Source · Select Committees · Public Accounts Committee
Recommendation 21
21
Accepted
Department lacks data on local authorities' use of profit margin assumptions
Conclusion
Viability assessments are financial appraisals submitted to LPAs by developers, that establish whether a site is viable by examining whether the value likely to be generated by the development is more than the cost of developing it, including ‘suitable’ profits for developers. Planning practice guidance states that, for the purposes of plan making and for individual negotiations, a profit margin of 15% to 20% may be considered suitable. Developers can submit a viability assessment alongside their planning application.30 The Department wrote to us after the session, stating that it does not hold any analysis or data on LPAs’ use of the profit margin assumption, because it is important for viability judgements to be informed by engagement between the relevant parties and to reflect local circumstances.31
Government Response Summary
The government will consult on a revised National Planning Policy Framework and publish updates to viability planning practice guidance (PPG) alongside the consultation to seek views on further changes to support revised policy.
Government Response
Accepted
HM Government
Accepted
5.1 The government agrees with the Committee’s recommendation. Target implementation date: Summer 2026 5.2 The government will be consulting on a revised National Planning Policy Framework before the end of this year. The government intends to publish updates to viability planning practice guidance (PPG) alongside the consultation and seek views on where further changes should be made to support revised policy. 5.3 The government’s existing PPG on viability is already clear that the role for viability assessment is primarily at the plan making stage. It is up to applicants to demonstrate whether particular circumstances justify the need for a viability assessment at the application stage. Such circumstances could include, for example, where development is proposed on unallocated sites of a wholly different type to those used in viability assessment that informed the plan; where further information on infrastructure or site costs is required; where particular types of development are proposed that may significantly vary from standard models of development for sale (for example build to rent or housing for older people); or where a recession or similar significant economic changes have occurred since the plan was brought into force.