unviable in whole or in part, including the planning requirements expected as part of delivery. Affordable housing is one such example, frequently challenged by developers on the grounds of ‘viability’.

The concept of ‘viability’ is common and well understood within the planning community. However, in almost all cases, it is something that is raised at a much later stage of the plan-making or planning application process.

My view is that viability, which I include within my own term ‘Land Economics’ to encompass other financial matters relating to the delivery of a housing project, is fundamental to housing delivery (including anticipated five-year land supply trajectories) and should therefore be a more integral part of the site selection and allocation process. Land Economics includes matters such as; residual land values, land contracts, restrictive covenants and how the presence of these can affect housing delivery and critically sustain policy compliant planning (106) agreements.

Landcycle.com is seeking to make a difference in this process by offering a simple, rough residual valuation for any property over 10 acres, based on the assumption that it is allocated for housing. Landcycle.com automatically produces a synopsis showing the number of units that could be achieved and the residual value of the land following planning consent. This at least initiates the process of asking the right questions, such as: “If we are to allocate this site for housing, will it be able to sustain a policy compliant planning agreement and what else can be secured for the local community in terms of infrastructure?” Local Planning Authorities (LPAs) often allocate land without first asking these key questions of themselves, the pertinent landowner or the contracted housebuilder.

Contracts between housebuilders and landowners often include a ‘Minimum Price’ per acre obligation, under which the landowner benefits from a high land acquisition price. The housebuilder may then be forced to renegotiate infrastructure delivery, relying on arguments of ‘viability’ as part of discussions with the LPAs on planning agreements.

When housebuilders or promoters enter into contracts with landowners they (in almost all cases) register either a ‘restriction on title’ or use the register to confirm the presence of a land contract, such as an option, by way of a ‘Unilateral Notice’.  In both cases the Land Registry should make such data freely available to local authorities and planning and property data platforms like Landcycle, so the existence of a ‘land contract’ is evidently available to an enquirer without forcing them to pay the charge of purchasing a copy of the registered title.

It is counterintuitive to assume that housebuilders, often with decades of experience in securing land deals, would enter into contracts with landowners on terms they could not fulfil. However, some agreements between landowners and developers can exist for 15–20 years, during which time a range of factors—including house prices, build costs and wider economic conditions can significantly affect the residual land value of a project.

I would propose that, as part of the Strategic Housing Land Availability Assessment process, a confirmatory synopsis be required from the site promoter setting out any salient facts that could affect delivery. Councils should also undertake their own assessments, using Landcycle as a tool to assist with a quick appraisal and to cross-check these points. It is worth pointing out that Landcycle does not charge a subscription fee and also offers local authorities the opportunity to use their PSGA Number, allowing them to get Ordnance Survey data free, through Landcycle.

James Sorrentino is a Chartered Town Planner and a Royal Institute of Chartered Surveyors licenced valuer, with over 25 years experience in planning and strategic planning. His recent project alongside his directorship at Lightwood Group, is Landcycle.com which is a planning and property platform.