Benchmark land value and the existing use value approach

Benchmark land value viability arguments are usually won or lost before anyone looks at the build cost. The benchmark is the figure the appraisal's residual land value is compared against, and because the surplus or deficit is the difference between two large numbers, a change in the benchmark of 10 per cent can turn a scheme from policy compliant to unviable. Which is why authorities scrutinise it harder than any other input, and why the Planning Practice Guidance on viability sets out how it should be established.

The guidance is clear on the primary method: benchmark land value should be based on existing use value plus a premium for the landowner, with the premium reflecting the minimum return at which a reasonable landowner would be willing to sell.

Why the benchmark decides the answer

The appraisal mechanics are simple. Gross development value, less build costs, fees, finance and developer return, gives a residual land value. Compare that residual with the benchmark. If the residual exceeds the benchmark, the scheme can carry more policy obligation. If it falls short, the applicant argues for less.

Because the residual is a difference between two much larger figures, it is highly sensitive. A 5 per cent movement in sales values or in build cost can swing the residual by a large multiple of that proportion. The benchmark, as the comparator, carries the same weight in the other direction.

So two appraisals using identical costs and values can reach opposite conclusions on affordable housing because one used existing use value plus 20 per cent and the other used a market value derived from transactions in a market where nobody was applying current policy. That second approach is precisely what the guidance warns against.

Existing use value plus a premium

The method has two parts, and both need evidence.

Existing use value is the value of the land in its current use, assuming no development potential and no hope value. For a working farm, agricultural value. For an occupied industrial building, the investment value based on the passing rent and yield. For a vacant building, the value in its existing use with an allowance for its condition and void. The valuation should be dated, should state the method, and should be supported by comparable evidence.

The premium is the part that gets argued. The guidance frames it as the minimum return at which a reasonable landowner would be willing to sell, and it is not a fixed percentage. The relevant considerations:

• The nature and security of the existing use income, since a landowner with a long income stream needs more to give it up than one holding a derelict site
• The owner's circumstances only to the extent they are typical of a reasonable landowner, not their individual aspirations
• The policy context at the time, because a landowner is expected to know that policy applies
• Evidence of premiums accepted on comparable sites, from published appraisals, committee reports and appeal decisions
• Any site-specific abnormal costs, which belong in the appraisal rather than in the premium

Premiums in the range of 10 to 30 per cent above existing use value appear frequently in published decisions, with higher figures where the existing use produces secure income. That is an observed range from public documents rather than a rule, and quoting a figure without evidence from the locality will be challenged.

When alternative use value is relevant

Alternative use value is the value of the site for a different use that would itself be permitted. It is a legitimate consideration in limited circumstances, and the guidance restricts it.

The test is whether the alternative use would in fact be granted permission, taking full account of policy requirements including affordable housing. A landowner cannot claim the value of a hypothetical office scheme that policy would refuse, or claim the value of a residential scheme while discounting the affordable housing that scheme would have to deliver.

Evidence that supports an alternative use value claim: an extant permission for the alternative use, a site allocation for it, or a clear policy basis with an appraisal of that alternative applying full policy compliance. Where the site already holds a consent, the analysis changes again, as our note on benchmark land value where the site already has consent sets out.

What does not support it: a pre-application response, an agent's opinion, or a comparable transaction for a site whose planning status was different.

Market value with policy-compliant assumptions

The third approach is where most disagreement starts. A price paid for a site is evidence of what a buyer paid, not evidence of what the land is worth with policy applied. Where the purchaser paid a figure that only works if affordable housing is reduced, treating that price as the benchmark imports the error into the planning decision. The guidance addresses this directly: the price paid for a site is not, by itself, a justification for failing to comply with policy.

That principle gets resisted by applicants and it is firmly established in practice. An overpayment is a commercial decision, not a planning consideration.

Evidence authorities accept

What a benchmark section should contain for an officer or their consultant to accept it without a full independent review:

1. A dated valuation of the existing use with the method stated and comparable evidence annexed, prepared by a valuer with relevant local experience.
2. The premium stated as a figure and a percentage, with the reasoning and with comparable evidence from the same authority area where it exists.
3. A sensitivity analysis showing the effect on the surplus of moving the benchmark up and down by defined amounts.
4. A statement of what the site cost and when, with an explicit acknowledgement that the price paid is not the benchmark.
5. The alternative use analysis, where relied upon, with its own appraisal on policy-compliant assumptions.
6. All assumptions in a schedule a reviewer can check line by line.

Point three is the one most often omitted and the one that most helps an applicant. A sensitivity table showing that the conclusion holds across a reasonable range of benchmarks is far more persuasive than a single number asserted with confidence.

Our note on viability appraisal submission format covers the document structure, and independent review of a viability appraisal explains what the authority's reviewer will test.

Errors that undermine the benchmark

Using the purchase price as the benchmark, as above. Still the most common.

Double counting. Including abnormal costs in the appraisal and also reflecting them in a reduced existing use value, which takes the same deduction twice.

Treating hope value as existing use value. The existing use valuation assumes no development potential, so a farm valued at a figure that reflects its allocation in the emerging plan is not an existing use value.

Stale valuations. A benchmark valued two years before submission, in a different market, invites a request for an updated figure and a delay.

Ignoring the policy context at the date of acquisition. Where a site was bought after the relevant policy was adopted, the landowner is taken to have known what the policy required.

And presenting a premium with no evidence at all, on the basis that 20 per cent is what everyone uses. It may well be what many decisions have accepted, and the applicant still has to show why it applies here.

Presenting it so it survives scrutiny

The benchmark section should be short, numbered, and written so a reviewer can agree or disagree with each step rather than with the conclusion. Separate the existing use valuation from the premium, give each its own evidence, and state plainly what the figure is and how a different assumption would change the outcome.

Where the existing use is itself unusual, such as a part-occupied listed building or a site with a temporary use generating income, the valuation needs explaining rather than asserting. Our note on listed building conversion viability deals with the first of those.

The honest position on this whole area: benchmark land value is a judgement supported by evidence, not a calculation, and two competent valuers can reach figures 20 per cent apart in good faith. Which is why the sensitivity analysis matters more than the point estimate, and why an applicant whose case depends on the benchmark being at the top of the defensible range should expect an independent review.

The Viability Assessment is the document that carries this, and the figures in it will be tested by a valuer acting for the authority. Draft it with PlanScope, then have the valuation reviewed by an RICS-registered valuer before submission.

This is general guidance, not legal advice; check the position with your local planning authority or a qualified professional before relying on it. PlanScope provides AI-assisted draft reports for planning applications. Reports should be reviewed before submission. We do not guarantee planning approval.