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”..
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.