In April, a High Court judge urged professional bodies and ministers to rethink existing guidance on development viability in a bid to clear up "misunderstandings" over market valuation concepts and techniques.
The aim, said Mr Justice Holgate, should be to avoid protracted land-value disputes, streamline decision-making and keep the judiciary out of arguments over "detailed valuation material".
The plea appeared in a lengthy "postscript" to Holgate’s ruling on a controversial appeal decision in June 2017 to refuse developer Parkhurst Road Ltd’s plans for 96 homes on a former Territorial Army centre site in north London.
The judge backed an inspector’s conclusion that the developer had not justified an affordable housing component of only ten per cent as the "maximum reasonable level", against a London-wide benchmark of 35 per cent and a borough target of 50 per cent, and that the viability review mechanism in its proposed unilateral undertaking was inadequate.
Now, in an open letter to RICS, the London Borough of Islington’s executive member for housing and development, councillor Diarmaid Ward, and London’s deputy mayor for housing and residential development, James Murray, have called on the professional body to amend its Financial Viability in Planning (2012) guidance note in line with the court’s judgement.
The RICS guidance treats market value as the appropriate benchmark for testing viability and determining affordable housing contributions. In contrast, boroughs like Islington are backing sites’ established use value (EUV), plus a premium, to reflect developers’ returns, as the benchmark for viability affordable housing provision.
Murray said: "The mayor wants to see more social rented and other genuinely affordable homes built in London – so alongside councils building more homes themselves, that means developers doing their bit too.
"To make sure this happens, we need clear planning guidance without any loopholes, which is why the mayor published new planning guidance within his first few months in office and why we want to make sure this approach is followed widely to benefit all Londoners."
New Planning Practice Guidance on viability, published by the government in July, states that a site's benchmark land value should be assessed by reference to its existing use value, plus a premium for the landowner, while a site's market value will not inform assessments.
Tony Mulhall, an associate director in RICS’ land group, said: "RICS is in the process of reviewing its technical guidance for planning and viability, to align with government’s recently published National Planning Policy Framework and Practice Guidance.
"This review process has established input from both public and private sector expertise, and the working group looking at our technical guidance in this area comprises representation from MHCLG, the RTPI, and the Law Society as well as GLA. We expect to have a draft available before the end of 2018.
"In the second stage of this review, RICS’ is addressing the recent comments published by Mr Justice Holgate including his desire for our guidance to play a central role in this area. Once complete, this will provide greater clarity on the methodology to be adopted by the profession in undertaking viability assessments, within the parameters of the government’s current policy.
"We intend to consult on the second stage of our review early in 2019 and, as above, will actively be encouraging broad input from stakeholders."
This article was updated at 14:45 on 11/10/18 to add the above comment from RICS