Independent review of a viability appraisal
A council will not take your appraisal at face value. Here is how the independent review works, where the disputes actually are and how to shorten it.
When a scheme comes forward with less than policy-compliant affordable housing, the council will not simply accept the applicant's appraisal. It commissions an independent review from a valuer, charges the applicant for it, and decides the affordable housing figure on the reviewer's advice rather than yours.
The review is not a formality and it is not usually hostile. It is a valuation exercise carried out by a surveyor who will look at four inputs first: the benchmark land value, the sales values, the build cost and the developer's return. Most disputes are settled on the first of those.
When a council commissions one
Two triggers are common. The application offers less affordable housing than the adopted plan requires, supported by a viability case. Or the applicant seeks to reduce or remove an existing obligation on a consented scheme.
Some authorities also review where the appraisal supports a nil or reduced Community Infrastructure Levy position, or where a development is large enough that the section 106 package is worth the fee on its own.
In London, the threshold approach in the London Plan changes the calculation. A scheme meeting the affordable housing threshold on the Fast Track Route does not submit a viability assessment at all, which avoids the review entirely, and that is usually worth more than the units it costs. Falling below the threshold puts the scheme on the Viability Tested Route, with a review at application stage and further reviews built into the section 106.
Who pays, and how it is secured
The applicant pays. Councils secure the fee before instructing, usually through a short written agreement or a unilateral undertaking, and some require payment up front into an account.
Two points to settle in that agreement. First, the scope: how many rounds of comment the fee covers, because a second and third round of exchange is normal and an open-ended instruction gets expensive. Second, whether the fee covers attendance at a meeting or at committee.
Ask for the reviewer's identity before agreeing. You are entitled to know who is valuing your scheme, and a reviewer who has recently acted against you elsewhere is worth raising early rather than after the draft lands.
What the reviewer looks at first
The order is fairly consistent, and knowing it tells you where to put your evidence.
| Input | What the reviewer tests |
|---|---|
| Benchmark land value | Whether existing use value plus a premium has been used, and how the premium is justified |
| Gross development value | Sales comparables, rates per square metre, unit mix, absorption rate |
| Build cost | Median or upper quartile cost data, externals, abnormals, contingency |
| Developer return | Percentage and whether it is taken on cost or on gross development value |
| Finance | Rate, arrangement fees and the period over which interest runs |
| Policy costs | Levy, obligations, and whether they have been counted twice |
Planning Practice Guidance sets the framework. Benchmark land value should be established on an existing use value plus premium basis, and the premium has to be justified rather than asserted. A price actually paid for the site is not the benchmark, and an appraisal built backwards from what the land cost is the single most common reason a review lands badly.
The guidance also treats a return of 15 to 20 per cent of gross development value as a suitable figure for market housing in most circumstances, with a lower return appropriate for affordable housing. Departing from that range needs a reason specific to the scheme.
Where the disagreements actually are
Benchmark land value first, every time. The applicant argues for a higher premium over existing use value on the basis that no landowner would sell for less. The reviewer argues that the premium has to reflect policy-compliant development, because otherwise the policy simply raises land prices.
After that, in rough order of frequency:
- Sales values, where the applicant uses second-hand comparables and the reviewer uses new-build evidence from the same submarket.
- Contingency stacked on top of abnormals that already carry their own risk allowance.
- Build cost percentile, where using upper quartile data for a standard scheme is hard to defend.
- Professional fees as a percentage, which drifts upward without evidence.
- Finance period, particularly where a long sales programme is assumed on a small scheme.
- Profit taken on cost when the policy framework works on gross development value, or the reverse.
Illustrative example. An appraisal shows a deficit of a little over a million pounds against a policy-compliant scheme. The reviewer accepts the build cost and the finance assumptions, reduces the benchmark land value by adopting a lower premium, and raises sales values by 4 per cent on the basis of two recent new-build schemes. The deficit becomes a small surplus, and the negotiation moves to a review mechanism rather than to the number of units. The figures are illustrative.
Responding to a draft review
Read the reviewer's appraisal, not just the narrative. Ask for the model itself if it has not been supplied, because the commentary rarely shows which single input moved the answer.
Then do three things. Identify the two or three inputs that actually change the outcome and ignore the rest, however irritating. Answer with evidence rather than assertion, which means dated comparables, a cost plan from a quantity surveyor, a term sheet for the finance assumption. And put the areas of agreement in writing, so the officer's report records a narrow dispute rather than a wide one.
A Viability Assessment submitted with the application should anticipate all of this. Councils expect a suitably qualified author, professional review is strongly advised, and an assessment that shows its comparables and its cost plan up front gets a shorter review than one that shows only outputs.
Narrowing the issues before committee
Where the gap will not close, two mechanisms usually bridge it.
A review mechanism in the section 106 revalues the scheme at a defined point, commonly on implementation, at a mid-point in build out, or before the final units are sold, and shares any uplift above an agreed threshold. It converts an argument about forecasts into a calculation on actual outturn, and most reviewers will accept a lower up-front figure in exchange for a well-drafted one.
A deferred or stepped contribution does something similar for infrastructure payments. Both need careful drafting, and the same drafting skills that go into overage and clawback in a section 106 apply directly.
Whatever is agreed has to appear in the Affordable Housing Statement and in the heads of terms in consistent terms. Where First Homes form part of the mix, the tenure has its own drafting requirements and securing them properly matters more than the headline percentage.
What it does to the programme
Expect the review to add one to three months to determination on a scheme of any size, depending on how many rounds the exchange takes and how quickly the reviewer is instructed.
You can compress it. Instruct your own valuer to produce the appraisal in a format the reviewer recognises, supply the model rather than a PDF of the outputs, and agree the fee arrangement at validation rather than at the point the officer asks for it. Where the scheme is marginal, consider commissioning your own independent check before submission, because finding the weak input yourself is far less costly than having it found for you in a published report.
One more thing to plan for. Planning Practice Guidance expects viability assessments to be publicly available, with only limited scope for redaction, so write the assessment knowing that objectors and competitors will read it.
This is general guidance, not legal advice. Check the position with your local planning authority or a qualified professional before relying on it.
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Frequently asked questions
Who pays for an independent viability review?
The applicant does. Councils secure the fee before instructing, usually through a short written agreement or a unilateral undertaking, and some ask for payment in advance. Settle the scope in that agreement, including how many rounds of comment are covered and whether attendance at a meeting or at committee is included.
What is benchmark land value and why does it dominate?
It is the value against which a scheme's residual value is tested, established on an existing use value plus premium basis under Planning Practice Guidance. It dominates because a higher benchmark turns a surplus into a deficit without changing anything else. The price actually paid for the site is not the benchmark, and appraisals built backwards from it fail.
What developer return will a reviewer accept?
Planning Practice Guidance treats 15 to 20 per cent of gross development value as a suitable return for market housing in most circumstances, with a lower figure appropriate for the affordable element. A return outside that range needs a reason specific to the scheme, such as an unusual risk profile, evidenced rather than asserted.
Will my viability assessment be published?
Planning Practice Guidance expects assessments to be made publicly available, with only limited scope for redaction of genuinely sensitive material. Write on the assumption that objectors, neighbouring landowners and other developers will read it, and avoid putting anything in the narrative you would not want quoted at committee.
How much time does a review add?
On a scheme of any size, one to three months is a fair expectation, driven mainly by how many rounds of exchange the parties need and how quickly the reviewer is instructed. Supplying the appraisal model rather than a PDF, and agreeing the fee arrangement at validation, are the two things that compress it most.
Sources and further reading
This article is general guidance about the planning system in England and, where stated, the rest of the UK. It is not legal or professional advice. Check your local planning authority’s validation requirements and take professional advice for your specific site.