Viability assessment and affordable housing
The most controversial implication of viability assessment is its impact on local authority affordable housing policies under section 106 agreements. This refers to a local authority planning obligations for a standard percentage of affordable housing from housing developments of more than 10 housing units. Given that for most local authorities this had become the principal means by which affordable housing could be delivered, it was of major concern (ref.) Many local authorities require 30%-40% of all new housing on large sites to be affordable i.e. sub-market housing usually bought and managed by a housing association. From a landowner point of view any reduction of the maximum amount of market housing on his site reduces the price of his land and reduces his incentive to sell to a developer. The developer on the other hand, is not usually willing to reduce his profitability; he will move to another site where he can achieve his benchmark profit level.
Thus, together developers and landowners aim to minimise the percentage of affordable units as far as possible; and viability assessment provides a means for them to do this. If they can show that the value of a completed development with the required policy percentage of affordable housing minus the costs of the scheme produces a land value that is below their benchmark, the scheme can be deemed unviable. Under the National Planning Policy Framework (NPPF), the planning authority will then be required to reduce its planning obligations for affordable housing until they reach the profit benchmark of the developer. READ MORE: Tensions_Viability_paper_viability_2015