ReportReport GVA 3 Brindleyplace Birmingham B1 2JB Site Allocations and Policies DPD Viability Testing to support Site Allocations Document Wyre Forest District Council March 2011 gva.co.uk Wyre Forest District Council Site Allocations and Policies DPD Policy Wording – Viability Assessments CONTENTS 1. Introduction............................................................................................................. 1 2. Relevance of Viability to Planning Policy............................................................. 3 3. Research and Background Evidence .................................................................. 8 4. Recommendations............................................................................................... 13 5. Conclusions and Next Steps................................................................................ 20 Appendices Appendix A Other DPDs, SPDs and Planning Policy Documents March 2011 I gva.co.uk Wyre Forest District Council Site Allocations and Policies DPD Policy Wording – Viability Assessments 1. Introduction 1.1 GVA have been instructed by Wyre Forest District Council (WFDC) to develop a framework for viability testing to support the Site Allocations and Policies Development Plan Document (DPD), which is being prepared as part of the Local Development Framework (LDF) process. The overall objective of this document is to suggest policy wording, which will be included in the Site Allocations DPD to guide applicants’ (developer/landowner) assessments of viability when seeking to challenge planning gain / affordable housing provision on the grounds of viability at planning application stage. This document will set out the apprasial inputs and detailed evidence required to support the various assumptions adopted as part of the viability assessment in order to support applicants’ requests for reduced affordable housing provisions / planning obligations to WFDC. Approach and Methodology 1.2 Our approach has been to draw upon the previous viability work undertaken on behalf of WFDC in 2009/10, which provided a viability assessment of a selection of potential housing sites to be allocated through WFDC’s emerging Local Development Framework (LDF). 1.3 We have undertaken a review of other Development Plan Documents (DPDs) and Supplementary Planning Documents (SPDs) in relation to planning obligations and affordable housing to assess the approach taken to viability modelling elsewhere. We have also assessed the implications of our emerging best practice guidance note for the RICS on financial viability in planning, which seeks to provide Local Authorities and Chartered Surveyors with definitive and objective guidance on evaluating the impact of planning obligations and planning policy on the financial viability of development proposed by developers / landowners. This should be adopted as a formal guidance note by the RICS iminently. 1.4 This research and best practice guidance has been utilised to set out recommendations as to the policy wording, key inputs and evidence which will need to be submitted by applicants to WFDC. These recommendations set out a robust and clear framework for March 2011 I gva.co.uk 1 Wyre Forest District Council Site Allocations and Policies DPD Policy Wording – Viability Assessments developers and / or landowners when seeking to negotiate affordable housing provision / planning gain requirements on grounds of viability with WFDC. Report Structure 1.5 The remainder of the report is structured as follows: • Section 2 sets out the legislative and policy background, highlighting the relevance of viability to the current planning system; • Section 3 sets out the background to the project and the research undertaken to inform our recommendations; • Section 4 identifies our recommendations as to policy wording regarding the inputs and evidence required by developers for inclusion in the Site Allocations DPD; and • Section 5 identifies conclusions and next steps. March 2011 I gva.co.uk 2 Wyre Forest District Council Site Allocations and Policies DPD Policy Wording – Viability Assessments 2. Relevance of Viability to Planning Policy Legislative Context and National Policy 2.1 Viability implications should be a key consideration in the formulation of planning policy. The current planning policy framework and guidance on planning policy preparation is set out in Planning Policy Statement 12: Creating strong safe and prosperous communities through Local Spatial Planning (PPS12) (2008). In accordance with the principles of PPS12, good spatial planning should aim to create a framework for private investment and therefore encourage appropriate development in the right locations. If viability is not appropriately considered in setting planning policy objectives and strategies then development can become unnecessarily constrained and policy targets may become undeliverable. 2.2 PPS12 sets out the tests of ‘soundness’ in the adoption of Core Strategies and other Development Plan Documents (DPDs), such as Site Allocations and Area Action Plans. To be ‘sound’, PPS12 states that Core Strategies and other DPDs should be justified, effective and consistent with national policy. The issue of development viability, along with the availability of sites and their suitability for development, is critical to the consideration of deliverability and the effectiveness of the Core Strategy. At paragraph 4.44 PPS12 states that Core Strategies must be: • Deliverable; • Flexible; • Able to be monitored 2.3 In order to achieve the above criteria it is necessary for the viability implications of planning policy objectives to be understood to ensure that they can be delivered. In this sense the concept of viability is highly relevant to spatial planning. 2.4 In particular, viability is a key consideration when setting affordable housing policy and targets to ensure they are deliverable, flexible and set with regard to a robust and credible evidence base including an assessment of economic viability. This is acknowledged by Planning Policy Statement 3: Housing (PPS3) (June 2010). Paragraph 29 March 2011 I gva.co.uk 3 Wyre Forest District Council Site Allocations and Policies DPD Policy Wording – Viability Assessments of PPS3 states that in preparing Local Development Documents, LPAs should set an overall target for the amount of affordable housing to be provided and that this should “reflect an assessment of the likely economic viability of land for housing within the area, taking account of risks to delivery and drawing on informed assessments of the likely levels of finance available for affordable housing, including public subsidy and the level of developer contribution that can reasonably be secured”. 2.5 Certainty and clarity in policy making is important however at the same time policies should be able to adapt to changing market circumstances. For example, in considering appropriate levels of affordable housing, policies should allow account to be taken of scheme viability on a site-by-site basis. 2.6 In recent years it has become common practice for LPAs to set ‘tariffs’ or ‘standard charges’ for Section 106 contributions on new developments through Supplementary Planning Documents (SPDs). The key principles of PPS12 should also apply to the adoption of SPDs by ensuring that the requirement and levels of contributions sought are ‘justified’ by a robust and credible evidence base. The evidence base should again take account of the viability implications of the amounts sought. As set out in Circular 05/2005 (Planning Obligations) (July 2005), standard charges should not be applied in blanket form regardless of their actual impacts. Determination of Planning Applications (Section 106 / CIL and Tariffs) 2.7 Scheme viability is also a material consideration in the determination of planning applications as it is inherently linked to ‘delivery’. The consideration of financial viability in determining planning applications is particularly important in the context of negotiating Section 106 contributions/obligations, including affordable housing. 2.8 The source of the Council’s powers to seek planning obligations is Section 106 of the Town and Country Planning Act 1990 (as amended). The Government has issued guidance on Planning Obligations in Circular 05/2005 in which it provides detail on how planning obligations should work and when and how they should be sought by Council’s. Planning Obligations are intended for use to make development acceptable, which would otherwise be unacceptable in planning terms. Obligations can also be secured through unilateral undertakings by developers. March 2011 I gva.co.uk 4 Wyre Forest District Council Site Allocations and Policies DPD Policy Wording – Viability Assessments 2.9 The tests for planning obligations are set out in Circular 05/2005 and these apply to all land uses. Paragraph B5 requires that planning obligations are only sought where they meet all of the required tests, namely that they must be: i. Relevant to planning; ii. Necessary to make the proposed development acceptable in planning terms; iii. Directly related to the proposed development; iv. Fairly related in scale and kind to the proposed development; and v. Reasonable in all other respects. 2.10 Section 106 contributions are a development cost whilst the level of affordable housing sought affects the Gross Development Value (GDV). These in turn impact upon residual land value and profit. It is important to understand these impacts when negotiating Section 106 Agreements to ensure