In property development, financial viability is a cornerstone concept, influencing decisions across every stage of a project. When it comes to gaining planning approval, developers must achieve a careful balance between profitability and meeting planning obligations.
This is where a Financial Viability Assessment (FVA) comes in. It becomes essential as part of the decision-making process under the National Planning Policy Framework (NPPF).
Gary Jeffries, Head of Residential Property explores why they are indispensable for housing developers.
What is a Financial Viability Assessment (FVA)?
An FVA is an analytical tool that assesses the financial feasibility of a proposed development. It considers whether a project is economically viable when accounting for all costs—such as land value, construction, infrastructure, and planning obligations—against projected revenues.
The primary goal of an FVA is to demonstrate whether a development can afford the planning requirements (such as affordable housing and community infrastructure), without compromising its profitability.
Under the NPPF, viability is essential to ensure that developments are not financially overburdened by planning obligations. This is important because unfeasible requirements can stall or even prevent developments, reducing housing supply and slowing economic growth.
The FVA provides both developers and local planning authorities (LPAs) with a transparent, data-driven basis for negotiating obligations and securing the best possible outcome for the community.
The Role of Financial Viability Assessments in the NPPF
The NPPF places significant emphasis on sustainable development, aiming to create thriving communities through balanced growth.
Paragraph 58 of the NPPF specifically addresses the importance of viability in decision-making and acknowledges that development plans must be realistic in their expectations.
If a developer can demonstrate that a project cannot meet certain obligations due to viability constraints, the FVA may influence the decision-making process, allowing for adjustments to planning conditions or financial contributions.
In this context, an FVA is not just a formality; it is a tool for flexibility. By providing evidence that supports adjustments to planning obligations, developers can ensure projects remain financially sound while still contributing to the wider community.
