In the late part of last week you may have noticed many references in the media to the so called ‘Legal Loophole’ that developers are allegedly exploiting in order to build less affordable homes. This article will provide a brief insight into the ‘loophole’ that these articles have been referring to.
Property developers drop plans to build many affordable homes each year and do so due to ‘viability assessments’. Viability assessments are used to evaluate the economic viability of any proposed development. The current Planning Practice Guidance says that a site will be viable ‘if the value generated by its development exceeds the costs of developing it and also provides sufficient incentive for the land to come forward and the development to be undertaken’.
The National Planning Policy Framework dictates that in order to ensure viability the costs of any requirements likely to be applied to development (such as requirements for affordable housing, standards or infrastructure contributions) should, when taking account of the normal cost of development and mitigation, provide competitive returns to a land owner and developer to enable the development to be deliverable. Should a Developer be able to prove by way of their viability assessment that the proposed amount of affordable housing at their site would make the development economically unviable, then they can apply for an exception or reduction in the required amount of affordable units on their site in order to make such development viable.
Viability Assessments are therefore often used to request a reduction in the amount of affordable housing that a Local Planning Authority has requested at the development.
Whether considered a loophole or not it would seem that the viability assessments are crucial in order to ensure that developments remain profitable and new homes are continually built.