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Closing the viability loophole

Closing the viability loophole

Last month, while much of the country sweltered in record-breaking heat, the housing and planning world was eagerly awaiting the publication of the government’s revised National Planning Policy Framework.

The NPPF is a set of planning rules that defines where houses are built, what type of houses they are, and crucially, how affordable they are. It sets the tone for planners and local councils across the country as they try to meet our need for affordable housing while protecting treasured green spaces.

It must be said that much of the final rulebook is bad news for the countryside. However, thanks to our campaigning, the government did make a big, bold change that could drastically increase the number of affordable homes that are built in rural areas – they closed the viability loophole.

Viability tests are a legal loophole within planning policy that means developers can reduce their affordable housing commitments if their profits slip below ‘competitive’ levels – which the major housebuilders define as around 20%. It allowed developers to overpay for land, safe in the knowledge they could recoup the costs later by going back on their commitments and squeezing out affordable housing.

It’s worth reflecting on what this meant for communities. This loophole allowed developers to get away with telling councils that it wasn’t possible to deliver the affordable homes we need – because they’d paid too much for the land – leaving ordinary people, unable to afford market prices for housing, to lose out. 

Our joint ‘Viable Villages’ report with Shelter, demonstrated the damaging impact that viability assessments can have on rural communities. In 2015/16, across the eight rural local authorities surveyed, the use of viability assessments led to a 48% drop in affordable homes delivered – contributing to the affordability crisis that is hollowing out many of our rural communities. So:

  • We called on the government to reform the viability system and make sure that future viability assessments would be limited, transparent and fair.
  • When the government released the draft NPPF earlier this year, we challenged ministers to make key changes to ensure the final policy matched their rhetoric on affordable housing delivery and developer accountability.
  • We called for significantly more clarity in the wording of the guidance on viability, and for the Government to make it absolutely clear that the cost of land should be treated as part of the normal cost of doing business for housebuilders, and not an excuse to provide fewer affordable homes than council targets.

The government made a significant change in the final text of the policy to address our concerns. The new guidance states, no fewer than four times, that developers can no longer use the high cost of land as an excuse to wriggle out of building affordable homes.

From now on, the onus will be the developer to demonstrate what has changed since a local plan was drawn up if they wish to carry out any further viability testing, rather than enjoying a default guarantee of their profit levels. The guidance also states that viability tests must be ‘proportionate, simple, transparent and publicly available’, very similar to our ‘limited, transparent and fair’.

Also important are changes to the guidance to make it clear to councils that they’re not expected to carry out individual viability assessments on every site they allocate, allowing under-resourced local planning authorities to breathe a collective sigh of relief.

These changes add up to a major win for communities across the country. The human impact of the viability loophole should not be underestimated; we received many stories from supporters about the impact of the rural housing crisis on their town or village, and this tightening will go some way to alleviate it. It could offer a lifeline for rural communities struggling to get enough affordable homes built as part of new developments.

It is also testament to our campaigning and to the effectiveness of partnership working; our work with Shelter helped build a coalition that the government couldn’t ignore.

We’d also like to say a big thank you to the hundreds who donated so generously to our spring appeal. Your generous gifts helped us close the loophole that was putting developer profits before the needs of communities.

There is still a long way to go before national planning policies properly address the housing crisis in the countryside - but let’s take a moment to celebrate our successes as we continue to campaign for change.

Developers can no longer use the high cost of land as an excuse to wriggle out of building affordable homes.

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