Whilst at RICS Headquarters recently, I learned with interest that we can expect an Addendum to the RICS Guidance Note: Financial Viability in Planning (2012), in early 2015.

The aim of the Addendum will be to clarify parts of the wider RICS Guidance Note. However, we can also expect further direction on its relationship with the LHDG advice: Viability Testing Local Plans (2012), and the appropriate application of both.

This would undoubtedly assist in the ability of the two documents to work in tandem as envisaged (i.e. on a site specific or an area wide basis respectively) rather than in competition, as we have seen historically.

So, what else can we expect?

With PRS now being recognised as an evolving market in residential development, making up some 18% of housing stock composition (mainly through individuals and small company landlords, but with ever increasing institutional ownership), the Addendum is likely to provide clarification on PRS (and other new forms of affordable housing), its perceived use class, and the valuation approach to be applied.

Whilst I would not necessarily agree with any intention to sit PRS in a class of its own (Sui Generis), an intention to standardise the approach to valuing PRS across the industry is welcomed.  In this instance (and where there is a commitment to remain a PRS  for typically 10-15 years), the indication is that the valuation approach will be similar to Registered Providers and student housing providers – DCF on gross or net operating income.

I also understand that a potential update to Paragraph 4.3 of the wider Guidance Note as it relates to the FOI Act 200 (sections 41 and 43 (2)), is likely to be forthcoming, and could potentially provide some assistance when seeking to balance matters of commercial sensitivity and transparency.  Likewise, an obligation on viability consultants to provide a personal disclaimer when undertaking viability assessments could ensure greater credibility being given to the assumptions made as part of any assessment.

The introduction of third party reviews (i.e. where agreement cannot be reached, and prior to appeal), further guidance on the use and application of comparable evidence, as well as development returns, have also been muted.

Therefore, there is clearly an opportunity for any forthcoming Addendum to improve the ease of use of the existing guidance across the industry, and to address a number of important issues that are central to the concept of financial viability assessments, as a material consideration in the planning process.

We await publication of the Addendum, and look forward to advising further.