Property investor and developer V-Fund had full planning permission from the London Borough of Greenwich to redevelop several buildings at Depford Bridge.
Its scheme included the retention of one property and the demolition of other buildings and their replacement with several residential blocks with commercial units at ground-floor level.
A 2013 section 106 agreement specified that the scheme should contain three affordable homes.
But in December last year V-Group submitted an application to modify the affordable housing element on the grounds of its impact on the scheme’s viability, and subsequently appealed Greenwich Council's non-determination of the application.
Deciding in V-Group’s favour after a hearing last month, inspector John Felgate said that between December last year and May this year, the developer had twice revised down its profit-margin forecast for the scheme, reducing it from 11.69 per cent down to 7.61 per cent.
"Even based on the highest of these figures, the forecast range is well below the ’benchmark range’ of 15-20 per cent of costs, which is generally recognised as the minimum necessary to willingly bear the risks of carrying out a substantial development project of this nature," he said.
"On the latest corrected figures, which seem likely to be the most accurate, the viability gap becomes even greater."
Felgate said he understood the narrow time window Greenwich had to deal with the application to modify the S106 agreement, but said the council had not been able to present any evidence that gave him grounds to reject V-Group’s figures.
In a separate case, planning inspector Jeremy Sargent has refused an application to vary a s106 affordable housing agreement for a 16-home scheme in Ixworth, Suffolk.
St Edmondsbury Borough Council granted developer Lyons Lucas permission to build 13 homes on a 0.5-hectare plot at Dover Farm in the village.
The 2012 approval also allowed for a further three homes to be created with barn conversions and a subsequent section 106 order agreed the designation of five of the properties as "affordable".
Lyons Lucas sought to reduce the affordable provision down to a one-off contribution of £11,162, on the grounds that the benchmark residential value of the site was significantly higher than its original estimate.
But Sargent said the developer had failed to provide robust evidence for its case and dismissed the appeal.
For the Greenwich case please click below
For the St Edumndsbury case please click below