Section 73 viability appeal allowed for 600+ homes in Camden

Viability remains a key constraint on development in London, notwithstanding the emergency measures package. One particular challenge is how to address an extant permission granted under different circumstances and now no longer viable.

This issue was considered recently in an appeal concerning Camden Goods Yard.

Camden Goods Yard is a large mixed-use scheme comprising 600+ homes, offices, a new foodstore, public space, and other elements. The original permission was granted in 2017, with a further section 73 consent in 2023. The permission has been implemented, and the scheme is part complete.

A recent appeal took place under section 73 and sought consent to vary conditions relating to approved plans and dwelling numbers and mix to implement fire safety requirements and in light of changed viability. The effect would be to reduce the affordable housing provision from 38% to 15%.

The approach to viability assessment was a main issue in the appeal.

1. Benchmark Land Value

The viability PPG states that Benchmark Land Value (BLV) shall be “based on existing use value” (EUV). However, the existing use of the appeal scheme was a construction site encompassing a partially complete mixed-use development.

The Council argued that an Alternative Use Value (AUV) should be adopted rather than EUV, determined as the residual sum realised by the revenue that the sale of the completed development would generate, less the various costs to complete. This afforded an assessed value to that created by costs (e.g. acquisition and construction) incurred to date. See DL 17-18.

In contrast the Appellant’s approach was to use EUV+ but based on an updated valuation of the original supermarket prior to the demolition. In addition, incurred costs to date were added into the appraisal. See DL 19.

The Inspector preferred the Appellant’s approach. See DL24-25.

2. Profit measure

The second key difference between the parties related to profit measure. The Council’s preferred metric was profit on Gross Development Value (GDV), whereas the Appellant identified 17.5% Internal Rate of Return (IRR). See DL26.

The Inspector concluded that while the Homes for Londoners SPG states that normally profit will be considered as a factor of GDV, in this instance use of IRR had been justified because the scheme is a large and complex urban development with a longer development programme. He found that IRR, unlike GDV, is sensitive to timing of costs and income.

The Inspector concluded that an IRR of 17.5% was reasonable and the appeal scheme, even on optimistic outcomes for sale rates, values and build costs would only realise an IRR of 8.22% (DL42).

3. Overall conclusions

The Inspector’s overall conclusion was that the Appellant had demonstrated, with regard to the viability evidence, that the scheme would make appropriate provision for affordable housing in accordance with local and national policy (DL83).

As such, in the context of Camden’s lack of five-year housing land supply and continued high demand for affordable housing, great weight was afforded to the provision of market and affordable homes (DL84) and the appeal was allowed with the benefit of the titled balance (DL85-86).

The full decision reference is APP/X5210/W/25/3369926.

Rupert Warren KC and Odette Chalaby represented St George West London Ltd, instructed by Lindsay Garratt and Matt Steinbrecher, Winckworth Sherwood LLP.

Matthew Henderson represented Camden Council.