profit on value. The Council will take IRR into account if requested by the applicant, provided the development programme and timings of costs and values are fully justified. Regardless of the measure of profit that is considered to be the most appropriate, the level of profit allowed for should reflect the risks associated with the scheme as well as the prevailing market evidence relating to acceptable levels of profit. In most cases the Council expects that profit on residential development, including affordable housing, to be expressed as a % of GDV. Where schemes are identified as unviable at the proposed level of planning obligations, the level of profit allowed for should be adjusted to the extent that the scheme as proposed becomes viable. Benchmark land value (BLV) The process for establishing an appropriate benchmark land (BLV) for a viability assessment is one of the most important issues within a viability assessment because this indicates the threshold for determining whether a scheme is viable or not. A development is deemed to be viable if the land value’ is equal to or ‘residual higher than the benchmark land value as this is the level at which it is considered that the landowner has received a reasonable return and will release the land for development. In most BLVs will be assessed with reference to existing use value (EUV) of the site, plus a financial incentive (‘premium’) that would ensure the release of the land from its existing use. This is called Existing Use Value Plus (EUV+). The premium above EUV that is applied will generally not be expected to exceed 20%. A realistic alternative scheme may be used to form a BLV. It is not necessarily the case that a planning permission for the alternative use must be in place (however this is preferred), However the application of a particular alternative use will need to meet a number of criteria, such as: The alternative use be policy compliant and would secure permission; would be no additional costs or delay in securing that permission or – those additional costs and delays are assessed; The detailed alternative proposal is required to be worked up to an equivalent level of detail as the proposed housing-led scheme, incorporating realistic current day costs and values; There is a real world demand for the alternative at the values assumed; In the real world the landowner would really develop out the alternative rather than use it as a negotiating lever to force down affordable housing.
profit on value. The Council will take IRR into account if requested by the applicant, provided the development programme and timings of costs and values are fully justified. Regardless of the measure of profit that is considered to be the most appropriate, the level of profit allowed for should reflect the risks associated with the scheme as well as the prevailing market evidence relating to acceptable levels of profit. In most cases the Council expects that profit on residential development, including affordable housing, to be expressed as a % of GDV. Where schemes are identified as unviable at the proposed level of planning obligations, the level of profit allowed for should be adjusted to the extent that the scheme as proposed becomes viable. Benchmark land value (BLV) The process for establishing an appropriate benchmark land (BLV) for a viability assessment is one of the most important issues within a viability assessment because this indicates the threshold for determining whether a scheme is viable or not. A development is deemed to be viable if the ‘residual land value’ is equal to or higher than the benchmark land value as this is the level at which it is considered that the landowner has received a reasonable return and will release the land for development. In most BLVs will be assessed with reference to existing use value (EUV) of the site, plus a financial incentive (‘premium’) that would ensure the release of the land from its existing use. This is called Existing Use Value Plus (EUV+). The premium above EUV that is applied will generally not be expected to exceed 20%. A realistic alternative scheme may be used to form a BLV. It is not necessarily the case that a planning permission for the alternative use must be in place (however this is preferred), However the application of a particular alternative use will need to meet a number of criteria, such as: The alternative use be policy compliant and would secure permission; would be no additional costs or delay in securing that permission – or those additional costs and delays are assessed; The detailed alternative proposal is required to be worked up to an equivalent level of detail as the proposed housing-led scheme, incorporating realistic current day costs and values; There is a real world demand for the alternative at the values assumed; In the real world the landowner would really develop out the alternative rather than use it as a negotiating lever to force down affordable housing.