Ministers must tackle the corrosive impact of viability appraisal concerns, by Jamie Carpenter

Away from the main conference hall and the Prime Minister's mishap-strewn speech, one of the most compelling scenes to witness at last month's Conservative Party conference was the hard time given to the communities secretary by his own councillors over the use of viability assessments in the planning system.

Sajid Javid faced a barrage of questions over the viability process, with several delegates arguing that developers are using the system to reduce their affordable housing obligations.

One month on, and housing charity Shelter has ruffled a few feathers with a report criticising developers for exploiting a "legal loophole" in order to get out of building affordable homes.

Commentators are divided on whether such a loophole exists. Some accept Shelter's thesis that the National Planning Policy Framework's "competitive returns" wording allows developers to cite viability concerns to lower the amount of affordable housing they are required to provide in order to guarantee a "20 per cent profit margin and inflate their bids for land".

But for others, what Shelter is describing is policy, rather than a legal loophole. They say that the use of viability assessments is an appropriate check and balance and that the charity's report underplays the role played by local authority valuation experts in scrutinising developers' arguments.

Nevertheless - as Javid's comments in Manchester suggest - in urging ministers to reform the system of viability assessments, Shelter is pushing at an open door. Like Javid, the planning minister Alok Sharma believes the system needs to change. "The starting point is that clearly the system as it is does not work," Sharma told MPs last month. Proposals contained in the government's recent housing need consultation, including to limit the use of viability assessments at the application stage, further underline ministers' appetite for change.

In exploring options for reform, ministers could do worse than to look to London, where practitioners say that a couple of recent developments have resulted in a step change. An appeal decision issued in June, in which an inspector held that an "inflated land value" should not be "subsidised by a reduction in affordable housing", combined with the mayor's new planning guidance, which offers a fast-track route for schemes providing 35 per cent affordable homes without subsidy, are helping to embed affordable housing requirements into land values in the capital, they say.

Pinching policies from the London mayor may prove a step too far for Tory ministers. But it is crucial they get this right. The perception that policy makes it too easy for developers to escape affordable housing contributions is corrosive for confidence in the planning system. It must be tackled with urgency.


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