Recent Real Estate and Planning Research on Development Viability Appraisal and the Community Infrastructure Levy

Centre for Real Estate & Planning Research at Henley Business School

By Ruth Pugh, Research Coordinator

New research, co-authored by Professor Neil Crosby, has found that interpretation of recent changes to the planning system has had a significant negative impact on affordable housing provision in London, through unintentionally inflating land values.

The study, commissioned by 13 London Boroughs and undertaken by a consortium of Royal Agricultural University, the University of Reading, Kingston University and Ramidus Consulting, shows that since April 2009 the surge in London house prices, together with a raft of new national planning measures intended to stimulate house building in the wake of the 2008 financial crisis, has led to a rise in residential land values of nearly 150 percent, but has not significantly boosted the delivery of new affordable homes as hoped.

There is a generally accepted recognition that some of the gains released by development should be recouped by the community in the form of contributions towards infrastructure (CIL) and affordable housing (via S106). However, the cumulative changes to planning policies since 2012, as operated in practice, have had the effect of shifting the balance of power between developers, landowners and community. The result has been that landowners are the primary beneficiaries at the expense of community benefits that could be funded out of uplifts in land value.

The reasons for this are complex but many relate to the definitions of and interpretations around 'economic viability' and the assessment of 'benchmark land value'. This has produced a circular situation in which the more a developer pays for a site, the lower the community benefits. Such arguments have been accepted by some Planning Inspectors as 'plan compliant' even though they fall short of published plan targets.

The researchers concluded that these unintended consequences need urgent redress and their recommendations are set in their report published earlier this year.

In a related project, the Department for Communities and Local Government recently commissioned Professor Pete Wyatt and Three Dragons consultants, in association with Smiths Gore and David Lock Associates, to conduct research on the Community Infrastructure Levy (CIL). The aim of the research was to provide an evidence base that would inform an independent Government review of the CIL.

The research report has now been published as supporting evidence underpinning the Housing white paper. The independent review will be further considered by Government, and options for reforming the system of developer contributions will be announced in the Autumn Budget 2017.

Although CIL is a relatively new policy, this research also showed that many welcomed its introduction, particularly the predictability it offers in comparison with negotiated section 106 planning obligations. Meanwhile, some argued that section 106 agreements are preferable to CIL, and considered that they provided a more direct local connection between money collected and infrastructure provided; others indicated that there was a perceived complexity in operating CIL (including when development viability is also in place), and viewed it as an unwelcome "tax" on development.

The report also highlights that implementation of CIL by local authorities was initially slow, but by the end of August 2015, 58% of authorities were engaged with CIL (having adopted CIL, or progressing towards adoption). The research showed that operational CILs are concentrated in more affluent parts of the country where market and land values are higher. Reasons for not adopting CIL included the lack of viability and the prioritisation of affordable housing delivery which cannot be funded through CIL. Finally, the research indicated that it is unlikely that CIL in its current form will yield the income anticipated by local authorities.

Both these studies are part of a much wider body of work underway since 2010 by leading UK academics in development viability appraisal within the Real Estate and Planning Department.

For further information email or contact 0118 378 8175.

The research covered in this article will be discussed in more detail at a new RREF Research Forum that will be held on 4 October this year at BNP Paribas Real Estate. Bookings will open shortly, but to register your interest in advance, please email


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