What happens when councils require developers to make viability assessments public?

What happens when councils implement a viability 'open book' policy, Joey Gardiner asks.

New homes: more councils requiring full publication of the viability assessments undertaken by developers
New homes: more councils requiring full publication of the viability assessments undertaken by developers

Lambeth and Tower Hamlets this month became the latest councils to require full publication of the viability assessments undertaken by developers, which critics say are sometimes used to dodge affordable housing targets.

These formal borough plan policies come in the wake of the mayor of London’s viability supplementary planning guidance, published in August, and a joint protocol agreed between all London boroughs in November 2016 that both urge the full publication approach.

Last month, a government consultation promised to make viability assessment "more transparent" across the country. Islington, Southwark, Hounslow and Greenwich councils have now had similar policies to Lambeth’s and Tower Hamlets’ in place for more than a year.

Gilian Macinnes, of consultancy Gilian Macinnes Associates, says a number of authorities outside the capital are also set on making viability assessments available to the public, with Brighton & Hove City Council recently declaring its intention to start doing so from this month. "It is the direction that everyone seems to be heading in," she says.

These moves follow increasing concern over the use of viability assessments by developers to sidestep planning requirements, particularly in relation to affordable housing. A series of legal judgments have made clear that, given the public interest, developers cannot expect to always rely on commercial confidentiality concerns to keep these assessments private.

The early experience of authorities and developers that have taken the open book approach suggests developers, despite lobbying against the policies, mostly play ball. Katherine Dunne, cabinet member for housing at the London Borough of Hounslow, says the borough has met "very little resistance to the publication of viability assessments", with Southwark and Greenwich echoing this.

So far, some authorities appear happy to listen to developers’ arguments to keep specific pieces of information, such as construction cost schedules or rights to light compensation, out of the public domain, while others are more rigid.

For example, a spokesperson for Islington Council said it had "not agreed to any exceptions to its transparency and confidentiality requirements" and publishes both developers’ and its own viability assessments on major applications and its own assessments on minor ones. But one consultant told us that on minor applications he has submitted for clients in the borough, the council has not published either his or its own viability assessments, and that he would resist any dissemination of clients’ figures in such appraisals. However, the council says that it will publish assessments of this consultant’s clients’ schemes in due course.

Anthony Lee, joint head of residential advisory at consultancy BNP Paribas Real Estate, says: "I don’t think transparency has been enforced very rigidly." Both Lee and Mark Smith, managing director of consultancy Affordable Housing 106, say this is a good thing. "If more is made public then reports will be more careful and guarded," says Smith. But for Sue Brownill, reader in urban policy at Oxford Brookes University, this approach is a sign that developers are finding ways round the system: "They’re clever people and can employ more clever people to get round this."

Either way, the boroughs with these policies are not claiming transparency alone has increased the amount of affordable housing generated. This doesn’t surprise Lee. "There have been a lot of conspiracy theories and people might assume that making this public influences the outcome," he says. "But it makes no difference."

Case studies

Greenwich

In January last year, the Royal Borough of Greenwich became one of the first authorities to put viability assessments in the public domain, by adding them to an updated list of information required for new planning applications. The move came after it lost a legal battle to keep confidential the details of a viability assessment on developer Knight Dragon’s controversial 10,000-home Greenwich Peninsula scheme. In 2015, a first tier tribunal judge found it was "particularly hard to accept that the pricing and other assumptions embedded in a viability appraisal are none of the public’s business".

Victoria Geoghegan, assistant director of planning at Greenwich, says developers in the borough now expect that full viability assessments will be published as standard. "Initially, there was some resistance," she reveals, "but now I think there’s general acceptance of the approach."

While Geoghegan makes clear that developers are able to make the case for keeping specific information secret, such as estimates of rights to light compensation, she says this happens rarely. In fact, Greenwich has a reputation for being "very prescriptive" in enforcing transparency, according to Anthony Lee, joint head of residential advisory at consultancy BNP Paribas Real Estate. "The only way to demonstrate we’re doing our job is to let everyone see it," says Geoghegan.

But Lee says this rigidity over including all details actually leads to developers removing detail from assessments, making it more time-consuming for councils to validate the documents’ claims and assumptions. "There’s a tendency for the viability assessments to move away from using real figures to very generic inputs," he adds. "This means you’re moving away from reality. In Greenwich, the data ticks all the boxes, but can be light on detail." But Geoghegan defends the approach: "These assessments tend to be quite generic anyway. It’s why we have robust viability consultants to check whether it’s reasonable."

While Geoghegan reckons it is too early to say whether the transparency requirements have increased the amount of affordable housing, she says it is notable that "quite a few" developers have chosen to avoid the need to publish viability assessments by offering above the 35 per cent affordable housing threshold. She sees no sign that developers have been put off working in the borough. "We’re falling over sites in the pre-application stage," she adds. "There’s no slowing down of interest."

Southwark

The London Borough of Southwark brought in its own transparency policy around viability shortly after Greenwich, in March 2016. It put the requirement in a supplementary planning document to its local plan. What marks Southwark out is that it only requires an executive summary of the viability appraisal to be submitted initially, with the full assessment not published until "one week prior to determination".

A council spokesperson says its policy has meant that "developers know where we stand on the issue, and councillors and interested members of the public feel better informed". According to government figures, the number of affordable homes starting on-site in the borough nearly doubled between 2015/16 and 2016/17, rising from 393 to 692. But the spokesperson admits that the authority has not assessed whether this is because of its policy on transparency.

Like Greenwich, Southwark’s policy emerged after losing a fight with the government’s Information Commissioner, this time over the viability assessment for the redevelopment of the Heygate Estate. But Jerry Flynn, one of the local campaigners who fought to get that viability assessment released, says transparency has not improved the outcome. "The viability assessments don’t seem to have changed," he adds. Developers still assume profit margins that are too high, he argues, at 17-25 per cent, while "making very low expectations of what properties can be sold at". He adds: "We’ve got to take issue with these assumptions before things will change."

Moreover, Flynn says Southwark’s particular approach hinders scrutiny. "Only publishing the full document a week before determination is ridiculous," he maintains. "It seems almost purposely designed to frustrate transparency."

Southwark’s spokesperson says the council does not rely on objectors to challenge viability figures. "Officers will have already scrutinised the application and, if we do not agree with the assessment, pushed back to make the development policy compliant. This is part of ongoing discussions while the application is going through the process."


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