Hot Topic Highlight - Viability and Land Allocation

6 minutes ago
7 min read

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What is this blog about?

In this week’s blog, Property Elite consultant, Chris Molyneux MSc MRICS discusses viability and land allocation. These will be of concern to candidates on the Planning & Development and Land & Resources pathways, and to a lesser extent, the Valuation pathway.

A little more about Chris…

Chris is a Chartered Planning and Development Surveyor and RICS Registered Valuer at Avison Young, operating within the Place Advisory Service Line. Based in Leeds, he brings six years of specialised experience in real estate planning and development. His daily professional practice involves acting for both public and private sector clients, with a focus on high level consultancy and technical reporting.

His technical expertise includes the preparation of detailed Planning Viability Reports, development appraisals, and options testing. Additionally, Chris provides critical pre-acquisition advice, helping clients navigate the complexities of development potential and land value. This active involvement in current market practices ensures he provides candidates with up-to-date and practical industry insights.

Chris joined the Property Elite team in 2026 as a consultant and is a qualified RICS APC Assessor. He provides comprehensive support to candidates through submission reviews, e-mock interviews, mentoring, and question pack writing. He also specialises in RICS APC Counsellor coaching and sign-off, guiding both candidates and their supervisors toward successful RICS membership.

How does this link to my RICS APC competencies?

Viability and land allocation will be covered by the following RICS APC technical competencies:

Development Appraisals – the output of a development appraisal will be interpreted differently depending on whether the benchmark land value is based on pre-planning or post-planning value.
Housing Strategy and Provision – if the benchmark land value is increased due to allocation, this could push out scope for affordable housing.
Legal & Regulatory Compliance - various RICS Professional Standards shape how viability assessments are written, including Assessing Viability in Planning under the National Planning Policy Framework (1^st Edition) and Financial Viability in Planning – Conduct and Reporting (1^st Edition).
Planning & Development Management – the decision maker will need to weigh the viability evidence as a material consideration alongside all other matters to decide whether to grant planning consent for a modified scheme.
Spatial Planning Policy – if the spatial planning policy of allocation increases viability challenges, this may result in lower developer contributions towards onsite infrastructure via s106 agreements, or off-site provision through the Community Infrastructure Levy.
Valuation – what counts as the ‘best available evidence’ for comparable land transactions hinges on whether allocation is treated a hope value or not, and this, in turn, influences the bar that the residual valuation output needs to meet to be considered as viable.

The mandatory competency, Communication and Negotiation, is also directly relevant. This is because this area of practice involves a negotiation process and dialogue between the Council, the Applicant and their viability consultants to balance viability realities with the public interest.

Viability Challenges

Sometimes a developer goes into the planning process thinking they can provide the full planning contributions the Local Planning Authority requests, then realises later that this would result in the development not making enough money to cover its costs and a reasonable profit for the developer. This is called a viability challenge.

When this happens, the developer has the option to employ a Chartered Surveyor to undertake a financial viability assessment on their behalf. This is a detailed analysis of the proposed project’s forecast financial health, as a material consideration in the determination of their planning application.

A common approach to do this is to calculate the gross development value (GDV) and deduct all relevant costs (including a market facing profit), to calculate what residual (left over) amount may be available for the land after all other costs are met. This number would need to meet or exceed what is known as a Benchmark Land Value (BLV).

What is Benchmark Land Value?

A BLV is an essential component of the viability assessment process. It is the number that an appraisal needs to match or beat for a development to be considered viable.

In line with paragraph 13 of the UK Government’s Planning Practice Guidance (PPG) on Viability, the BLV is the minimum a hypothetical landowner would expect in order to release the land for development.

Furthermore, the RICS define Benchmark Land Value as:

‘The value to be established on the basis of the existing use value (EUV) plus a premium for the landowner (PPG, paragraph 013) or the alternative use value (AUV) in which the premium is already included’.

The existing (or most recent) use value can become challenging to identify when land is allocated for the use that the applicant (developer) is proposing. This is because it is easy to erroneously treat the value added by allocation as hope value (value inflation due to some potential future use), which must be disregarded for viability purposes.

What is hope value?

The key point is that treating allocation value-add as hope value would be erring in its interpretation.

In the RICS Professional Standard Valuation of Development Property (1^st Edition), hope value is defined as:

‘Any element of open market value of a property in excess of the current use value, reflecting the prospect of some more valuable future use or development’.

According to the RICS Land Journal, hope value applies only where there is a less than reasonable expectation of planning permission. In order for the value added by planning potential to be considered as valid for viability purposes, the additional value needs to pass the ‘reasonableness test’.

This can be achieved by the land having a more than reasonable chance for development, and the comparable land transactions having either planning permission or a reasonable prospect of it (e.g., allocation in an adopted development plan or SHMA status).

The RICS Professional Standard Valuation of Development Property (1^st Edition) states that:

‘Under the current system, where there is 'a reasonable expectation' of securing planning permission... it is necessary to assume that permission is in place. However, where there is a less than reasonable expectation of permission, the valuation may include an element of hope value (emphasis added). In the valuation of development land, the planning status can have a particular impact and land transactions with planning permission or reasonable prospect of permission will increase the reliability of the comparable (emphasis added)’.

What is the reasonableness test?

Imagine a hypothetical greenfield site where a developer wishes to build out a residential scheme. Where a site is recognised as being suitable for residential development through allocation in the local plan, it is clear that the relevant Local Planning Authority considers this site a suitable location for new housing. This, in turn, means that it passes the ‘reasonableness test’ for having residential development potential.

This matters because it impacts how we approach the comparable evidence. While the Existing Use Value (EUV) of an unconsented greenfield site must still reflect its current use (e.g., agricultural value), the site's allocation introduces a highly realistic prospect of planning permission. To reflect this potential accurately within a viability framework, we need to look to an Alternative Use Value (AUV) approach or look at comparable land transactions of allocated greenfield sites with a reasonable prospect of permission, rather than purely speculative hope value.

The consequence is a market-reflective starting point for the land value. When using these allocated comparable transactions to inform a valuation or appraisal, it materially increases pricing certainty and passes the reasonableness test’; provided the comparables referred to are strictly policy-compliant schemes (and do not have inflated land values driven by historic cuts to affordable housing or planning obligations).

This ‘reasonable prospect’ language aligns with the National Planning Policy Framework (NPPF) definitions of Deliverable and Developable sites:

‘To be considered deliverable, sites for housing should be available now, offer a suitable location for development now, and be achievable with a realistic prospect that housing will be delivered on the site within five years’.

Therefore, where a site meets all the above criteria, it is valid to use comparable land transaction evidence of allocated and planning-consented sites to robustly inform the valuation or appraisal process.

Conclusion

Navigating the intersection of land allocation, hope value and viability is part of demonstrating technical competence for Planning & Development and Land & Resources candidates.

Some key takeaways from this blog are:

Master the definitions - ensure that you can distinguish between EUV and AUV, and how they feed into the BLV equation.
Reasonableness test - allocation changes the game. If a site has a ‘reasonable prospect’ of development, treating its value-add as purely speculative hope value is technically inaccurate. Use reliable, policy-compliant allocated or consented comparables to justify your appraisal or valuation.
Guidance - be familiar with active regulatory frameworks or guidance, specifically the various RICS Professional Standards and current Government guidance.

Ultimately, viability assessments are not just mathematical exercises; they are a critical negotiation point balancing commercial realities with the public interest. Showing your assessors that you understand how planning policy status directly drives appraisal outcomes will demonstrate a high level of technical competence.

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