The Royal Institution of Chartered Surveyors (RICS) is consulting on fresh draft viability guidance to reflect new policies in the revised 2018 National Planning Policy Framework (NPPF) and subsequently updated Planning Practice Guidance (PPG).
The revised NPPF and PPG include a requirement for viability assessments to be carried out when local plans are being prepared and aim to discourage their use in association with specific planning applications.
RICS' draft Assessing financial viability in planning under the National Planning Policy Framework for England replaces a guidance note published in 2012 after publication of the first NPPF.
The consultation states that a surveyor should be appointed "at a very early stage" in the plan-making process and should work with planning officers to review evidence and agree an approach to viability assessment, including the strategic sites and development typologies to be tested.
Local authorities will rely on the viability assessor to help "generate value and enable delivery of planning policies", the guidance states, adding that plan policies informed by viability assessments will likely include changes to land use, density, and infrastructure requirements.
While "it is the responsibility of the [planning authority] to lead the overall consultation", surveyors may "take the lead on technical aspects", the guidance states.
Surveyors are advised that viability assessments undertaken during the plan-making process should include "testing of alternative economic scenarios and the sensitivity of individual inputs" that take into account the cyclical nature of land markets.
However, "inputs into the viability assessment should not be adjusted to conservative estimates", the guidance states, describing market cyclicality as a "development risk" that should already be accounted for in a developers’ risk-adjusted return.
"In summary, the outcome of a [viability assessment] should not be viewed as a financial certainty, and marginal unviability in both plan-making and decision-taking should not be used to reduce plan requirements", the guidance says.
Similarly, the guidance advises that viability review mechanisms should be used to help secure policy-compliant developer contributions over time and "are not a tool to protect the developer return".
Site owners and developers will therefore be expected to engage in viability assessments undertaken at the plan-making stage. The guidance states: "If this did not occur, the onus is on the applicant to demonstrate why."
The new draft guidance follows an updated note published by the RICS in May on the conduct expected of their members involved in preparing viability assessments.
The RICS consultation closes on 9 February 2020.