Viability Assessment
A viability assessment tests whether a proposed development can bear the cost of planning obligations, including affordable housing, infrastructure contributions, and community benefits, while still providing a competitive return to the landowner and developer. Viability has become one of the most contested areas of planning in England, with developers using it to argue for reduced affordable housing and local authorities scrutinising assessments to protect community benefits. The NPPF and Planning Practice Guidance set out clear expectations for how viability should be assessed and when it is appropriate to submit one.
Typical Cost
£300 – £5,000+
Turnaround
1 – 6 weeks
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What is a Viability Assessment?
A viability assessment is a financial appraisal that models the economics of a proposed development to determine whether it can afford to deliver the full policy requirements for affordable housing, planning contributions under Section 106 agreements, the Community Infrastructure Levy (CIL), and other planning obligations while remaining commercially deliverable. The assessment compares the residual land value generated by the scheme, after deducting construction costs, professional fees, finance, developer profit, and all planning obligations, against a benchmark land value that represents the minimum price at which the landowner would be willing to sell the site for development.
When is a Viability Assessment required?
A viability assessment is required when a developer argues that the full policy requirements for affordable housing and other planning obligations cannot be delivered because they would render the scheme financially unviable. Under the NPPF, the weight to be given to a viability assessment is limited because the Framework expects that the cost of all relevant policy requirements should have been factored into the price paid for the land. Viability assessments are most commonly submitted for major residential developments in areas with high affordable housing targets, brownfield sites with significant remediation costs, schemes involving listed building conversion or heritage constraints, and developments with abnormal infrastructure requirements.
What does a Viability Assessment include?
A viability assessment includes a gross development value (GDV) calculation setting out the expected revenue from the completed development based on comparable sales evidence, a detailed construction cost estimate covering build costs, preliminaries, contingency, and abnormal costs specific to the site, an allowance for professional fees including architect, engineer, planning consultant, and project management costs, finance costs modelled over the anticipated development programme, a benchmark land value derived from existing use value plus an appropriate premium or alternative use value where relevant, the developer profit margin typically expressed as a percentage of GDV, a schedule of all planning obligations including affordable housing, CIL, Section 106 contributions, and on-site infrastructure costs, and a sensitivity analysis testing the impact of changes in key assumptions such as sales values, build costs, and profit margins.
How much does a Viability Assessment cost?
A viability assessment for a small residential scheme typically costs between £5,000 and £10,000. Medium-scale assessments for developments of 50 to 200 units, which require detailed comparable evidence, construction cost analysis, and sensitivity testing, usually range from £10,000 to £25,000. Large or complex schemes involving multiple phases, mixed uses, significant infrastructure, or contentious affordable housing negotiations can cost £25,000 to £60,000 or more. If the assessment is subject to independent review by the local authority's appointed assessor, the developer may also be required to contribute to the review costs.
Who can prepare a Viability Assessment?
Viability assessments are typically prepared by chartered surveyors who are members of the Royal Institution of Chartered Surveyors (RICS) and have specialist expertise in development viability. The RICS has published a Professional Statement on Financial Viability in Planning which sets out mandatory requirements for practitioners preparing viability assessments. Alternatively, specialist development consultancies and planning economists may prepare assessments, though RICS-qualified professionals carry the greatest weight with planning authorities and inspectors.
How long does a Viability Assessment take?
A viability assessment for a straightforward scheme can usually be prepared within 3 to 5 weeks, provided comparable evidence and cost information are available. More complex assessments requiring detailed cost analysis, phasing models, and negotiations with the local authority typically take 6 to 12 weeks. Where the assessment is independently reviewed by the council's viability consultant, the review and negotiation process can add a further 4 to 8 weeks. On highly contested schemes, the viability negotiation can extend over several months.
Frequently Asked Questions
Can viability reduce the affordable housing requirement?
Yes. If a viability assessment demonstrates that delivering the full affordable housing requirement would make the scheme financially undeliverable, the local authority may accept a reduced level of affordable housing. However, the NPPF states that the price paid for land is not a relevant justification for failing to accord with policy, meaning the policy cost should have been accounted for in the land price. Authorities are increasingly robust in challenging viability arguments.
What is a benchmark land value?
The benchmark land value is the minimum price at which the landowner would reasonably sell the site for development. Under the NPPF and Planning Practice Guidance, it should be based on the existing use value of the land plus a premium sufficient to incentivise the landowner to sell, or an alternative use value where there is a realistic prospect of an alternative scheme being delivered. The benchmark should reflect the full cost of policy requirements and should not be inflated by the price actually paid for the site.
Are viability assessments made public?
Yes. Since 2018, the Planning Practice Guidance states that viability assessments submitted in support of planning applications should be made publicly available. This represents a significant change from previous practice where assessments were often treated as confidential. Some limited commercial information may be redacted in exceptional circumstances, but the presumption is firmly in favour of transparency. In London, the Mayor requires all viability assessments to be published in full.
What is an independent viability review?
Most local authorities appoint their own viability consultant to independently review the developer's viability assessment. The reviewer checks the assumptions, inputs, and methodology against market evidence and industry benchmarks. They produce a report advising the planning authority whether the assessment is robust and whether the conclusions on affordable housing and planning obligations are reasonable. The cost of the review is often charged to the applicant through a planning performance agreement.
What developer profit margin is acceptable?
The Planning Practice Guidance suggests that a developer profit of 15 to 20 percent of gross development value is generally considered reasonable for planning viability purposes. The blended rate is often around 17.5 percent, with a lower margin applied to affordable housing units which carry less sales risk. The precise profit level is a matter of professional judgement and should reflect the risk profile of the specific scheme. Higher margins may be justified for particularly complex or risky developments.
What is the Community Infrastructure Levy?
The Community Infrastructure Levy (CIL) is a fixed charge levied on new development by local authorities that have adopted a charging schedule. CIL is payable on most developments creating 100 square metres or more of new floor space. Unlike Section 106 contributions, which are negotiable, CIL rates are fixed and non-negotiable. CIL costs must be included in viability assessments as they affect the overall burden of planning obligations on the development.
Can I challenge a viability review outcome?
If you disagree with the independent reviewer's conclusions, negotiation with the planning authority is the first step. Where agreement cannot be reached, the planning application may be refused on the grounds of insufficient affordable housing, which can then be appealed to the Planning Inspectorate. At appeal, both the developer's and the council's viability evidence will be tested and the inspector will reach their own view on the appropriate level of affordable housing and planning obligations.
What are abnormal costs in viability?
Abnormal costs are site-specific construction costs that are over and above normal development costs. Examples include contamination remediation, demolition of existing structures, piling through deep made ground, flood mitigation, diversion of utilities, stabilisation of mining voids, and archaeological investigation. Legitimate abnormal costs reduce the residual land value and can justify reduced planning obligations. The local authority's reviewer will scrutinise abnormal cost claims carefully to ensure they are genuine and properly evidenced.
Does the NPPF support viability arguments?
The NPPF acknowledges that viability is relevant but places clear limits on its use. Paragraph 34 states that policy requirements should be set at a level that takes account of the cost of affordable housing and infrastructure, so that in most cases the development should be able to meet them. The weight given to a viability argument is reduced where the price paid for the land was inflated beyond what should have been paid given the policy requirements applicable to the site.
What is a late-stage viability review?
A late-stage viability review is a mechanism used by some local authorities, particularly in London under the Mayor's Affordable Housing and Viability SPG, to review the actual financial performance of a development near completion. If the scheme has performed better than the original viability assessment predicted, the review may require the developer to deliver additional affordable housing or make an additional financial contribution. Late-stage reviews ensure that communities benefit when schemes prove more profitable than initially forecast.