Benchmark land value in a viability assessment

Benchmark land value is the figure a viability assessment uses to represent what the land is worth before the proposed development, and it is the input that decides almost everything else. Set it high and the residual valuation shows the scheme cannot afford policy-compliant affordable housing. Set it low and it can. Councils know this, their reviewers test this line first, and most viability disputes at application stage are arguments about benchmark land value dressed up as arguments about build costs.

National guidance is unusually direct about how it should be derived.

What the figure is meant to represent

Benchmark land value stands for the minimum the landowner could reasonably be expected to accept before deciding to keep the land in its current use instead. It is not what the developer paid. It is not what an agent thinks the site would fetch on the open market with an unencumbered permission.

Planning Practice Guidance on viability sets the approach: benchmark land value should be based on existing use value, allow a premium to the landowner, and reflect the implications of abnormal costs, site-specific infrastructure costs and professional site fees. That formulation, usually shortened to existing use value plus a premium, is the default and the starting point for any assessment a council will accept.

The point of anchoring to existing use is that it strips out the developer's own expectations. A site bought in the expectation of a lower affordable housing contribution than policy requires does not become less viable because of the price paid, and the guidance says so.

Existing use value plus a premium

Existing use value is the value of the land in its current lawful use, valued on the assumption that use continues. A working farmyard is valued as a farmyard, an operating warehouse as a warehouse, a scrubby infill plot as whatever it lawfully is.

The premium is where the argument sits. Guidance describes it as a reasonable incentive for a landowner to bring the land forward while allowing a sufficient contribution to comply fully with policy requirements. Two constraints follow from that sentence.

The premium has to be enough to persuade a rational landowner to sell. And it has to be small enough that policy requirements can still be met, because a premium calculated by working backwards from the developer's target profit defeats the purpose of the exercise.

Comparable evidence helps, but it needs adjusting. Transactions in the same market usually reflect the affordable housing and infrastructure assumptions the buyers made at the time, so unadjusted comparables import those assumptions into your benchmark. Say how you have adjusted them.

When alternative use value is admissible

Alternative use value can be used instead of existing use value, but only where the alternative use is a real prospect rather than a valuation device.

The tests are whether the alternative use has planning permission, or whether it can be demonstrated that it would be an appropriate use in policy terms and could actually be implemented. So a redundant office building with an extant consent for a hotel has an alternative use value that is arguable. The same building with no consent, in a location where the local plan resists hotels, does not.

Reviewers look for three things: evidence of the policy position, evidence that the alternative use is deliverable on this site, and evidence of demand. A single agent's letter asserting that a site would be worth more as something else is not enough on its own.

Why market value is treated with caution

Market value has a place, and the guidance permits its use, provided the value reflects policy-compliant assumptions. In practice that qualification does most of the work.

Where a developer paid a price that only makes sense if the scheme delivers less affordable housing than the plan requires, that price is evidence of what happened rather than evidence of what the land is worth in policy terms. Using it as the benchmark asks the council to underwrite an overpayment. Officers refuse to do that, and inspectors have not been sympathetic to the argument either.

There is an honest tension here. Land markets do not always behave as policy assumes, and a site that will not transact at its policy-compliant value may simply sit undeveloped. That is a real problem, and it is one reason plan-making viability testing matters more than site-by-site negotiation. It is not a reason to inflate the benchmark on an individual application.

What a council's reviewer will test

Assume the assessment goes to an independent reviewer appointed by the council, paid for by the applicant. They will work through, in roughly this order:

• the basis and date of the existing use valuation, and whether the use valued is the lawful use
• the evidence for the premium, and whether it is derived from adjusted comparables or asserted as a percentage
• whether alternative use value has been substituted without meeting the policy and deliverability tests
• abnormal costs, tested against a quantified schedule rather than a lump sum
• professional fees, marketing costs and finance rates against market norms
• the developer's return, its basis, and whether a different return has been applied to the affordable housing
• sales values and build costs against published cost data and local evidence
• the site's planning history, including any earlier viability position taken by the same applicant

Two habits improve the outcome. Show the calculation rather than the conclusion, including the sensitivity of the answer to the benchmark itself. And disclose the purchase price and date, because the reviewer will find them at the Land Registry and an omission reads as concealment.

Note that viability assessments submitted with an application are expected to be publicly available, in line with the transparency requirements in national guidance. Write them knowing objectors will read them.

How the benchmark drives the affordable housing outcome

The mechanics are simple, which is what makes the input so powerful. Gross development value, less build costs, fees, finance and the developer's return, produces a residual land value. Compare that residual against the benchmark. If the residual exceeds the benchmark, there is headroom for contributions. If it does not, the assessment concludes the scheme cannot bear the full policy requirement.

Move the benchmark by a modest amount on a site of any size and the conclusion flips, which is why the viability assessment has to justify the benchmark rather than assert it. Councils increasingly respond to a viability case with review mechanisms in the section 106 agreement, so that if values improve or costs come in below forecast the contribution is recalculated later. Early-stage and late-stage reviews are now standard drafting in many authorities.

Where a reduced affordable housing offer is agreed, the affordable housing statement should record the tenure mix and the review triggers as well as the numbers. And note that viability affects section 106 obligations rather than the levy: Community Infrastructure Levy liability arises from the charging schedule and is not negotiable on viability grounds in the same way.

Viability work is a specialism. Councils expect a suitably qualified author, usually working to the relevant RICS professional statement on financial viability in planning, and professional review is strongly advised before submission. PlanScope drafts the structure and the policy framing of a viability assessment and flags where inputs are missing rather than inventing them, and the valuation judgements belong to the valuer who signs it.

This is general guidance, not legal advice. Check the position with your local planning authority or a qualified professional before relying on it.

Browse the 66 PlanScope report types to see how the viability and obligations documents sit in a major application pack. PlanScope provides AI-assisted draft reports for planning applications. Reports should be reviewed before submission. We do not guarantee planning approval.