The NPPF and an update on viability

In December, the HBF warned there is a “viability crisis” in the planning system – with the number of planning applications down dramatically due to increased taxes, levies and policy costs; problems that are exacerbated when development of many consented sites is stalled due to an inability to shift the s106 affordable housing stock.[1] The Mayor, acknowledging the issue of “squeezed viability”, announced a series of emergency measures designed to speed up delivery and provide funding.[2]

It is in this context that developers have been anxiously awaiting the updated planning practice guidance on viability (the PPG) which was published in December. 

The PPG continues to detail that the role for viability assessments is primarily at the plan-making stage, with plan makers able to use site typologies (i.e. grouping sites by shared characteristics) to assess site viability, rather than assessing each and every site when drawing up their plan. The PPG now includes a specific provision that plans should include the minimum proportion of social homes required. 

The PPG still states that it is up to the applicant to demonstrate whether particular circumstances justify the need for a site-specific viability assessment at the application stage. These particular circumstances may include situations where:

• the development is significantly different from any assumed typology;
• site characteristics differ substantially from the plan’s viability assessment assumptions;
• the development is demonstrably burdened by unforeseeable costs; and/or
• site or economic circumstances have changed significantly.

This is now reflected in the proposed new policy DM5 of the draft National Planning Policy Framework (NPPF) (published for consultation in December 2025), which confirms that it is only in limited circumstances (which may include the above scenarios) that a viability assessment may be used to proceed on a non-policy compliant basis (i.e. with a reduced package of financial contributions / affordable housing). 

In the event that a viability assessment is submitted at application stage, the draft NPPF details that it “should reflect the recommended approach in planning practice guidance” utilising “the standardised inputs” which will be set out in an Annex to the NPPF. The PPG provides the necessary detail for this (which is unchanged)  – advising that the site-specific viability assessment should refer back to the development plan’s assessment, with key inputs reflecting the PPG guidance. For example:

• Gross development value may be total sales and/or capitalised net rental income, with grant funding and market evidence taken into account.
• Costs include build costs, finance costs (such as loans), professional costs (for example in connection with project management, sales and marketing) and contingency costs.
• Benchmark land value should incorporate abnormal costs (such as treatment for contamination), site-specific infrastructure costs (such as access roads, sustainable drainage systems etc), and the costs of policy compliance (such as affordable housing contributions, Community Infrastructure Levy charges, biodiversity net gain costs etc).   The land value should be defined by establishing the existing use value (excluding hope value), plus a premium for the landowner - for the purpose of plan-making, a 15-20% return on GDV should be assumed.

The updated PPG however does provide extra clarity on how a viability assessment should be presented – stating that it should evidence inputs used and explain any differences from the inputs and assumptions used in the viability assessment that formed the basis of the plan. The PPG also now states that a decision-maker may require an updated assessment if the submitted assessment lacks clarity.

The updated PPG also now discusses the weight to be given to a viability assessment – stating that this is a matter for the decision maker, having regard to all the circumstances in the case, including whether the plan and viability evidence underpinning the plan is up to date, site circumstances, and the transparency of assumptions behind the evidence.

The Government is currently consulting on its proposed changes to the NPPF, and Annex B of the consultation document details that the Government is interested in hearing views on viability inputs. In particular, the consultation seeks opinions on:

• specific figures for developer return (i.e. a lower figure than the 15-20% range for profit on GDV) with the Government proposing 17.5% for market-led development, and asking for views on 6% of GDV for affordable housing tenures;
• whether in some circumstances a landowner premium may not be required; and
• alternative metrics for viability (other than profit on GDV) and whether guidance on additional metrics would assist with delivery.

With arguments on viability often holding up development, it is welcome that the Government is looking at this.  However, perhaps it should go one step further and acknowledge that viability can change post permission – and expressly consider how planning obligations can be varied to assist with viability issues at that stage. As part of its consultation the Government is seeking views on how it can simplify the process for varying section 106 agreements – and this could be viewed in tandem with viability, with guidance issued to local planning authorities to encourage flexibility when a site becomes stalled due to viability where changes to the s106 agreement could unlock development in the public interest.

You have until 10 March 2026 to comment on the consultation.