Negotiating Affordable Housing Obligations in London Planning Applications

A development viability appraisal in the London context works as follows: Gross Development Value (GDV): The total value of the completed development if sold at current market values. For residential development, this means the aggregate open market sale value of all units plus any commercial values. The affordable housing units are valued at Affordable Housing Transfer Value (AHTV) — significantly below market value, as they are transferred to a Registered Provider at a discounted price. A higher affordable housing proportion therefore directly reduces the GDV. Build cost: The cost of constructing the development, derived from BCIS (Building Cost Information Service) data and any site-specific cost adjustments. Build cost per square metre in London typically ranges from £2,500–£4,500/m² for residential, depending on specification, height, and ground conditions. Professional fees, finance costs, and other project costs are added. Developer profit requirement: The developer's required profit margin — typically expressed as a percentage of GDV (15–20% on private residential is often used) or as a percentage of total development cost (20–25%). This is a contested element — the planning authority may argue for a lower profit requirement; the developer argues that the market requires a higher return to attract development capital. Residual Land Value (RLV): GDV minus build cost, fees, finance costs, and profit. This is the amount that remains to pay for the land. If the RLV exceeds the Benchmark Land Value, the scheme is viable at the tested affordable housing level. If RLV is below BLV, the developer argues the scheme is unviable. Benchmark Land Value: The minimum value that a rational landowner would accept for the land, reflecting its existing use value and a reasonable premium above it. The NPPF and PPG require BLV to be based on existing use value, not on "hope value" (the expectation that planning permission will be granted for a higher-value use). In practice, establishing BLV is highly contested.

When a developer submits a viability appraisal arguing for a reduced affordable housing obligation, the planning authority will almost always instruct the District Valuer Service (DVS) to carry out an independent review. The DVS is a team of RICS-qualified government valuers within the Valuation Office Agency. Their role is to independently assess the developer's assumptions and prepare their own view of the viability position. The DVS review typically takes 6–12 weeks. It covers: GDV review — whether the developer's assumed sale prices are realistic for the location and specification, using comparable evidence from recent transactions. Build cost review — whether the developer's construction cost assumptions are reasonable, benchmarked against BCIS rates and adjusted for site-specific factors. BLV review — the most significant area of divergence. The DVS typically argues for a BLV based on existing use value (EUV) plus a premium — a substantially lower figure than comparable land transactions used by developers to justify a higher BLV. Profit review — whether the developer's required profit margin is appropriate, having regard to the risk of the scheme. DVS findings are submitted to the planning authority as a confidential or (increasingly) public report. In many cases, the viability negotiation converges at a point between the developer's submission and the DVS's assessment — the final affordable housing provision is typically higher than the developer initially proposed but lower than the policy target.