This was an important and highly contested site of discursive struggle, to produce the area wide viability assessment document for County Durham. The Council sought to employ the storyline of “robust viability assessment” to support its promotion of this viability work and to support its overall ambitious proposals for growth and CIL proposals. There are two parts of the viability assessment calculation process, the area wide assessment and the assessment of the threshold land value, both of which were challenging in the Durham case study.
Firstly, the area wide assessment involving the residual valuation of a series of hypothetical sites across the county, for a series of different uses, to attempt to map the variations in property markets and therefore viability across the county. This was particularly challenging in Durham due to the nature of its geography
“whereas in Newcastle/Gateshead you are able, probably just the quantum’s of the areas and the conurbation factor you are able to supposed to do a bit
…… more able to identify the markets as larger chunks of land” (LA:D3 Interview)
“it’s the way Durham is, whereas Newcastle/Gateshead does operate as one area (conurbation) there is a sort of relationship between even Rowlands Gill and Gateshead centre there is a link people will go from Rowlands Gill to Gateshead centre catch the metro or bus to it. Whereas the relationship of even the big towns in Durham just isn’t there in the same way, there is probably not a relationship between Barnard Castle and Seaham, Newton Aycliffe is linked to Darlington (a neighbouring unitary authority) in how it
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operates day to day, Sedgefield has not got a lot to do with Chester-le-street and that’s with the bigger places” (LA:D3 Interview)
“yes, we took 7 sites which were actual developments which have been anonymised we have put the first round appraisals we did were hypothetical sites, which the house builders weren’t quite happy because they weren’t providing a realistic reflection of what was going on in the market so we took 7 sites that had planning approval and we have put each of these 7 sites into a delivery area NE, SW etc., applied the values in those areas to those sites to arrive at the residual value and we calculate the CIL from that the 7 notional sites each in a different area obviously each has got a different density we have worked out the residual value, the existing use value, the additional profit and that’s where the CIL rate is derived from” (LA:D3 Interview)
The local trope “granular property market” was used by HDH to illustrate the challenge of mapping very localised spatial variations in the housing market, with significant differences of residential values within even one small settlement, this made it practically impossible to draw boundaries for different areas and led to the county wide CIL rate proposal.
“interesting point Simon Drummond Hay made he has done 6 or 7 CILs for other counties, he said he has never come across this problem anywhere as bad as us, everywhere else has a really clear valuation pattern and Durham hasn’t hence the “granular market” (LA:D3 Interview)
Secondly, the threshold land value calculation is one of the most difficult aspects of the viability assessment and has been the subject of varied and sometimes
conflicting national guidance which has changed over the period.
“There is considerable common ground between the RICS and the Harman Guidance but unfortunately they are not consistent. The RICS Guidance recommends against the ‘current/alternative use value plus a margin’ which is the methodology recommended in the Harman Guidance.” (Para 1.44 Durham County Council and HDH, 2013)
In the early stages of the period studied the local authority sought to promote its local storyline of “robust viability assessment” and local trope of “granular property market”
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indicating the specific challenges of the area wide viability assessment process in Durham. The ambitious proposals for the CIL rates discussed in the next section supported by the early versions of the viability assessment reports were however the subject of a strong challenge by private developers.
Using national storylines “encouraging developers” and “incentivising landowners” as well as the national policy trope “appropriate available evidence” private developers challenged the viability assessment work by the Council and its “robust viability assessment”. This can be considered in three broad areas linked to the three discursive mechanisms highlighted above, the “encouraging developers” which challenged the assumptions within the area wide appraisal, the “incentivising
landowners” which challenged the threshold land value assessment and the national policy trope “appropriate available evidence” which challenged the evidence base to the work.
The assumptions in the viability assessments were strongly challenged particularly by the HBF, with assumptions about developers profit and marketing costs also
disputed, this relates to the national policy storyline of “encouraging developers”.
“contradictions between Viability appraisals and what’s happening on the ground because been too lenient with the house builders may be should have held our ground and said we disagree with that assumption we think it should be 20% profit on cost not on GDV, but been trying to work with them and try and reflect their views as much as we can but swung the other way round and is not reflective of what’s on the ground we are getting permissions and sites developed out in certain areas where not viable” (LA:D2 Interview)
“I think one of the biggest issues was the profit margins when we started out we put 20% of total development costs, as developers return, went down badly, weren’t happy. We backed down on that and used 20% of gross development value” (LA:D3 Interview)
The main challenge by developers using the “encouraging developers” storyline was that there was a lack of understanding by the local authority planners and of the in-house surveyors of the economics of development. This reflects the use of the
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storyline to undermine the credibility and trust attached to the Councils storyline of
“robust viability assessment” and is illustrated by:
“Development Economics is absolutely vital I went for 5 years to Town Planning and never touched an economics course surprises me how little taught on viability, if you want to deliver, you have to deliver, the government is giving you no choice” (DV:D/NG3 Interview)
The planners however considered that their knowledge of viability was in fact improving over time, but lacked confidence and required the support of an
independent external consultants view on values and market conditions, this will be considered further when the impact on practices is considered.
In challenging the TLV calculation the volume house builders and the HBF on their behalf were particularly concerned that too low a land value had been included in the assessment and that this wouldn’t provide enough “incentive for landowners” to sell land and that this would stop development coming forward. Volume house builders as the term would suggest rely on a significant supply of sites to maintain the scale of development their business model requires, hence their especially strong concerns about land value assumptions.
“I think at the land values set just in Durham, nobody will sell the land, land will not come forward to the market in values set out in Durham’s Local Plan”
(DV:D/NG3 Interview)
As discussed earlier evidence was given greater emphasis over time in national policy guidance as illustrated by the national policy trope “appropriate available evidence” and this also played a key part in the discursive struggle. The Council not having credible evidence in the eyes of the developers, and the evidence provided by the developers not being completely trusted by the local authority officers.
“evidence have had challenges from industry stating (developer) “I know the abnormal cost on that site you (the council) don’t” but then not prepared to give it to the council, but will at examination here’s the evidence that you have under estimated abnormal costs” (LA:D2 Interview)
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“Local authorities don’t believe the evidence or don’t get access to it”
(DV:D/NG3 Interview)
The discussion about values and evidence was difficult as a result and the issue of using second hand values as comparable evidence for new housing development appraisals, was an issue. The issue of build costs also was disputed in great detail and was considered to be a bigger issue in some respects than the market values evidence. This was something where the developers clearly had much more detailed information from specific sites, although the Council did use its own evidence from s106 negotiations as evidence.
“The additional evidence of actual development land transactions support the assumptions used around viability thresholds and land values.” (Para 8.8 Durham County Council and HDH, 2013)
Following the strong challenge to the proposals the local authority sought to build credibility, acceptability and trust by presenting detailed and transparent
documentation showing all the assumptions and evidence supporting the viability assessment.
When this was challenged strongly by the HBF in early 2013, a small panel or working group was established to try and resolve the areas of dispute, this was an important arena in which viability was contested, including both the assumptions used in the calculations and the evidence upon which these assumptions were based. Whilst the working group had been established to build trust and acceptability, in fact this was not particularly successful.
“House builders need them on board cannot do with, cannot do without them its where get a lot of evidence from, same time mindful are pushing
assumptions in a direction they want them to go” (LA:D2 Interview)
The outcome has been that the County Council and their consultants have stated that agreement was reached on specific matters and the HBF representatives have disputed that, stating that matters were not agreed.
“Importantly the methodology and assumptions were confirmed through an open and transparent consultation process. Where there was not a consensus
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or the consultees have subsequently made further or different points we have considered these in the context on more recently available information.” (Para 8.3 Durham County Council and HDH, 2014)
“the truth is we don’t understand them and they don’t understand us”
(DV:D/NG3 Interview)
This has also been reflected in the local authority’s frustration and disillusionment with the viability assessment process with local storyline of “artificial process”
together with the local trope of “playing games”.
The clustering of knowledge claims are based on the knowledge of building
economics and viability and are developed from training and experience, the house builders and agents have training in this area and have day to day experience, the planners in the local authority have neither, and lack confidence as a result when challenged. Hence the need for both consultant and peer group support, it has also revealed a difference in values, as the local authority think the viability assessment is
“an artificial process” and doesn’t reflect reality on the ground, and it is developers
“playing games” as they have more knowledge and evidence.
“Surely the viability appraisal is not fit for purpose and you know the
developers will always be one step ahead of the local authority because even though our understanding of viability appraisals has gone up massively since viability became part of planning, we still will never be able to do a viability appraisal like a developer will, who knows every little detail, how to reduce cost of development” (LA:D1 Interview)
The trust between the actors is eroded to the point where the Council don’t believe the information and evidence from the developers thinking they are hiding something and the developers think it is a waste of time providing the information as the Council ignore it, so don’t want to waste their time, hence the resolution at the CIL
Examination.
“the house builders know they are playing the assumptions to their advantage and so think the Council must be as well. Which clearly we the Council are not, as we would be still using asking prices. Different cultural viewpoints
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negotiation position v finding the right answer [the house builders] didn’t trust the Council, but did the agents on evidence.” (LA:D2 Interview)
There were several attempts to try and resolve this conflict but these were only partly successful, a key final meeting on 1st October 2013 for example.
“The above results were presented to the HBF working group on the 1st October 2013. There was universal agreement that there are sites across the whole County that are able to bear some affordable housing and that it was appropriate to have an affordable housing policy in all areas and to do so would not put the development plan at serious risk. Through drawing on the findings of this study, recent planning consents, the industry’s’ detailed knowledge of the market and officers’ experience it was concluded that the following affordable housing targets are appropriate and viable providing that the policy continues to be worded in such a way which would allow flexibility and for site by site negotiations where viability issues arise.” (Para 9.12 Durham County Council and HDH, 2013)
As mentioned earlier this discursive struggle is yet to be resolved as the dispute has been left to be resolved at the CIL Examination if and when that takes place. What has been evident from the discursive struggle from 2012 to 2015 is that the
positioning effects have been to positon developers and consultants as experts on development economics and viability with the local authority being less
knowledgeable and having less evidence.
The clustering of knowledge is at the heart of this discursive struggle with sources of evidence and knowledge claims disputed by the storylines. The process of
assessing viability is an imprecise exercise involving making judgements about the future based on evidence from the past, it also involves trying to anticipate the decision making and behaviour of key actors, landowners in assessing the TLV and of developers in the overall viability assessment.