Purchase price and the viability defence
National guidance says the price paid for land is not, by itself, a justification for departing from policy. The benchmark is existing use value plus a premium, and the gap is the buyer's problem.
Land purchase price viability arguments fail more often than any other line in an appraisal, and they fail for a reason set out in black and white. The planning practice guidance on viability states that the price paid for land is not, in itself, a relevant justification for failing to comply with policies in the plan. So an appraisal that starts from what the site cost, shows a shortfall and concludes that the affordable housing has to come down is arguing against the guidance rather than within it.
The benchmark the guidance does use is existing use value plus a premium to the landowner. That figure can be a long way below the transaction price, and the gap is the developer's problem rather than the council's.
Why the price paid is not the benchmark
The logic is circular if you let the price in. Policy requirements are supposed to be reflected in land values, so a bidder who ignores policy can outbid a bidder who prices it, win the site, and then ask the authority to reduce the policy burden to make the overpayment work. Allowing that would transfer the cost of the bidding process to affordable housing.
The guidance closes the loop in two ways. It directs assessors to benchmark land value based on existing use value plus a premium, and it says explicitly that landowners and purchasers should consider policy requirements when agreeing land transactions. Both halves matter, because the second tells you when the thinking should have happened.
Existing use value is the value of the land in its current use, not the price paid and not the value with permission. The premium is meant to be a reasonable incentive for a landowner to release land, while still leaving a contribution that complies with policy. That phrase sets the ceiling.
What counts as evidence, and what does not
Market transaction evidence is not excluded, but the test is narrow. The guidance allows market evidence where the comparable sites were subject to the same policy requirements, which in practice means you have to show that the price in those transactions already priced in the policy you are now arguing against.
That is a high bar and most comparables fail it. Land sold on an unconditional basis before a plan was adopted, or sold with a differing affordable housing expectation, is not a comparable for this purpose.
Alternative use value is only relevant where the alternative use has an implementable permission. An aspiration to a higher value use, with no consent and no prospect of one, is hope value, and hope value is to be disregarded. The treatment of interim uses is a related question, covered in meanwhile use and its effect on benchmark land value.
Options, promotion agreements and overage
Deal structure does not change the benchmark, but it changes who absorbs the consequence.
- An option at a formula price, typically market value with a discount and costs deducted, flexes with the planning outcome, so a reduced scheme reduces the price paid.
- A promotion agreement sharing net sale proceeds behaves similarly, since the promoter and landowner share whatever the policy-compliant scheme produces.
- An unconditional purchase at a fixed price transfers all the planning risk to the buyer, which is precisely the structure that produces the unwinnable viability argument.
- Overage payable to the vendor on planning uplift can be structured so that policy relief, if granted, is shared, which removes the incentive problem an authority will otherwise point to.
If you are advising before exchange, the structural point is worth more than any appraisal: a conditional or formula-based deal leaves room for a policy-compliant scheme, and a fixed unconditional price does not.
Where an authority may accept the price as relevant
There are narrow situations, and knowing them is more useful than pretending there are none.
Where the purchase was itself at existing use value, for instance an operational building bought as a going concern, the price may be the best evidence of existing use value. Where the site was acquired through a competitive public process with policy requirements stated in the brief, the price arguably reflects those requirements. And where the plan's own viability evidence used market transaction benchmarks rather than existing use value plus premium, consistency arguments become available.
Even then the price is evidence of existing use value, not a substitute for the benchmark. The distinction sounds academic until an independent reviewer makes it in writing, which is one of several reasons to commission the review early, as described in independent review of a viability appraisal.
Restructuring a deal rather than restructuring the appraisal
When the sums do not work, there are usually more options on the land side than on the planning side.
- Renegotiate the price, with the policy-compliant appraisal as the evidence. A vendor facing a scheme that cannot proceed is sometimes more flexible than expected.
- Convert a fixed price into a formula or overage structure, so the land price follows the planning outcome.
- Phase the payment, reducing finance costs during the determination period and the period before works start.
- Reduce the policy cost legitimately, by redesigning the mix towards the tenures the authority's own evidence prioritises, or by delivering affordable housing with a registered provider partner who can fund it.
- Accept a review mechanism, offering a lower initial contribution with an uplift if values improve, which is usually more acceptable than a permanent reduction.
A listed building or other heritage constraint changes the arithmetic again, since repair costs are real abnormals rather than contested allowances, which is the position examined in viability on a listed building conversion.
What rarely works is reworking the appraisal to make the price fit. Inflating abnormals, adding a second contingency, or raising the finance rate to a figure no lender would charge are all visible to a reviewer, and they damage the credibility of the inputs that were legitimate.
The conversation to have with a client
This is the part of the job nobody enjoys. A client who has exchanged unconditionally at a price that assumed policy relief wants to hear that the appraisal can fix it, and it cannot.
Say it early and in writing. Set out what the benchmark land value calculation produces, what the policy-compliant scheme looks like, and what the gap is. Offer the restructuring options rather than only the problem. And where the client insists on running a viability case that the guidance does not support, record the advice, because the case will be published and the appraisal will carry your firm's name.
There is an honest uncertainty worth naming. Benchmark land value on a site with an unusual existing use, such as a partly let yard on short leases or a building with a marriage value to an adjoining owner, is properly arguable, and a range rather than a single figure is often the defensible answer. That is different from arguing the price paid.
A Viability Assessment and the Affordable Housing Statement should set out the benchmark land value method on the first page, because that is the line a reviewer turns to first. PlanScope drafts both from your project answers and flags where a site-specific figure is missing, so the land value, cost and value inputs still come from your valuer and cost consultant. Reports should be reviewed before submission, and viability work on a contested scheme should be prepared or signed off by a suitably qualified valuer.
Illustrative example. A 1 hectare former haulage yard bought unconditionally for a figure assuming 10 per cent affordable housing against a 35 per cent policy. Existing use value as a let yard, plus a premium, produces a benchmark well below the price. The appraisal that works does not mention the purchase price at all: it shows the policy-compliant scheme against the benchmark, identifies the genuine abnormals with the ground investigation behind them, and offers a review mechanism on the balance.
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.
Frequently asked questions
Can I argue viability because I paid too much for the site?
No. The planning practice guidance on viability states that the price paid for land is not, in itself, a relevant justification for failing to comply with plan policies. The assessment works from benchmark land value, based on existing use value plus a premium to the landowner, which may be well below the transaction price.
When can market transaction evidence be used for benchmark land value?
Where the comparable sites were subject to the same policy requirements, so that the prices already reflected the policy you are testing. Most comparables fail that test, particularly land sold unconditionally before a plan was adopted or sold with a different affordable housing expectation attached to it.
Does alternative use value help?
Only where the alternative use has an implementable planning permission. An aspiration to a higher value use with no consent and no realistic prospect of one is hope value, which the guidance says should be disregarded in setting benchmark land value.
Which deal structures protect against this problem?
Options at a formula price, promotion agreements sharing net proceeds, and purchases with overage payable on planning uplift all flex with the planning outcome. An unconditional purchase at a fixed price transfers all the planning risk to the buyer and produces the viability argument that cannot be won.
What should I do if the client has already overpaid?
Set out in writing what the benchmark land value calculation produces and what the policy-compliant scheme looks like, then work on the land side rather than the appraisal. Renegotiate the price, convert to a formula or overage structure, phase the payment, or offer a lower initial contribution with a review mechanism.
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.