Viability Assessments in Planning: What Homeowners and Developers Need to Know

Introduction

Financial viability assessment (FVA) is a process used in the planning system to test whether a development proposal can reasonably bear the full range of planning obligations — affordable housing, Community Infrastructure Levy, section 106 contributions and other requirements — while still generating a return sufficient to attract development. For most standard householder extension projects, viability is not relevant. However, for homeowners undertaking more substantial development — converting a house to flats, adding a new dwelling, building significant new residential accommodation — viability assessment may become relevant, particularly where a local authority seeks section 106 contributions or affordable housing provision.

This guide explains how viability assessment works, when it arises in a residential development context, and what it means for larger residential projects in north London.

What Is Financial Viability Assessment?

A financial viability assessment tests whether a proposed development can bear a proposed level of planning obligation and still achieve a competitive return to the developer. The assessment compares the residual value of the development (the value of the completed scheme less the cost of development) against the existing use value of the land plus a premium. If the residual value is insufficient, full policy-compliant provision of planning obligations cannot be justified.

The key inputs to a viability assessment are:

• Gross Development Value (GDV): The estimated value of the completed development, based on comparable sales and rental evidence
• Development costs: Construction costs, professional fees, finance costs, contingency and developer's overheads and profit
• Land value (or Existing Use Value with a premium): The Benchmark Land Value against which residual viability is tested
• Planning obligations: Affordable housing contribution, CIL, s106 contributions, infrastructure costs

The Planning Practice Guidance and Viability

National Planning Practice Guidance (PPG) on viability was updated in 2019 to require that viability be assessed at the plan-making stage, with the intention that site-specific viability assessment should be less common where local plan policies have already been tested for viability. In practice, viability remains a significant consideration for larger residential development schemes in London, particularly where:

• Affordable housing obligations are material (typically schemes of 10 or more dwellings, or 1,000 sqm+ in some boroughs)
• CIL rates are high and affect scheme economics
• Site-specific abnormal costs (contamination, basements, listed buildings) reduce viability
• The local plan's policy-level viability assessment assumed different cost or value levels from those prevailing when the application is made

When Viability Arises for North London Homeowners

For standard householder extension projects, viability assessment is not relevant — planning obligations are not applied to extensions, loft conversions or other domestic works that do not create new dwellings. Viability becomes relevant when a project involves:

Creating New Dwellings

Converting a house into two or more self-contained flats, building a new dwelling in the garden or replacing a house with a new-build property with additional units. In Camden, for instance, any development creating 10 or more additional habitable rooms may trigger affordable housing policy requirements — and these can only be waived or reduced through a demonstrably viability-tested scheme.

Large-Scale Basement Schemes

In some cases where basement extensions significantly increase the value and usable area of a property, Camden has sought viability review as part of its general development management process for larger projects, though this is not routine for standard single-dwelling basements.

Section 106 Contributions

Where a planning application would otherwise trigger a section 106 contribution (for transport improvements, open space, community facilities or similar), a viability argument may reduce or remove the obligation if full payment would make the development unviable.

Community Infrastructure Levy (CIL)

CIL is a fixed-rate charge on new floor area created by development, set by the local authority in a Charging Schedule. Unlike s106, CIL is not negotiable on viability grounds once the Charging Schedule has been adopted — it is a standard charge based on the amount and type of new floorspace. However, certain exemptions apply, including a self-build exemption (see CIL self-build exemption guide) and a social housing relief.

CIL rates in north London boroughs vary considerably:

For larger extension projects creating new floor area, CIL can represent a significant cost. It must be accounted for in project budgets before planning permission is sought.

Instructing a Viability Consultant

If viability is likely to be relevant to a project, a specialist viability consultant (typically a chartered surveyor with development appraisal expertise) should be instructed at an early stage. The consultant will advise on whether the project is likely to be policy-compliant and, if not, prepare a viability assessment to support the application. Viability assessments must be prepared transparently and submitted to the local authority for review — they are increasingly published alongside planning applications.

The cost of a formal viability assessment for a small residential conversion or infill scheme typically ranges from £3,000–£8,000 depending on the complexity of the scheme and the level of s106 negotiation required.

Conclusion

Financial viability assessment is relevant to residential development projects that create new dwellings or trigger planning obligations, not to standard householder extensions. For homeowners considering conversion of a house into flats, building a garden dwelling, or undertaking development that might trigger a section 106 contribution, understanding the viability framework and CIL liability is an important part of the pre-application planning process. An architect experienced in residential development in north London will identify viability issues at the feasibility stage and co-ordinate with viability consultants where necessary to ensure project economics are properly understood before significant fees are committed to a scheme.