Housing developers in England are required to make contributions – either financial or in the form of affordable housing – to mitigate the impact of their developments on local facilities and to benefit local communities. Despite significant increases in developer profits, the relative value of developer contributions has fallen consistently over recent years.
In investigating this paradox, researchers in Real Estate and Planning at the University of Reading found that developers and landowners were exploiting flaws in the planning regulations set by Government to systematically reduce developer contributions and so maximise land values and profits.
Developer contributions are set within a system that requires Financial Viability Assessments (FVAs) to be undertaken to identify how much of the gains from the granting of planning permission are used for the benefit of the community and how much of that gain is retained by developers and landowners.
The research team led by Neil Crosby, Peter Wyatt and Patrick McAllister found that landowners and developers, together with their expert advisers, were able to exploit flaws in the Government’s Planning Practice Guidance to persuade local authorities and planning inspectors to reduce the contributions required from the development, with the inevitable increase in land values and profits.
The research identified the specific flaws in the regulations and their interpretation by planning inspectors which, if allowed to continue, would have eliminated developer contributions over time.
The research was accepted first by local government in London and then by Central Government and led to significant changes to housing and planning policy and regulation. It has also informed the development of industry practice, providing the basis for guidance issued by the Royal Institution of Chartered Surveyors (RICS) to valuers and other stakeholders undertaking FVAs for planning applications in England and to valuers undertaking more general development appraisals globally.
Find out more
View the full impact case study on the REF 2021 website: Improving Community Benefit by Driving Policy and Practice in the Financial Viability Assessment of Property Developments