Aylesbury Vale Area Affordable Housing Supplementary Planning Document

5. Factors that might reduce the amount of affordable housing

Permitted Development Rights for conversions (PDR)

14. Local planning authorities cannot seek affordable housing from conversions that are made possible solely through permitted development rights. In circumstances where a site is a mix the following is an example of how this would be dealt with.

Sites that aren't viable

15. VALP was adopted in September 2021. The policies in VALP were tested in the VALP Viability Assessment. A minimum 25% affordable housing target was found likely to represent a realistic level.

16. In line with VALP Policy H1 (b), it is up to the applicant to demonstrate whether circumstances justify the need for a viability appraisal at the planning application stage to justify a reduced level of affordable housing. It is clear from the Planning Practice Guidance on Viability and Decision Taking that there will be limited circumstances where viability testing at the planning application stage is considered necessary.

17. In circumstances where viability appraisals are used, they will need to be open book and will be made public (see para 37 of this SPD). Examples of circumstances where a Viability Appraisal will be accepted, set out within the PPG ( Planning Practice Guidance on Viability Paragraph: 007 Reference ID: 10-007-20190509), and used as the basis for the council's approach include:

• where development is proposed on unallocated sites of a wholly different type to those used in the viability assessment that informed the plan;
• where further information on infrastructure or site costs is required;
• where particular types of development are proposed which may significantly vary from standard models of development for sale (for example build to rent or housing for older people); or
• where a recession or similar significant economic changes have occurred since the plan was brought into force.

18. Planning applications that are accompanied by a viability appraisal should be based upon, and refer back to, the viability appraisal (2017) that informed the VALP ( The VALP Viability Assessment Final Report 2017 available here). The applicant should provide evidence of what has changed since then, in line with national policy advice, to demonstrate the need for a viability appraisal to be undertaken.

19. In accordance with guidance, set out in the Planning Practice Guidance, the price paid for land is not a relevant justification for failing to accord with relevant policies in the Plan.

20. The weight to be given to a viability appraisal is a matter for the Council, and the Council will have regard to all the circumstances in the case, including whether the plan and viability evidence underpinning the plan is up to date, any change in site circumstances since the plan was brought into force, and the transparency and robustness of assumptions behind evidence, submitted as part of the viability assessment.

Viability Appraisals

21. Viability appraisals are sensitive to minor changes in the figures used to calculate viability and to variations in methodology. Where viability is cited as a barrier to meeting policy requirements for affordable housing is supported by a viability appraisal (if justified as above), the council will assess the Viability Appraisal to ensure that the maximum viable level of contribution to planning obligations are received.

22. When a viability appraisal is submitted, an editable electronic version of the viability model should be made available to the council, or anybody acting on its behalf, to enable a robust review of the submission. The council should also be provided with all the assumptions and calculations included in the appraisal. The following, amongst others, will be analysed as part of the review of the viability appraisal:
Existing use value plus premium (benchmark land value)

23. EUV is the value of the land in its existing use. It is not the price paid for the land and should disregard hope value.

24. The PPG sets out that,

"To define land value for any viability assessment, a benchmark land value should be established on the basis of the existing use value (EUV) of the land, plus a premium for the landowner." Paragraph: 013 Reference ID: 10-013-20190509)

"Existing use values will vary depending on the type of site and development types. EUV can be established in collaboration between plan makers, developers and landowners by assessing the value of the specific site or type of site using published sources of information such as agricultural or industrial land values, or if appropriate capitalised rental levels at an appropriate yield (excluding any hope value for development)."

Paragraph: 015 Reference ID: 10-015-20190509)

"Sources of data can include (but are not limited to): land registry records of transactions; real estate licensed software packages; real estate market reports; real estate research; estate agent websites; property auction results; valuation office agency data; public sector estate/property teams' locally held evidence". Paragraph: 015 Reference ID: 10-015-20190509)

25. The premium (or the 'plus' in EUV+) is the second component of benchmark land value. The PPG defines it as, "the amount above existing use value (EUV) that goes to the landowner. The premium should provide a reasonable incentive for a landowner to bring forward land for development while allowing a sufficient contribution to fully comply with policy requirements."

Alternative use value

26. The PPG sets out that, "For the purpose of viability assessment alternative use value (AUV) refers to the value of land for uses other than its existing use. AUV of the land may be informative in establishing benchmark land value. If applying alternative uses when establishing benchmark land value these should be limited to those uses which would fully comply with up-to-date development plan policies, including any policy requirements for contributions towards affordable housing at the relevant levels set out in the plan. Where it is assumed that an existing use will be refurbished or redeveloped this will be considered as an AUV when establishing benchmark land value."

Market and sales values

27. The values arrived at must take account of real current market values for the type and location of development. The source of this information must be clearly justified.

28. Viability Appraisals should incorporate relevant analysed sales evidence in justification of the sales value proposed. Sales evidence used must demonstrate true comparability, for example, in terms of new build, location size, aspect and amenity and any adjustments/assumptions made by the valuer in applying this evidence.

Comparable evidence

29. Analysis of land transactions has limited use in determining appropriate benchmark land values. Transactions may only be considered as a basis for cross checking values derived by Existing Use Value plus or Alternative Use Value methods. Transactions must be recent, reflect full policy compliance and be based on transactions where planning consent was in place prior to the purchase. A high level of understanding underpinning developer assumptions is also required to provide meaningful analysis. Although consideration of land transactional evidence is a RICS mandatory step, Viability Appraisal's will not be expected to submit evidence on this basis unless relevant evidence compliant with the conditions outlined above is evidenced.

Abnormal costs

30. It is important that any site-specific or abnormal costs are disaggregated and supported by robust evidence (including contractor costs). The presence of abnormal costs would normally be expected to influence land value, as is set out in the PPG. The applicant should have been aware of abnormal costs prior to purchasing the site, therefore the presence of abnormal costs (alongside relevant requirements of the development plan) is assumed to have influenced the level of premium above the existing use value a landowner would expect. Thus, it should not be assumed that abnormal costs will be offset at the expense of compliance with the Development Plan.

31. Viability Appraisals should also reflect the potential benefit of Land Remediation Relief, or Contaminated Land Tax Relief, which allows businesses to claim relief of 150% of the cost in cleaning up the site, against their Corporation Tax bill.

32. All viability appraisals will be independently assessed by a party of the council's choosing. The assessment will only be undertaken once the applicant has entered into an agreement to meet the council's full costs in appointing consultants to undertake the assessment. The submitted financial viability appraisal should accord with the guidance set out in the Planning Practice Guidance.

33. Viability appraisals will remain valid until such time as it is considered by the council that significant changes have occurred which require an update of the Appraisal to be undertaken. These changes could relate to factors such as a change in land values, a recession or alternatively an economic upturn.

34. Any planning application scheme which fails to deliver a policy compliant scheme because of viability should be subject to a late-stage review, based on the actual costs and values generated by the scheme. The review will, in accordance with the advice in the PPG, only apply to uplifts in compliance with planning policies over the lifetime of a project. Unless otherwise agreed with the council, the s106 agreement will contain inter-viability review mechanisms, at the applicant's expense, and at trigger point(s)/ times agreed with the council (e.g. completion or occupation of the development) when construction contracts have been agreed) to ascertain the extent of any changes in these values and costs.

35. The PPG is clear that,

"Any viability assessment should be prepared on the basis that it will be made publicly available other than in exceptional circumstances. Even in those circumstances an executive summary should be made publicly available. Information used in viability assessment is not usually specific to that developer and thereby need not contain commercially sensitive data. In circumstances where it is deemed that specific details of an assessment are commercially sensitive, the information should be aggregated in published viability assessments and executive summaries and included as part of total costs figures. Where an exemption from publication is sought, the planning authority must be satisfied that the information to be excluded is commercially sensitive. This might include information relating to negotiations, such as ongoing negotiations over land purchase, and information relating to compensation that may be due to individuals, such as right to light compensation. The aggregated information should be clearly set out to the satisfaction of the decision maker. Any sensitive personal information should not be made public." Paragraph: 021 Reference ID: 10-021-20190509

36. The council expects viability assessment to be undertaken using a residual land value approach. The Residual Land Value is the amount that a developer can pay for a site, whilst still being able to deliver the project. A fixed land value should be used as the proposed benchmark value with the target profit also included. The outcome is expected to be presented as a surplus/ minus profit level.

37. The accessibility standards for new dwellings are set out in the Policy H6c. For the avoidance of doubt, on sites that meet the threshold set out for affordable housing but based on viability make no provision for it, the market housing will be expected to comply with the requirements set out in Policy H6c.