Assumptions for base land values

A recent high court decision concerning the assumptions for base land value in viability assessments has caught a lot of attention.

In his summary on Parkhurst Road Ltd v Secretary of State for Communities and Local Government and London Borough of Islington [2018], Mr Justice Holgate held that the burden of demonstrating that a viability assessment that is sought to be relied upon to argue a reduction the policy requirements for affordable housing (or any other planning obligations), is firmly on the person seeking to rely on that assessment.

It is not the job of the local planning authority to provide that assessment or, if it is rejected on proper grounds, provide an alternative. The price paid is rarely determinative, any comparable must, to have any weight, be shown to have taken into account policy requirements and not have misjudged the development potential of the site.

Mr Justice Holgate held that:

• any base land value used in a viability assessment will need to do better than "doing little more than averaging land values obtained from a large number of transactions within a district" which falls into a circularity trap. That is such a valuation is likely to inflate land values by including sites where there was a misjudgement over the likely development potential of the land or those where appropriate planning requirements (such as policy complainant affordable housing) have not been taken into account.
  • The circularit' is that a base land value based upon such flawed comparables will merely provide a further flawed comparable;
• "adequate information about comparables relied upon (including the planning context and circumstances influencing bids and the transacted price)" must be obtained;
• "[o]n the other hand, it is understandable why developers and landowners may argue against local policy statements that base land value should simply conform to an existing use value plus a percentage basis of valuation, especially where the document has not been subjected to independent statutory examination prior to adoption";
• the price paid for land is not determinative. This is also reflected in the draft revised NPPG.

Point 3 above needs to be considered against the draft revised NPPG. If it is published in its current form, it promotes the use of existing use value+ for a base land value assessments.

To many developers the judgment, ignoring price paid, may seem to fly in face of reality.

To Local Planning Authorities it is likely to be welcome news in what they perceive as a fight to prevent the watering down of policy requirements under the guise of viability issues. It also neatly plays into the government's apparent drive to limit the effectiveness of viability assessments in reducing (mainly) affordable housing provision.

To the extent it and the revised NPPG achieves that without limiting the supply of land for housing development remains to be seen. While it could reduce the price sought for land or more accurately the price that developers are willing to pay for land, it could, of course, also have the effect of reducing the land available. One matter that we can be certain about, is that limiting viability assessments effect on, in particularly the provision of affordable housing, is a real direction of travel. This case brings that into focus now.