Viability: handbook and intensive courses
Viability has been identified as an area where there is a significant skills issue for local government planners. Read our latest advice. You can also download the handbook, exercises and presentations from our popular series of intensive courses.
- Viability Testing Local Plans: Advice for planning practitioners
- RICS Financial viability in planning guidance
- Viability handbook and exercises
Viability has been identified as an area where there is a significant skills issue for local government planners. It is important for planners to understand:
- the language and approach of developers
- the criteria that developers use to assess development proposals
- risk and return for different types of developer and investors
- capital and revenue appraisals
- ‘yield' and why it is important
- financing development: working capital, investment finance and gearing
- residual valuations
- viability appraisals and models
- the impact of planning interventions on the viability of development
- how to commission more appropriate and useful viability assessments.
The Local Housing Delivery Group was set up as a cross-industry group involving a broad range of stakeholders with an interest in home building in England. It was set up in 2011 to:
- respond to the Government's challenge to boost the delivery of new homes
- simplify housing standards where possible
- support growth and high standards in home building by helping local authorities and developers find agreed ways to fulfil their obligations under the new National Planning Policy Framework (NPPF).
As part of the Local Housing Delivery group a working party was set up to develop viability advice for practitioners. The NPPF, has placed a much stronger emphasis on viability and in particular viability in terms of plan making. With a focus is on total plan viability, the NPPF calls for balance between sustainable development which benefits the local community and realistic returns for land owners and developers, so that development is commercially viable.
The document Viability Testing for Local Plans: Advice for planning practitioners was launched by Sir John Harman the Chair of the Housing Delivery Group on 22 June 2012. This document will be a useful resource to aid an understanding of the issues and language of viability testing for all those involved in plan making and the Community Infrastructure Levy. Please note the large file size:
In addition, as part of the work of the Local Housing Delivery Group, a working group has looked at local standards applied to house building and a report of their initial review has been published.
RICS Financial viability in planning guidance (October 2012)
The RICS have published a guidance note on financial viability in planning. The main focus of the document is site-specific schemes and it takes a market value approach. The stated purpose of the guidance is:
"The guidance note provides all those involved in financial viability in planning and related matters with a definitive and objective methodology framework and set ofprinciples primarily for application to development management."
And goes onto state:
"The motivation for undertaking this guidance note arose from the gap (partly as aresult of a lack of clear published guidance) that often occurs between what local planning authorities consider viable to provide, and what development proposals are actually capable of supporting financially, in terms of planning obligations, while seeking to meet policy requirements. This does not just relate to the ‘development management' stage of the planning process where section 106 agreements are negotiated, but also to the beginning of the spatial planning process where policy is formulated in local development plan documents. Viability is also relevant to local planning authorities when drafting Community Infrastructure Levy (CIL) charging schedules."
The approach taken in the RICS guidance to plan making viability and CIL is not recommended by the advice given in ‘Viability Testing in Local plans' document (pg 29 - see above) that was created by a cross industry working party chaired by Sir John Harman. The Harman report states:
"Consideration of the appropriate Threshold land value needs to take account of the fact that future plan policy requirements will have an impact on land values and landowner expectation. Therefore using a market value approach as a starting point carries a risk of building –in assumptions of current policy costs rather than helping to inform the potential for future policy."
It then goes on to state that market value can act as a useful sense check.
This distinction and the historic nature of the market value approach can be very important to local authorities when looking at plan wide and CIL viability.
Both of these documents should be read to increase an understanding of viability and the issues and language of viability. To ensure that you understand and agree with the approach your viability specialist is taking and the impact that will have on your policy making.
There are currently no plans to schedule any further viability courses.
The PAS viability handbook, developed for PAS by Roger Tym and Partners and Mick Beaman, has been created to help you understand these key elements of viability and enable you to feel more confident when dealing with issues of viability. The handbook sets out the development context and the basis of property development, looking at the different types of development and developers. It also covers:
- the language, concepts and tools used by developers
- development appraisals using simple residual valuations and more complex models
- sources of information, inputs and development costs
- examples of appraisal models for both residential and commercial development.
The handbook includes practical exercises for you to work through. These aim to consolidate the knowledge gained from handbook (and course materials). Some of these exercises can be done just using a calculator and others require the use of specific Excel spread sheets that have been designed for the course included in the materials.
Mick Beaman has produced some audio podcasts to support the handbook:
Podcasts and transcripts - on Mick Beaman's website
There are a very large number of different appraisal models on the market and some that have been specifically created for a development scheme. The models available below may be helpful in demonstrating the elements of viability discussed in the handbook.
- Basic Commercial Appraisal Model Example - RTP Michael Beaman Ltd (XLS, 69KB)
- Basic Residential Appraisal Model Example - RTP Michael Beaman Ltd (XLS, 71KB)
- Basic Residential Appraisal Model Example - RTP Michael Beaman Ltd (PDF, 2 pages, 157KB)
- Roger Tym Partners - Day 1 viability exercises Excel model (XLS, 124KB)
- Roger Tym Partners - Day 1 exercises presentations (PPT, 1.5MB)
- Roger Tym Partners - Day 2 viability exercises Excel model (XLS, 291KB)
- Roger Tym Partners - Day 2 exercises presentations (PPT, 721KB)
Note: There are many appraisal techniques and models available for use by the development sector. The models used in the handbook (and on the viability course), and presented here, are only examples and many of them have been created specifically to demonstrate and illustrate the points being made.
Additional course materials
The materials and presentations used on the viability courses we have run provide additional learning resources on viability. The materials include:
- Planning Inspectorate approach to viability (presentation, appeal and court decisions)
- HCA presentation and area wide viability model (AWVM) for more strategic approaches to viability.
- ATLAS presentation - viability case studies
- Roger Tym and Partners - an introduction to viability and planning, and getting and using advice.
22 July 2013