Crash, Bang, Wallop… is it viable?

Crash, Bang, Wallop- is it viable ? – The last 8 years…

I started with PAS in 2008 and there was the ‘Crash’ – I could mean the first time I went to a PAS event when a waitress threw a pot of coffee at me and my colleague Phillipa followed it up with a jug of iced water, but I don’t. ‘The Crash’ – was definitely the economic one and it has had a fundamental impact on local authorities and planning over these last 8 years. Development stalled and development viability took centre stage with both developers and LPAs. In seeking to get development going developers and house builders used viability appraisals to demonstrate the need to reduce development contributions and affordable housing. It was and is, all about delivery.

Although viability assessments were around before 2008 they were less common, developers just wanted to get on and develop, house builders to build. In a rising market – it cost more to argue about it -they paid up and got on with it.

Following the crash, there were increasing arguments over the ability of developments to pay for infrastructure and affordable housing so the industry and monster that we know as ‘viability’ flourished. The growth of the viability industry was kicked off by the Blyth Valley decision (2008) and followed up by Wakefield.  As development viability started to grow in importance in both plan making and development control (or Management) – there were questions about whether there was enough understanding in planning about viability. This led to the report by Roger Tym and Partners- ‘Training in Development Economics’ (sponsored by a wide range of industry organisations including PAS). This lead to the first PAS training course on viability with Roger Tym and Partners (now PBA) and continued with AECOM/ HDH planning (2013-16). Having run these courses for six years -approximately 1000 delegates -it is apparent that there is always demand because it is a central to planning and delivering development. The importance of viability to the delivery of development was the driver behind the Harman report (Viability Testing Local Plans) which was being worked on at the same time as the NPPF which cemented the importance of viability as a tool in planning.

But is our approach to viability and the deliverability of development effective?

I do think it is vital for planners to understand development economics, viability and the development industry context. I also think it is equally important for the surveyors, viability consultants and development industry to understand planning, their behaviour on the wider built environment and the impact of the developments they are promoting on communities. I have become increasing frustrated over the years:

• That the development industry do not understand that viability is not a game or a mathematical exercise but has a fundamental impact on communities and the ability of the development industry to build. They have a responsibility to look beyond the spreadsheet.
• With the RICS’s approach to viability, releasing their ‘Financial Viability in Planning’ guidance just after Harman and conflicting with it, focusing on market value which is inappropriate particularly for plan making. Also in practice practitioners taking a market value comparative approach to viability with sites that aren’t comparable and not take into account the current policy environment contrary to RICS guidance;and
• The Government, up until a couple of months ago, continuing to allow recessionary measures such as the s106 appeal process for affordable housing all based on the ‘mathematical certainty’ of viability appraisals.

All this has led to Communities becoming increasingly resistant to new development as they are fed up with poor quality developments that do not provide the infrastructure to support it or the affordable housing to support the community. They do not make places that the community are happy to accept. Why are new developments rejected by communities?- because according to the  appraisal model  the planning policies that would meet the needs of the development and local community are not  ‘viable’; CIL is not ‘viable’ and development proposals even when assessed against existing policy are not ‘viable’ according to the viability appraisal – the model says NO. It appears that such modelling has taken on mathematical certainty and has a scientific aura that is not there. Our approach to viability appraisal does not appear to be effective in the delivery of growth.

Viability modelling is a tool – to give an indication – to aid decision making- not the answer in itself. We need to take a step back from the modelling and look at the whole picture.

As a nation we are now concerned about the housing shortage – it has taken a while I have written several blogs on that subject over the years but it has now reached the front page of the newspapers. In 2012 I asked

“..When are we going to see on telly, read in the tabloids and hear our leaders and those in positions of power saying:“We have a very serious national housing shortage that is thwarting economic growth and harming the lives of millions of people. We think that a huge house building programme should be supported by all – this is a national priority”..

https://planningadvisor.wordpress.com/2012/08/07/what-we-want-is-economic-growth-but-not-house-building/

So are we satisfied with the approach we are taking to viability appraisals and their impact on the delivery of housing?  Is it the models fault? – No but the interpretation of the results by consultants, LPAs and Inspectors is at fault.  The models need to be interrogated, there needs to be greater understanding and challenge of the inputs that go into the modelling and they need to look out the window.

The models need to be transparent. Latterly there has been a push for this which should be supported by all parties to win back trust. Viability appraisals should be to be available to the public – that will drive transparency. I have heard the cry (and may even have indulged in it myself at some point) the public won’t understand it – remember the public are us- we are the community.

When the model says no and building is still going on we need to understand, when s106 was pulling in much higher contributions that the model says CIL can we need to question, when the model says offices are viable and no one has built any in the last 3 years you have to question. It is a tool and it is not the answer.

What is the answer – understand the context, understand the inputs into the model and how small variations can make big differences, understand that all developers do not exist in the same circumstances and therefore the models we have are only a proxy to give us a picture not THE picture. As a country we need to address the issue of what is a competitive return for land, the land monopoly in many area and the monopoly of the house builders when it is not in their interest to build more houses and flood the market with their product. So if the monster viability is to have some respect we need to change our attitude to the models and the appraisals- we have to appreciate its limitations (as well as its usefulness).

I started with a crash – I hope I don’t go out on another crash or is this the wallop. At this momentous time- leaving the EU it is certain the questions of viability will remain- it should be the approach and culture that surrounds  viability assessments that will be important going forward.

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Housing crisis – There is about to be a new government – it will be fine…

Listening to Radio 4, women from Bexley were talking about when they were young – they got married, lived with their parents for a year to save a deposit for a house, and then bought one. They went on to say that now there was no way their children could do that.

Who’s fault is that? One said the government had to do something  and another said that the government couldn’t do anything, and it was all because we were too soft letting too many people into the country.

The impact of the ageing population still living in their houses, some people still having babies increasing the need for supply, years of undersupply and decreasing affordability, exacerbated in some areas by the domestic draw of economic prosperity; seems to be forgotten by the ‘immigration’ viewpoint put forward particularly in the press.

There is just not enough housing nor is there enough planning for housing. And there’s increasing resistance to housing in many areas – often where the need and demand is highest. Essentially, people don’t like change; people particularly don’t like change that in any way undermines their personal life experiences.

What makes people resistant to new housing development (I have been here before https://planningadvisor.wordpress.com/2012/08/07/what-we-want-is-economic-growth-but-not-house-building/) is lack of infrastructure and lack of the provision of affordable housing for those in their community. People will resist when they find that they can’t get their child/grandchild into the local school, when it is more difficult to get a doctor’s appointment etc.

People fail to connect that their view of not wanting new development next to them, in their town, on their countryside, to why their children are still living at home at 26 – and why the generation of 20+ now don’t contemplate ‘family’ life as they are still living in their mum and dad’s back bedroom.

So surely, the government, house builders, developers, land agents and all the others involved in the industry know this…? Well, yes, but effectively tackling the infrastructure issue appears too challenging and politically the issue of more housing at a local level is toxic in many areas. So, the main political parties appear to agree that there is a housing shortage but… they will need to translate national rhetoric to local policies in action – they will have to demonstrate leadership and bottle to deliver and meet the needs of the country and its population, particularly the young. To do this they will need to take on the vocal ‘middle-aged’ middle class and the self-interested landowners, developers, housebuilders etc..

At present some government policies have made it more difficult to achieve the provision of affordable housing and housing accompanied by infrastructure.

The CIL Regs which now prohibit pooling five or more s106 obligations (as a reason for granting planning permission), with only a third of local authorities having a CIL in place, will mean that many authorities have no mechanism to collect contributions towards the necessary infrastructure that communities crave. This lack of a mechanism may make it impossible to get contributions to even basic mitigation which may result in the refusal of development including market and affordable housing development that are so desperately needed.

In addition, both CIL and now S106 net off existing vacant floorspace – further reducing the LPA’s ability to seek contributions to infrastructure and affordable housing respectively.

I have before voiced concern about the issue of viability, land value and the role of the land owner (https://planningadvisor.wordpress.com/2014/01/21/do-the-landed-aristocracy-hold-the-key/) if this is appreciated as a crisis – harming lives and the country’s prosperity – the role and expectation of the landowner needs to come under scrutiny and be addressed by government.

All that said, an obvious difficulty is that the planning system keeps changing – local planning authorities (LPAs) keep getting knocked off course with their plan making and their CIL. Every time something changes they have to review their evidence, update their evidence, spend more money, get council approval and so on… An example of this is six changes to the CIL regulations in five years and changes by examiners to the interpretation of these regulations, most notably in relation to viability and affordable housing.

Changes to s106 and CIL knock on to plan-making and plan wide viability. And, finally, the challenges of objectively assessed need and duty to cooperate (with no regional plan), which need to be balanced, should not be underestimated as obstacles to the planning and delivery of housing.

But don’t worry – there is about to be a new government – it will be fine..

Community Infrastructure Levy hits Housebuilding – If only it were that simple!

Savills’ recent report, referred to by Planning and the FT – http://offlinehbpl.hbpl.co.uk/NewsAttachments/RLP/SpotlightCILIs_it_delivering.pdf – seem to suggest the correlation between introducing a CIL and an area not being attractive for house building is simple. I don’t think it is a clear correlation to say CIL makes the area less attractive for house building.

Firstly there are very few authorities with CIL – many of them have relatively recently adopted it – Savills’ evidence base is not huge (16 local authorities). Nearly all of those that have a CIL already had a plan in place. These may have already consented much of their growth and will have allocated sites that have been the subject of planning consents that are already being built out – in the best plan led fashion. That cannot be said for all the authorities in the country.

Also, as identified by Savills, there is a huge a spike in the numbers of planning applications being granted subject to s106 obligations at every authority pre the adoption of a CIL. Many of these schemes have been in negotiation for years and to start again with discussions in a CIL world would not be desirable –although the decision rests with the developer. It is also worth bearing in mind that a lot of applications will have been hanging around for some time pre CIL as developers want a planning ‘decision’ and by that they often mean the resolution to grant subject to a s106. They are not always in a hurry to complete the s106 as they are not intending to go straight on site and the resolution will be enough for them to work on. However an authority’s decision to adopt CIL gives a new imperative to get the s106 sorted.

To compare these limited CIL authorities with the rest of the country is very misleading- it should be noted that areas without CIL are also usually areas without a plan and probably, in a lot of cases, without a five year housing land supply. These areas are magnets for developers seeking consents on unallocated land under the NPPF- the rush has been on to get planning permission on these non-plan led sites – increasing the number of houses granted in some areas.

In terms of getting money in – that only happens in a CIL regime when the development starts and in the cases of authorities with an instalments policy later still. So it is not surprising that these 16 authorities, after only a year, have little to show so far considering: the post adoption lull of consents, then the normal lag to get development on site, the developer focus on areas which are targets for non-plan led housing, and that CIL money at most authorities will only ever be able to contribute a relatively small proportion of the overall infrastructure costs associated with the growth plan.

Savills do make a very good point that CIL does not get collected from the broad range of development originally envisaged and the amount the charging authority are able to collect has been reduced due to the neighbourhood proportion, the changes in exemptions including self-build. Most authorities with large strategic sites appear to be sticking to the use of s106 with zero or low CIL for broader strategic infrastructure – this aids the delivery of key infrastructure on these large sites. Where possible, and the CIL/s106 rules allow, CIL will be best used as match funding or part of a wider funding strategy bring in money from LEPS, City Deals, New homes bonus, business rate retention etc. for strategic or sub regional infrastructure; but all of this takes time to implement. Many charging authorities (District level) have not had the experience of pulling together funding, forward funding, and delivery of major infrastructure. This is a whole new area where they will need to develop the skills and mechanisms to deliver projects themselves or with others. Having available mechanisms for future funding infrastructure and available advice for these authorities will help the delivery of infrastructure projects in these areas.

No More Pooling – Date is Looming: Thoughts of a CIL Anorak

I have been wearing my CIL anorak a lot recently – fully zipped up and my hood on… It seems that no matter how long I do CIL there are always questions to be pondered on – these are the ones that are exercising me at the moment.

Do people really get that there is no pooling of more than five s106 obligations after 2015? I am not convinced that this has totally sunk in – or that the implications of this has been explained to councillors or management teams. I also think that some think that there is a way around it – if there is please tell me! I can understand that some take the view that they will do everything on large strategic sites with s106 – this might be possible but:

• Have you worked out how you can make sure that these sites are not broken up into more than five parcels?
• Do you have policies that define not only the new developments but also the required infrastructure on the strategic site?
• And will you only accept a master planning application for the whole package? Would you be in a position to refuse applications that came in for chunks of it?

If you have thought this through and have an air- tight approach – I am really interested. It certainly needs a lot of thought.

In areas where the growth is not strategic sites I am truly puzzled if people think the pooling limit will work for them. The assumption must be that they will not bother. That CIL is not worth doing, is too expensive to implement, there’s not enough viability to get a decent rate, and will only provide 5-10% of infrastructure money (a small contribution – but not to be sniffed at I would have thought). So, is the focus on ‘New Homes Bonus’ to provide supporting infrastructure?

I also worry that some think that you can still pool if it is site-specific mitigation – just to be clear –you can’t pool five or more, even if it is necessary to make the development acceptable in planning terms.

So what will you do? Refuse it?

Oh, to end on some potentially good news – there is no pooling restrictions on s278 of the Highways Act. Hooray!

For more information, see the CIL section on the PAS website.

Do the landed aristocracy hold the key?

Mr Boles I have an answer for you : It is the land value that stands in the way of development- whether that is development accompanied by infrastructure, development accompanied by affordable housing, or in some cases just development in the spatially appropriate place.

In the PAS courses that I run on viability – viability is ‘all about delivery’ (my catchphrase). But in some places is this actually possible on paper, and/or in reality?

The existing community will do everything they can to

What we want is economic growth….. but not house building

Recently I have spent a lot of time listening to people talk about economic growth – how welcome it would be and how they would like to encourage it. The country certainly needs it and most councillors I hear from want to promote it. If you asked communities if they would like the council to help boost their economy I am sure they would say yes.

This is why I want to SHOUT very loudly – “How can you expect the economy to grow when you are anti housing development?”

With a population that is rapidly ageing occupying the existing housing stock and a continuing failure to build housing – where are the workers in the economy going to live? With mum and dad forever?

View from the CIL

About a year ago it became apparent that the government was going to keep the fundamentals of the Community Infrastructure Levy (CIL). Authorities who had paused to see what would happen with CIL started work on it again. I have been involved in both the CIL Front Runner projects and it has been a steep learning curve for all.

The key things I have learnt are:

The Jigsaw Puzzle

I have been to a couple of different seminars and workshops lately on the subject of -not surprisingly – spatial planning. Following these seminars I have been contemplating spatial planning in the real world……