CPO or CP-No: The Essential Role of Viability Assessment In Successfully Promoting Compulsory Purchase Orders

Viability assessment plays a crucial role in Compulsory Purchase Orders (CPOs), serving as a critical tool for evaluating the economic feasibility and justification of proposed developments. Here’s an overview of its importance in the CPO process:

Ensuring Project Viability

Viability assessments help determine whether a proposed development is financially feasible and, therefore, deliverable. This is essential in CPO cases, as it ensures that land acquisition through compulsory purchase is justified by a viable project that can deliver public benefits. If this cannot be proven then it will be viewed as an impediment to scheme delivery and a key factor for the confirming authority to consider in deciding on confirming or refusing a CPO.

Balancing Public and Private Interests

It is important to remember that compulsory purchase powers override the human rights of landowners – so the promoting authority needs to demonstrate a compelling case in the public interest. A thorough viability assessment helps strike a balance between public interest and private property rights. It demonstrates that the proposed development is not only beneficial to the community but also economically sustainable, justifying the use of compulsory purchase powers.

Informing Decision-Making

Viability assessments provide crucial information to decision-makers, including local authorities and planning inspectors. This data helps them evaluate the merits of a CPO and make informed decisions about whether to confirm or refuse it. This will be required as part of making the CPO, usually within the Statement of Reasons. However, increasingly we are seeing local authorities ‘front-loading’ the CPO process, requiring early viability assessment (as well as providing funding evidence, land assembly estimates, planning certainty, detailed engagement and rights of light assessment) prior to making a First Resolution, indicating a willingness to make a CPO to enable scheme delivery.

Compliance with Planning Policy

Viability assessments help ensure that proposed developments comply with local and national planning policies, including requirements for affordable housing and infrastructure contributions, and still remain feasible and deliverable.

Recent(ish) Refusal

Viability has been at the centre of recent CPO Inquiries and at the forefront of the minds of promoting authorities and that is, in part, due to the (relatively) recent refusal of the  London Borough of Barking (Vicarage Field and Surrounding Land) Compulsory Purchase Order 2021. This refusal took place despite the Inspector noting that there was an “obvious and desperate need” for the scheme and that there was “an extremely compelling case for the acquisition of the Order lands”!

One of the main reasons for refusal was the lack of evidence on viability – notably the appraisals submitted to the Inspector were circa 5 years old and had been undertaken for planning (rather than CPO) purposes – so were undertaken as part of s106/affordable housing negotiations and demonstrated that the scheme was unviable. This put the Inspector in a position that (without up-to-date appraisals) provided a clear reason for refusal, despite commenting that the scheme would “provide comprehensive” and “transformative change” to the area.

This highlights the importance of up-to-date appraisals to support the CPO process. Further, the appraisals should be undertaken to assess the viability of delivering a planning permission, not focused purely on testing the viability of affordable housing and planning obligations with a prescribed profit level and land value baked into the assessment.

What to watch out for

The Levelling-Up and Regeneration Act 2023 (“the Act”) includes provisions to disapply “hope” value for schemes promoted by specified authorities that are providing affordable housing, hospitals or schools and where Directions are successfully applied for to the Secretary of State. It is difficult to predict if this will improve viability positions as this will depend on the nature of the scheme and the specifics of the site and surrounding area. However, it is certainly the case that this will be increasingly considered and financially modelled by promoting authorities.

The Act also includes provisions to replace CIL (completely) and s106 (partially) with an Infrastructure Levy. This Levy would impact viability assessments and will likely require an assessment methodology of its own. The Infrastructure Levy is yet to be implemented through secondary legislation and the planning community at large has expressed concern about the proposal (as have I, see my article, ‘IL’ at Ease – Addressing concerns on the newly proposed Infrastructure Levy (IL) .

Conclusion

Viability assessments are a vital part of the CPO process providing crucial economic insight, ensuring project feasibility and the balancing of various interests. Viability is a key test for an Inspector to consider as, if a planning permission is not viable to implement, this will be a material impediment to scheme delivery – and CPO is all about enabling a scheme to actually be built, not just to get vacant possession and then think about what happens next.

Viability assessments play a vital role in justifying the use of compulsory purchase powers and ensuring that such powers are used responsibly and in the public interest. Confirming authorities are increasingly wanting to see this tested early in scheme promotion in order to have the comfort to support land assembly with use of their planning powers.

Ardent has a team of specialist valuers that can undertake viability assessments, including for CPO purposes. To discuss these issues or how we can support you in respect of a regeneration or development scheme you are promoting (or are impacted by), please do get in touch.