The Government’s proposed changes to the National Planning Policy Framework include a variety of amendments to the assessment of viability. One of the most significant proposed changes relates to the treatment of benchmark land values for land released from the Green Belt through national policy. Here the Government identifies a range of options, including:

“b. Government sets policy parameters so that where land transacts at a price above benchmark land value, policy requirements should be assumed to be viable. As part of this approach, Government sets out that if land has been sold (or optioned) at a price which exceeds the nationally set benchmark land value, viability negotiation should not be undertaken. Under this approach, the planning authority should not be seeking higher contributions (e.g. 60 per cent affordable housing), but equally the developer should not be seeking lower contributions (e.g. 40 per cent affordable housing), as this would represent a transfer of value from the public to private landholders. Therefore, planning permissions would not generally be granted for proposed developments where land transacts above benchmark land value, and cannot comply with policy.”

This new proposal has generated a fair amount of online discussion in the built environment space.

This would represent a differential approach to viability which could have the effect of creating a “two-tier” market for land. Land which was in the Green Belt which has been sold at a price greater than the benchmark would effectively be subject to a more stringent set of requirements, whereby viability considerations are not “in play” or up for discussion at all for the purposes of the planning process. This in turn would be likely to reduce or limit the scope for viable development or redevelopment on that land.

The practical consequence of this proposal would be to hold back development and/or to directly depress the value of that land. Land which is outside of the Green Belt would not be subject to this rider, hence the “two-tier” market. Even if the policy concludes that due to the transactional value being above benchmark, development should in theory be viable, this does not have the effect of actually making the development viable in practice, and may discourage development on the ground.

The consultation document clearly indicates that the Government is keen to test the waters on benchmark land values in the Green Belt, with the explicit objective of avoiding “[inflating] landowner or developer profits at the expense of the public good”. There is a clear driver to release land from the Green Belt, and a desire to incentivise landowners, within reason, to develop where possible. 

However taking steps to fix the gains that would be realised by landowners, depress benchmark land values and limit the assessment of viability may have the unintentional effect of creating an exceptionally undesirable second-tier class of land, where development would be significantly more challenging, and this would not be consistent with the Government’s objectives in this respect.

It remains to be seen how this intention would intersect with the Government’s reforms to valuation and compensation included in the forthcoming Planning and Infrastructure Bill, trialled in the King’s Speech. The clear direction of travel is that the Government is prepared to intervene on land values across the board, where it considers these to be a blocker to development.