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Overview and Purpose of Development Viability SPG
1.1.1Belfast·SPG002 Development Viability
This Supplementary Planning Guidance (SPG) provides additional advice and guidance specific to development viability considerations in Belfast. The guidance focuses on residential viability. However,
dwellingcommercialnon-domesticStatus and Application of SPG Guidance
1.1.2Belfast·SPG002 Development Viability
SPG represents non-statutory planning guidance that supports, clarifies and/or illustrates by example policies included within the current planning policy framework, including development plans and re
site-planningRole of SPG in Creating Clarity on Viability Assessment
1.1.3Belfast·SPG002 Development Viability
This SPG is important in creating clarity and transparency for landowners, developers and agents, in terms of how baseline viability has been assessed across the city at the time of developing the Pla
site-planningDefinition of Development Viability
2.1Belfast·SPG002 Development Viability
There is currently no Northern Ireland specific guidance on viability in the development management process. The Council have therefore taken account of best practice in other jurisdictions and have a
site-planningKey Principles for Viability Assessment
2.2Belfast·SPG002 Development Viability
The key principles underlying the Council's approach to viability considerations in Belfast are as follows: As part of the preparation of the LDP, the Council has tested the impact of proposed policy
site-planningScope of plan-wide viability assessment
2.2.5Belfast·SPG002 Development Viability
However, it is important to note that a plan-wide viability assessment cannot provide a precise answer to the viability of every development likely to take place over the plan period. Rather, its purp
development-viabilityplanning-policyApplicant's responsibility for demonstrating unviability
2.2.6Belfast·SPG002 Development Viability
In a case where an applicant considers that they are unable to comply fully with the relevant policy requirements without rendering their development unviable, the onus will be on the applicant to dem
development-viabilityplanning-applicationSubmission of viability information and PAD process
2.2.7Belfast·SPG002 Development Viability
It is up to the applicant (or their representative) to submit what they believe is reasonable and appropriate viability information in their particular circumstances. We would strongly recommend that
development-viabilityplanning-applicationpre-application-discussionKey assumptions for viability testing and review process
2.2.8Belfast·SPG002 Development Viability
The key assumptions to be used as a starting point for site-specific viability testing will be published separately alongside this SPG and will be subject to regular review, as it is acknowledged that
development-viabilityplanning-policyDevelopment Viability Guidance Content
4Belfast·SPG002 Development Viability
• Key assumptions to be used as a starting point for site specific viability assessments (Section 4); • Site typologies identified as part of the strategic plan-wide viability assessment and main outc
site-planningdevelopment-viabilityViability in Belfast Plan Strategy Policy HOU5: Affordable Housing
3.2.2Belfast·SPG002 Development Viability
Viability is specifically mentioned within the policy wording of Policy HOU5: Affordable housing, where it states that the Council will consider suitable alternatives on a case by case basis "where it
dwellingflatsViability in Policy BH2: Conservation Areas
3.2.3Belfast·SPG002 Development Viability
In line with the SPPS, viability is also referenced in Policy BH2: Conservation Areas, requiring that due regard is given to the viability of retention or restoration of the existing building, in cons
conservationViability in Retail and Town Centre Policies
3.2.4Belfast·SPG002 Development Viability
Similarly, Policy RET2: Out of centre development and Policy RET3: District centres, local centres and city corridors, will only permit retail development outside of existing centres where there is no
commercialBroader Policies Affecting Development Viability
3.2.5Belfast·SPG002 Development Viability
A much broader range of policies are also relevant in the context of assessing viability in planning applications, such as Policy HOU7: Adaptable and accessible accommodation or Policy OS3: Ancillary
accessibilityexternal-spacePolicy context and local policies plan introduction
3.2.6Belfast·SPG002 Development Viability
The Local Policies Plan will set out site-specific proposals in relation to the development and use of land in Belfast. It will contain the local policies, including
site-planningLocal Policies Plan site-specific requirements
3.2.7Belfast·SPG002 Development Viability
The Local Policies Plan can also set out key site requirements for certain zoned sites which in some cases may include specific guidance in relation to affordable housing, and/or the requirements for
site-planningopen-spaceKey assumptions introduction and purpose
4.1.1, 4.1.2Belfast·SPG002 Development Viability
The following section seeks to provide clarity to both developers and planners in terms of the key assumptions used within the viability assessment process. These were the key inputs identified when c
site-planningPrinciples of key assumptions
4.1.3Belfast·SPG002 Development Viability
In summary, the key assumptions will: • Assume a reasonable level of profit for the developer; • Assume a reasonable return for the landowner; • Understand and allow for consideration of risk; • Build
site-planningDetailed assumptions and review mechanisms
4.1.4Belfast·SPG002 Development Viability
The sections below give a broad overview and explanation of the assumptions made, but the detail of each of these inputs will be published in a separate document alongside this SPG. These will be subj
site-planningOverall viability approach
4.2.1Belfast·SPG002 Development Viability
The broad approach taken to viability, for the purposes of this SPG, is illustrated by Figure 4.1 below. It highlights the importance of the value of development as a measure of the potential for plan
site-planningResidual Land Value methodology for viability assessment
4.2.3Belfast·SPG002 Development Viability
This methodology, also called the Residual Land Value (RLV) method, is the most appropriate to use for valuing land with development potential when undertaking viability assessment. Essentially, it is
site-planningViability factors: land value, costs, and developer return
4.2.2Belfast·SPG002 Development Viability
As the diagram indicates, if land is overvalued or costs too high, it will reduce the amount available to ensure compliance with all policy requirements and/or the developer's return. Accordingly, cor
site-planningBalancing developer return with policy compliance in marginal viability
4.2.4Belfast·SPG002 Development Viability
Where viability is marginal, it is often a matter of balance and judgement between the level of developer's return and policy compliance. It is therefore important that a developer plans to ensure com
site-planningKey assumptions in development viability testing
4.2.5Belfast·SPG002 Development Viability
In summary, the key assumptions used as part of this method of determining development viability are: • Benchmark land value; • Gross Development Value (GDV); • Developer return; • Construction/develo
site-planningBenchmark land value definition and purpose
4.3.1Belfast·SPG002 Development Viability
As outlined above, part of the approach used in development viability testing is to consider how the residual amount available to purchase land may compare to a benchmark land value, which is an estim
site-planningData sources for benchmark land value estimation
4.3.2Belfast·SPG002 Development Viability
As there is no single data source for estimating benchmark land values, the key assumptions draw upon a number of sources: • A database of open market development land transactions provided by private
site-planningSite-specific deviations from benchmark land value
4.3.3Belfast·SPG002 Development Viability
Although benchmark land value can vary according to different circumstances, the key assumptions to be used in viability assessments are standardised estimates. Examples of where specific sites may de
site-planningKey assumptions for site constraints and existing use value
4.3.4Belfast·SPG002 Development Viability
Where there are specific site constraints, e.g. contamination, flood mitigation, access difficulties, protected heritage assets, potential archaeological remains etc. In this case, it would be expecte
site-planningheritageLand acquisition price and planning policy compliance
4.3.4Belfast·SPG002 Development Viability
An important principle in considering development viability is therefore that land should be acquired at a price that takes into account all known costs, including the costs of complying with all plan
site-planningAlternative Use Value (AUV) as benchmark land value
4.3.5 to 4.3.6Belfast·SPG002 Development Viability
Although in most cases the benchmark land value should be used for the purpose of viability assessment, there may be a few occasions where an Alternative Use Value (AUV) should be considered instead.
site-planningAcceptable circumstances for Alternative Use Value
4.3.7Belfast·SPG002 Development Viability
The circumstances in which AUV will be considered acceptable include: Where there is evidence that the alternative use would fully comply with all development plan policies; Where it can be demonstrat
site-planningEvidence requirements for Alternative Use Value
4.3.8Belfast·SPG002 Development Viability
Where AUV is used, this should be supported by evidence of the costs and values of the alternative use to justify the land value presented in the site-specific viability assessment.
site-planningResidential Values and Market Analysis
4.4Belfast·SPG002 Development Viability
While development costs are considered broadly comparable across the city, values vary significantly. High level research undertaken to inform the Council's approach to viability assessment paid parti
dwellingflatssite-planningDeveloper return assumptions
4.5.1, Figure 4.3Belfast·SPG002 Development Viability
Potential risk is accounted for in the assumed return for a developer within a viability assessment. It is the role of developers, not plan-makers or decision-makers, to mitigate these risks. Although
site-planningImpact of construction costs and land prices on developer return
4.5.2Belfast·SPG002 Development Viability
If a developer can deliver a scheme with lower construction costs or can buy the land cheaper, they may be able to realise a higher return, as long as the planning policy requirements are met in full.
site-planningExceptional circumstances for alternative developer return
4.5.3Belfast·SPG002 Development Viability
The Council acknowledge that there may on occasion be exceptional circumstances where an applicant believes a proposal requires an alternative return. Such examples could include an unusual type or mi
site-planningRisk realisation and developer return reduction
4.5.4Belfast·SPG002 Development Viability
Given that potential risk is accounted for in this assumed return for developers at the plan making stage, the realisation of risk (e.g. a fall in land values or a rise in costs) would not itself be a
site-planningDeveloper return consideration after risk realisation
4.5.5Belfast·SPG002 Development Viability
Where a developer return has been reduced as a result of risk realisation and viability is still a concern, a minimum developer return for a site-specific viability assessment should be agreed with th
non-domesticdwellingflatscommercialBenchmark construction costs for viability assessment
4.6.1Belfast·SPG002 Development Viability
Development costs can vary due to location, development type, storey height and building use. However, benchmark construction costs for key development types help set a starting point for the consider
dwellingflatsOther development cost assumptions
4.6.2Belfast·SPG002 Development Viability
Other costs associated with the development of land included professional, marketing and legal fees, and Stamp Duty Land Tax. These are summarised in Figure 4.4 below. Figure 4.4: Other development c
dwellingnon-domesticflatscommercialViability considerations for historic built environment developments
4.6.3Belfast·SPG002 Development Viability
As recognised in the policy context, viability is often an important issue in respect of development proposals affecting built heritage. In the case of listed buildings and non-listed buildings within
conservationdwellingnon-domesticcommercialHeritage Building Conversion Costs
4.6.4Belfast·SPG002 Development Viability
The Council accept that in any of these circumstances there are likely to be additional costs to be considered in a viability assessment. However, where such land/buildings have been purchased for red
conservationenergyListed Buildings and Conservation Area Viability Requirements
4.6.5Belfast·SPG002 Development Viability
The Council's overriding concern will be the conservation and/or protection of the listed building and/or wider conservation area, in full accordance with the built heritage policies set out in the Pl
conservationSite Assembly and Acquisition Costs
4.7.1, 4.7.2Belfast·SPG002 Development Viability
Often, in the case of development and site assembly, various interests need to be acquired or negotiated in order to be able to implement a project. These may include: Buying leases of existing occupi
site-planningFinancing Arrangements
4.7.3Belfast·SPG002 Development Viability
Financing arrangements can also be factored into the cost of development, with 50 dwellings employed as a threshold. There is no difference between market and affordable housing in this respect.
dwellingBuild to Rent: Overview and Council Support
4.8.1, 4.8.2, 4.8.3Belfast·SPG002 Development Viability
Alternative funding models are often used in relation to Build to Rent (BTR) developments, which rely on institutional and/or international investors who must commit to the entirety of a project in on
dwellingsite-planningBuild to Rent Viability Assumptions
4.8.4, 4.8.5Belfast·SPG002 Development Viability
The assumptions outlined in Figure 4.5 below can therefore be used for large scale BTR development in the city centre. Whilst a maximum of 10% developer return may be accepted, sensitivity analysis u
dwellingsite-planningBuild to Rent (BTR) Financial Assumptions
Figure 4.5Belfast·SPG002 Development Viability
Type Cost Measure Developer return: 10% (for schemes which are forward funded or sold to an institutional investor) of Gross Development Value (GDV); 15% (for debt-based investments) of Gross Developm
dwellingflatsPolicy Impact on Development Viability
4.9.1Belfast·SPG002 Development Viability
It is recognised that policies in the Local Development Plan will affect the value and/or costs of development. As part of the preparation of the LDP, the Council has tested the impact of proposed pol
Local Mitigation Measures
4.9.2Belfast·SPG002 Development Viability
All new developments are expected to provide mitigation for local impacts, such as public realm improvements or off-site transport work. Based on a review of recent s76 Planning Agreements in Belfast,
dwelling