Financial Viability Appraisals (FVA’s) for Supported Housing – A Cost Consultant Perspective.

Targeted delivery of new homes

As the much-heralded, and long-hoped-for, reforms to the National Planning Policy Framework (NPPF) appear to be becoming a reality, the pressure will be on the Local Planning Authorities to deliver a huge increase in targeted delivery of new homes.

Brownfield first strategy

From what we have been told so far, the strategy is ‘brownfield-first’ but councils will need to review their Green Belt boundaries to identify ‘grey belt’ areas. Also, on the table, is to increase affordable provision to 50% from the established 20% benchmark.

With such a resultant increase in development, the submissions of Financial Viability Appraisals (FVAs) will increase accordingly. This, when taken down to a granular local perspective will be challenging, to say the least even setting aside the problem of actually delivering such a vast number of homes.

Green belt land of any shade will come with what we expect to be a greater resistance to allow planning permissions unless the approvals process is made by the local planning authority purely on the merits of developments fulfilling housing needs alone, without local councilors being part of the equation. This however is a matter for Government review and policy – as quantity surveyors, we are focussing on costs!

As viability appraisals are simply revenue less cost, and whether it be working for developers or Local Authorities, surveyors who work within this niche sector on the cost portion of the equation (our Registered Valuer brethren doing the heavy lifting on the revenue side) are heading for increased difficulty in having costs presented as being appropriate and robust.

Why is this?

The underlying principles of where we source our costs from are set out within the current Planning Practice Guidance (PPG)

How should costs be defined for the purpose of viability assessment?

Build costs based on appropriate data, for example, that of the Building Cost Information Service”. The current RICS guidance summarises the current viability process set out in the NPPF and PPG in a table. The evidence base is defined within this table as: at the ‘Plan making stage’ and states “ Costs and values will be based on average rates from comparable schemes.” This process is to be based on comparable, not actual schemes.

Furthermore, the table states that at the ‘Development management stage’ a detailed build cost plan and schedule of value should be provided. The RICS guidance goes on to describe the evidence collected to support assumptions on costs could include ‘the expected build cost (a full quantity surveyor’s cost report showing how costs have been estimated should be made available for site-specific information) and that plan making may have to rely on BCIS or other online information.’

As cost consultants, we present costs based on how much information is available for us to estimate such. Floor plans only would be BCIS using the relevant category. With more detail comes more ability to account for specifics, so progressively Order of Cost, and Detailed Cost Plans for RIBA stage 3 level of design with supporting specialist reports.

These are not hardlines as we should endeavour to capture all we can see and interpret from the information. Order of Cost and Detailed Costs Plans do not cause a problem, it is the BCIS Average Prices which do.