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What does NPPF mean for site price and planning gain?

Over the years I have advised on development viability and land/building price.

The new National Planning Policy Framework (NPPF) sets different criteria that will have significant impact on the price at which land for development is bought and sold.

The new rules set out how much a site/building is worth and how much of that value must go to affordable housing and infrastructure.

For anyone advising on land price or negotiating planning obligations, four policies now matter more than any others.

Development viability is the headline change. Where a scheme complies with up-to-date plan policy on contributions, it “should be assumed to be viable” – full stop.

The burden has shifted: a developer wanting to pay less than the policy figure must now prove in the planning process one of a short list of trigger conditions applies.

These are a materially different development type, different site characteristics, unforeseen costs, or a genuine economic shock such as a recession.

Crucially, the oldest argument in the book has been ruled out.

Neither the price paid for land/building, nor an option price can justify falling short of policy.

Any viability assessment that is submitted must trace back to the plan's own viability evidence, disclose its assumptions publicly, and follow Planning Practice Guidance, with the decision-maker still free to weigh how much credit to give it.

Developer contributions is where the real strategy sits.

The Government wants viability settled once, at plan-making stage, not renegotiated on every application.

Local plans must fix affordable housing and infrastructure requirements as a single figure, not a range, specifically so the obligation can be “accurately accounted for in the price paid for land/building”.

Thus, contributions are meant to depress the price a developer offers for a site, not erode the planning obligations or conditions after the site has changed hands.

This now applies to sites of any size and means the circumstances in which contributions can later be reassessed are now purely a plan-making matter.

This requires land/building owners to be actively involved in the consultation at the plan making stage where the long-term future for the site, building or area are decided by the local council.

This policy applies also to other matters, including Green Belt affordable housing and providing affordable homes.

A generally higher affordable housing requirement, at least 50 per cent, will be required for major development on Green Belt land, but with viability retained as the escape if that would render the site unviable.

Providing affordable homes requires on-site delivery in the normal case, and separately offers a built-in viability offset: the vacant building credit, which proportionately reduces the affordable housing contribution due where a scheme reuses an existing building.

The one thing that hasn't been settled is the arithmetic.

The Government has dropped its proposal to lock standardised viability inputs into a formal NPPF annex, citing the need for further testing with LPAs, developers and surveyors.

Those figures, including developers’ return, stay in PPG, to be updated “as soon as possible”.

While the structure for capturing development gain is now firmly plan-led, the actual numbers that determine how much gain gets captured remain, for now, unresolved.

For landowners, developers and the planning authority there is now a three-party negotiation process at both the Local Plan making stage and when detailed development plans for a site or building are formulated.

The planning authority, at the formulation of the local plan, has to get as closely as possible to the contributions required for affordable housing and other planning conditions.

This is challenging when the full details of the site or building cannot be determined at that policy making stage.

It therefore requires close consultation and negotiation with the landowner and/or developer.

None of the parties can now leave to chance the outcome of the decision in the Local Plan being overturned, unless one or more of the review rules mentioned above can be applied.

At the formulation of a specific development scheme the landowner and/or developer might be committed to the contributions set at the Local Plan that are required by the planning authority, unless unforeseen circumstances can be applied.

These arguments will be hard fought over.

Getting it right first time at the Local Plan making stage requires carefully considered advice and detailed investigation of the land and buildings that bring forward many considerations previously left until the formulation of a detailed development scheme.

Why use JK Property Consultants?

Getting this right at Local Plan stage, and holding the line when a scheme comes forward, is not a desk exercise.

It comes from having sat across the table on both sides of these arguments for many years negotiating land price, viability positions and planning obligations on behalf of landowners, developers and authorities alike, and knowing which arguments will actually survive scrutiny and which are simply opening gambits.

Where negotiation breaks down, that same experience is what qualifies me to step outside the negotiation altogether: acting as an expert witness in viability and valuation disputes, as an independent expert or arbitrator appointed to determine a disputed position, and as a mediator brought in specifically to get parties to agreement rather than into a hearing.

Each role demands a different discipline – advocate, decision-maker, or facilitator – and knowing which one a dispute actually calls for is itself part of the value.

That grounding extends beyond individual cases.

I chaired the RICS expert group responsible for the guidance now used across the profession on land agreements for development – the document practitioners turn to for how option agreements, promotion agreements and conditional contracts should be structured to survive exactly the kind of plan-led viability testing this new NPPF now demands.

Having helped write the rulebook is not the same as having merely read it.

For landowners and developers facing this new three-party negotiation with the local planning authority, at both plan-making and scheme stage that combination matters: someone who can advise on the number itself, negotiate it directly, and if it comes to it, argue, determine or mediate it to a conclusion.

Whichever side of the table you sit on, the important matter is to ensure that value for money is achieved – whether that is a landowner or developer satisfied that a contribution has been properly tested rather than simply accepted, or a planning authority confident that the affordable housing and infrastructure secured genuinely reflects what the site can bear.

Kevan Carrick is co-founder and owner of JK Property Consultants LLP. He is a member of the RICS Land & Natural Resources Professional Group Panel that consulted on the National Planning Policy Framework, and is chair of the North East Business and Innovation Centre.

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