London mayor Boris Johnson must lay down the law on viability assessments, to stop developers wriggling out of affordable housing commitments across London.
That’s the view of the London Assembly Planning Committee, which has reiterated its call for Johnson to issue Supplementary Planning Guidance on viability assessments. Greater clarity is needed to agree on methodologies used, which would then allow local authorities to rigorously assess arguments advanced by developers. The committee asked the mayor for guidance last summer, when it responded to a draft interim housing SPG.
“We agree with you that there is a real need to bring the “dark art” of viability assessments into the bright light of public scrutiny,” says committe chairman Nicky Gavron in her letter to the mayor. A new approach is needed, taking into account “benefits beyond profit for the developer and landowner”.
That guidance should, says the committee “promote transparency, take a strong position on land valuation, endorse a fixed affordable housing target for London and promote the Existing Use Value plus a premium (EUV Plus) approach to valuing land.” Currently, the set-up is being allowed to undermine the plan-led system, with a lack of clarity about how to value land. The NPPF currently says land prices should give “a reasonable competitive return” to the landowner, while having “regard to policy requirements”.
Says Gavron: “This lack of clarity means that developers are able to pay too much for land, leading to the loss of planning obligations.”
The committee has set out ten recommendations for the SPG in its letter, proposing a clear case be made for the Existing Use Value Plus approach to valuing land, and in cases where too much has been paid for a site, non-compliant applications should be refused.
Viability assessments should be made fully public, and only confidential in exceptional circumstances, suggests the commitee. And it recommends that affordable housing targets be set out in local development plans.
A fifth recommendation is that contingent obligations be used, where viability shows it is not possible to meet affordable housing targets. And the committee recommends the removal of any set benchmark level of profit for a developer.
A shortfall in skills has also been blamed for planners being outfoxed by developers and their agents. The committee recommends the mayor works with boroughs to identify areas where training is needed for planners, and work with the RICS and RTPI to set out best practice guidelines.
The London Boroughs Viability Group has been set up by Islington, to share best practice, and it is recommended the mayor actively engages with the group. Finally, the committee calls on the mayor to ensure that public sector land released through the London Land Commission maximises the delivery of affordable housing, setting “A new standard for transparency with all viability assessments and data on final outputs”.
Gavron says her committee gathered evidence that made it clear sites are being sold for too high a price, with viability arguments then being used to reclaim development profits. “In some cases confidential viability assessments are being used to overestimate costs and avoid providing affordable housing, pulling the wool over the eyes of planners, councillors and communities.”
“The Committee heard how overpayment for land on Parkhurst Road in Holloway led to the developer claiming to be unable to pay for affordable housing. In this case, the London Borough of Islington argued that the developer could have paid far less for the land and still have given a return to the landowner.6 While the Planning Inspector rejected this, arguing that other developers had made similar bids, the Committee agrees with Islington’s stance that developers should be taking planning policy into proper account when making bids for land. At present ‘the developer that gains the site is the one that has assumed the lowest level of policy compliance with the development plan’.”
The committee says that developers have successfully kicked back local authority affordable housing requirements across several major sites in the capital, including Greenwich Peninsula, the Shell Centre redevelopment and Heygate Estate.
Many developers insist that negotiations are confidential, rather reducing the evidence base; while those who demand copies of papers often find large parts of the evidence redacted, or blacked out.
LPA Perspective: The assembly’s various committees work hard to gather real evidence from the market, to inform their advice to the mayor. On this one, he needs to heed their advice and act.
Viability assessments are regularly used to run rings around planners, with the cloak of confidentiality used to stop the estimates used getting out, either at the time or later. Developers use hand-wringing to show they’ll barely make any money, and flat footed planning authorities too often fail to use tools at their disposal to revisit the numbers and demand an overage payment later, should everything turn out better than it was painted.
They also too often fall for the argument that figures need to remain confidential, effectively ensuring that no further scrutiny takes place.
And there is a need to ensure the developer community gets to understand that overpayment for sites cannot easily be fixed this way. As Barbara Brownlee, director of housing and regeneration at Westminster council told another committee hearing recently, her office sees sites regularly flipped by developers, such that the ultimate owner has overpaid; viability arguments are then used to chip away the cost of affordable housing, to revive development profit.
A clearer playing field for all would help deliver what the planning system was set up to deliver.
Once that is fixed, we can move on to the wider discussion about how we define affordable housing.