Impact case study database

Falling developer contributions at a time of rising developer profitability including major bonus payments requires investigation and a policy and practice response. Research at Reading has been at the forefront of the investigation and has played a major role in the development of government policy and industry practice responses. It identified the problem, informed central and local government consultations and discussions, and underpinned national and local government policy changes and global industry guidance. As a result, revised policy and industry guidance aim to stop the system being gamed and protect developer contributions for the benefit of the community as well as improving development appraisal practice globally.

Safeguarding developer contributions in FVA - Impact context

Economic viability is at the heart of the current English planning system. Viability assessments are used to identify the level of developer contributions. In its 2018 consultation paper ‘Supporting housing delivery through developer contributions: Reforming developer contributions to affordable housing and infrastructure’, the UK government stated that reforming the viability assessment process was “a vital step towards fixing our broken housing market and ensuring that it delivers for everyone”.

The UK housing market was relatively depressed in the aftermath of the Global Financial Crisis. However, in the economic recovery, the profitability of the seven largest housebuilders in the UK rose from an average 9% Return on Capital Employed in 2011 to 33% in 2017. It would be expected that an increasingly profitable industry would have been able to deliver more, not less, affordable housing. But the amount of affordable housing delivered by the same seven largest UK housebuilders reduced from 44% of completions to 20% between 2011 and 2017. As detailed in Section 2, the research had identified the flaws in the viability assessment process that were causing these anomalies and contributing to shortfalls in the levels of developer contributions.

Changes in planning policy and guidance in the London housing market

The first major sign that policymakers and practitioners were engaging with the research at Reading came from within London, in the Borough of Islington. It amended its supplementary planning guidance [source 1] in January 2016, citing Crosby and Wyatt’s research [Section 3, ref 4] in paras 6.67, 6.69 and 6.75 as reasons for their revised approach in addressing the circularity issue. They also used the research outputs in evidence statements at planning appeals. Using the research as a basis, with Crosby providing written expert witness evidence [source 2], Islington Borough Council successfully took a landmark case in Parkhurst Road through appeal and ultimately to the High Court ([2018] EWHC 991 (Admin)) [source 3]. Crosby and Wyatt’s research [Section 3, ref 4] was cited in the Planning Appeal and High Court decision as the source of the identification and explanation of the circularity issue within viability assessments, the central issue in the case.

Further to this, a consortium of 13 London boroughs (led by Islington) commissioned research in 2016 on land values and development viability, with the viability part undertaken by Crosby. This research [Section 3, ref 6] was Highly Commended by the Royal Town Planning Institute in its 2017 academic research awards. Importantly, the research widened the focus across the whole of London. As a result, McAllister, Crosby and Wyatt were invited to give evidence, later deemed “influential” [source 6] to the London Assembly and the Greater London Authority (GLA) Planning Committee (2016). Noting the importance of the Reading-authored RICS 2015 paper on FVA [subsequently ref 4] as “the first significant report to highlight the ‘circularity’ issue”, the GLA highlights that it “was subsequently referred to in guidance produced by London boroughs” [Sources 5 and 4]. Indeed, both the Mayor of London’s 2017 supplementary planning guidance (Para 3.48) [source 4] and the ‘London Borough Viability Protocol’ (Paras 8.8 to 8.13) [source 5] cite the research as the basis for the decision not to accept market values of land within viability assessments. Since then, Crosby, McAllister and Wyatt’s engagement with the GLA has continued through the GLA’s new viability team, established in 2017 [source 6].

Changes in the UK government housing and planning policy

RICS notes that “Reading University’s research drew attention to an underlying contradiction in government’s 2012 national planning policy” [source 8]. [Text removed for publication]. Therefore, “[t]he arguments produced by Reading University and the evidence upon which they were based … contributed significantly to a change in national government policy in what has emerged as the National Planning Policy Framework/ Planning Practice Guidance 2018/19” [source 8].

Changing industry practice in development appraisal and FVA

In 2018, Crosby and Wyatt were invited onto the industry working group responding to the new PPG. Administered by RICS, but involving the RTPI, the Law Society and the MHCLG, the aim was to rewrite the RICS guidance to valuers undertaking viability assessments and set out a process for the implementation of the new PPG. Revised RICS guidance had previously been requested by High Court Judge Holgate, in Islington Borough Council’s Parkhurst Road appeal, in order to address the circularity issue [source 3 para 147].

Crosby took on the lead authorship for the Guidance Note (GN), and guided it through the RICS Valuation Standards and Regulatory Board and the consultation process in 2019/20. In balancing the views of all stakeholders in the process, the new GN aims to facilitate delivery of government policy on the ground. [Text removed for publication].

These impacts on national housing policy and development viability practice are part of a wider impact on global development valuation. Crosby and Wyatt have used the research into the technical issues of development appraisal [Section 3, refs1, 4 and 5] to write the RICS Global Valuation Guidance Note Valuation of Development Property published in 2019 [source 9]. This Guidance Note forms the basis of the application of development appraisal modelling by all RICS valuation member worldwide (totalling 35,000). “This is a fundamental piece of guidance for practitioners undertaking what is regarded as one of the highest risk valuations. This guidance … applies to chartered surveyors working around the world … and is also fundamental in defining methods, data and information relied upon in development viability appraisal” [RICS Testimonial, source 8].

Summary of the impact

With a global membership of valuers, the RICS Guidance Note has a wide-reaching and important international role in improving global professional practice. Nationally, the change in viability policy and practice guidance is very significant in terms of ensuring communities have access to proper affordable housing and wider community benefits. [Text removed for publication].