For housebuilders, developers, landowners and land promoters, this has an important consequence. Engagement with an emerging local plan can no longer be focused principally on securing or protecting individual site allocations. The viability policies and assumptions embedded within the plan may ultimately have consequences for investment and development decisions across the whole authority area for many years.

That makes robust, market-facing viability evidence at the plan-making stage increasingly important.

The economics of development and land

The principle is straightforward. Local plans need to establish levels of affordable housing and infrastructure contributions which meet policy objectives while allowing the development required by the plan to come forward.

Planning Practice Guidance (PPG) already makes clear that viability assessment should primarily take place at the plan-making stage and that the cumulative cost of policies should not undermine delivery of the plan. It also specifically identifies a role for developers, landowners and other stakeholders in helping to establish realistic and deliverable policies.

The implications, however, extend well beyond allocated sites.

A housebuilder considering acquiring land in an authority area in five or ten years’ time, or a landowner deciding whether to bring land forward, will inherit much of the financial framework established through today’s local plan. Affordable housing requirements, infrastructure contributions and other policy costs all ultimately feed into the economics of development and land.

The task for the housing sector, through the local plan process, is therefore broader than a narrow focus on securing a site allocation, and more about ensuring the plan will enable investment, development and land transactions to take place throughout its 10-15 year lifespan.

Why examination evidence matters

Local planning authorities (LPAs) inevitably need to make assumptions when undertaking whole-plan viability assessments.

These can include sales values and rates of sale, construction and infrastructure costs, finance, professional fees, contingencies, abnormal costs, development programmes, developer returns, affordable housing values, and benchmark land values.

Relatively small differences in individual assumptions can become significant when applied across every allocation and windfall site. This is where defensible evidence from organisations actively operating in the land and development market can be particularly valuable.

Good viability evidence will help ensure that the eventual policy framework represents an appropriate balance: securing infrastructure and affordable housing to meet need, while maintaining the commercial incentives for land to come forward and development to proceed.

Importantly, the government has recently asked the Planning Inspectorate to take a pragmatic and proportionate approach to viability and deliverability at local plan examinations, considering delivery across the plan period rather than viewing current economic circumstances in isolation.

That approach makes good evidence more, rather than less, important. Inspectors need the information necessary to distinguish between short-term market movements and more structural changes in the economics of development.

Construction costs, regulatory requirements, finance costs, infrastructure demands and market conditions have all changed considerably in recent years. Understanding which assumptions are temporary and which represent longer-term changes requires evidence grounded in the market.

Historically, housebuilders, developers and landowners have understandably concentrated resources on local plans where they have significant site-specific interests.

Debating which sites should get allocated will obviously remain important. However, the sector now needs to ensure that viability evidence is presented to all local plan examinations.

A flawed viability assumption today will influence planning decisions and land transactions throughout the plan period. Waiting until the planning application stage to address those assumptions may be too late. National guidance is deliberately seeking to establish policy requirements through plan-making so that compliant development can subsequently proceed with greater certainty and with less reliance on application-stage viability negotiation.

Effective engagement should reduce friction later in the development process.

Typologies and strategic sites require different approaches

For the majority of development, authorities will use site typologies – representative development types based upon factors such as size, location, greenfield or brownfield status and development characteristics. Those typologies need to reflect the range of sites reasonably expected to contribute towards housing delivery and be tested using realistic assumptions.

Large strategic sites require a different level of consideration. National guidance recognises that more detailed assessment may be required for important sites on which delivery of the plan relies.

For these developments, viability can depend heavily upon phasing, infrastructure timing, abnormal expenditure, funding arrangements, sales rates and market absorption.

The examination process needs to test both: whether the general typologies are genuinely representative and whether strategic allocations are capable of delivering the housing and infrastructure in the timescales envisaged.

The government is aiming at greater consistency in viability assessment and this should be welcomed. Common definitions, methodologies and reporting formats can improve transparency and make it easier for LPAs, inspectors and the development industry to understand why assessments produce different outcomes. But consistency of methodology should not be confused with uniformity of inputs.

England contains markedly different housing and land markets. Development values, construction costs, infrastructure requirements, sales rates and landowner expectations vary considerably between locations and development types. The aim should therefore be a consistent methodology, supported by robust locally evidenced assumptions.

That combination provides transparency without losing the local market evidence necessary to assess whether allocated development will actually be delivered.

A greater role for coordinated market evidence

It is unrealistic to expect individual housebuilders or landowners to participate fully in every local plan examination.

Therefore, there may be considerable benefit in better coordination of market evidence between housebuilders, developers, promoters and landowners, particularly where several parties share concerns about the assumptions underpinning an emerging plan.

A smaller amount of strong, properly researched evidence is likely to be considerably more useful to an inspector than numerous representations making similar points without the supporting analysis.

This also highlights the value of bringing planning, development, valuation, infrastructure and market expertise together. The purpose is not simply to challenge policy requirements, it is to help ensure that those requirements are based on realistic evidence and support a local plan which can actually deliver the development on which it relies.

Getting the evidence right at the outset

The move towards establishing more of the development economics through the local plan should, if implemented effectively, create greater certainty for authorities, communities and developers alike. But that certainty is only valuable if the assumptions on which it is based are sound.

For housebuilders, landowners and land promoters, that means local plan viability can no longer be regarded as somebody else’s issue until a particular site comes forward.

Further information

Contact Mark Breen or Sarah Gregory