Viability Assessments: A Standard Viability Challenge

Viability assessment has been described as a ‘dark art’. Affordable housing policy is complex and hidden deep in policy PDFs, with different requirements (typically between 30 and 40% affordable housing) different tenure (typically 70 rented 30% intermediate) and starting at different thresholds (1 to 15 unit) for every local authority– see our blog posts for further information.

It can be confusing, and applicants often have questions when confronted with the need for viability assessment and affordable housing: what is it, how long does it take, what are the chances of success?

We hope the following brief outline will be of help.

What does a standard viability challenge look like?

This case study has been anonymised but is otherwise an accurate reflection of the key points of the case.

Stage 1: Briefing and instruction: The applicant was informed of a 50% affordable housing requirement on their site at the pre application meeting. The numbers did not stack up for them, and the local authority planner confirmed they would have to submit a viability report along with the full application to justify any reduction. The client contacted us to check the numbers and subsequently instructed us to complete the viability process.

Stage 2: Viability assessment: The viability assessment report was completed within 5 working days to ensure it could be submitted along with the full application. The report concluded the scheme could not viably provide any onsite affordable housing.

Stage 3: Council review: The local authority commissioned a third party to review the viability report. This review suggested several minor changes, including to the proposed flat values, benchmark land value and cost of construction.

Stage 4: Subsequent negotiations: In this case we did not concur with the proposed increased values and reduced costs. Further valuation work and cost consultancy was undertaken, with detailed quotes and modelling obtained for contested items. Subsequent discussions resulted in agreement that the scheme was in fact unviable and a zero contribution was appropriate on the basis of revised floor areas. A late review mechanism was agreed as appropriate subject to drafting, in order to best present the application to the planning committee.

If you have further questions take a look at our FAQ’s page.

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