Published: 10 Aug 2017 by Robin White

Regular readers of our blog – or followers of our work on housing supply – will have repeatedly heard our calls for increased transparency within housebuilding. One particular area where this is vital is when it comes to the murky world of viability assessments.

These assessments are used to reduce the affordable housing provision and other community contributions that a developer has to make on a scheme.

Recently we saw (and wrote about) a particularly egregious example of this in relation to Battersea Power Station, but sadly it’s also something we see all too often across the country.

However, despite viability assessments being used to take away community assets, communities themselves rarely see them as they are almost always kept confidential.

This is, quite clearly, a system that has no place in 21st century Britain, where openness and transparency are things we should be ensuring wherever possible.

The impact of a viability assessment can be severe. For example, it has recently come to light that the redevelopment of Hornsey Town Hall in Haringey, North London will – thanks to concerns over viability – potentially deliver no on-site affordable housing as part of the 149 home development. This is despite the London Borough of Haringey having a planning policy that targets 40% affordable housing. Had the developer met the local authority’s requirement, there would be 59 new, affordable homes for the local area.

As in most local authority areas, the reasons the developer provided to show why they can’t deliver any affordable homes in their viability assessment are confidential, and the version published on the council website is heavily redacted.

However, by copying and pasting into a Word document, it’s possible to produce the full version of the document, which reveals some of the incredible numbers involved.

For example, the proposed profit that the developer feels they need to make to take on the scheme is 19.05% – and their assessment is that they cannot do this while delivering any affordable housing.

This is on a scheme where 27 parking spaces will be sold at a price of £20,000 each, and where the overall sales value of the scheme is estimated at over £118 million (to save on the maths, that means the profit they are working to is over £22 million).

It is particularly disappointing that this is happening when the developer knew that the council’s policy was to include 40% affordable housing. Knowing this, they should have factored it into their plans from the very beginning – rather than seeing it as something to be reduced as needed.

Now, it is important to make two things clear:

1. Developers should be allowed to make a profit – of course they should, but in ensuring they make profit they shouldn’t be squeezing out affordable housing
2. The developer’s assessment of the scheme’s viability might well be fair – it may be that redevelopment with the policy-compliant level of affordable housing isn’t possible. However, the evidence to support this should be public for the local community to understand and scrutinise. Where local people aren’t getting what they would otherwise reasonably expect, they have to know why, and be able to question it

What we want is for communities to be able to scrutinise developments in their area properly. This means making sure that viability documents are available without redaction.

The accidental release of the Hornsey Town Hall viability assessment also proves that scrutiny by local communities would take place. For example, the local councillors for the development have now sent an open letter to the developer asking for further information on some of the specific points. Having seen the viability assessment, they are now making sure that their community is getting the best outcome – and this is exactly what should be happening.

In addition, transparency over viability would help to restore public trust in housebuilding. While the development industry remains murky and hidden, we cannot be surprised when local communities are distrustful and unlikely to support new schemes.

Fortunately, the need for transparency in this area of development does seem to be gaining traction.

In the Housing White Paper, the government made good noises about increasing the level of transparency in the development industry. In addition, some councils have taken a lead in trying to bring this to viability. For example, in Greenwich where viability assessments are now made public with no redactions.

The Mayor of London is also taking positive action. The Homes for Londoners Supplementary Planning Guidance makes it clear that where developers won’t meet a 35% affordable housing threshold they must explain this through a viability assessment that – apart from in certain circumstances – will be made public.

We can still go further though. As set out in Shelter’s New Civic Housebuilding proposals, what we really need is a much clearer and more transparent national approach to viability. As we’ve outlined before, the current approach is far too flexible and discretionary. A more robust approach would provide more certainty for builders, local authorities, and communities – and help to restore desperately-needed trust in new home building.