Developers getting away with viability dodges, admits mayor

Boris Johnson has admitted financial viability assessments are “something of a dark art” and conceded developers are sometimes “getting away with it”.

The mayor of London promised to discuss changing the rules which currently ensure the controversial reports are kept secret on the basis they contain commercially sensitive information.

He also said he would consider commissioning detailed supplementary planning guidance on viability.

Responding to questions from London Assembly planning chair Nicky Gavron, he confessed his frustration that some developers use the reports to wriggle out of building more “affordable” housing.

Viability assessments, which were ushered in by the NPPF, were condemned as “a wholesale fraud on the public purse” by Northampton University housing expert Dr Bob Colenutt in a recent Guardian investigation, prompting calls from architects for reform.

Last week Tower Hamlets planning committee raised concerns about the appraisals when they threw out a major development by Studio Egret West and Hawkins\Brown.

Gavron said the reports were meant to demonstrate how much affordable housing could be achieved in a project but said in reality developers were “gaming the system”. 

“They inflate the costs and then play down the value of the scheme until it is built out,” she said.

“What happens is that they then say, ‘We do not have enough, do we? We do not have enough for affordable housing’. London and Londoners are being ripped off and they are just not getting the affordable housing.”

Johnson said: “I appreciate that the whole viability assessment business is something of a dark art but it is, in my view, much better to have 25% of something than 50% of nothing, which is what we were getting before and that is one of the reasons why we are now seeing affordable homes being built in record numbers.”

He insisted he interrogated developers and planning officers closely about schemes that come before him and often sends them away to try to get more affordable housing.

“Sometimes these algorithms or whatever they are do not really reflect the reality that there is a huge opportunity to build more,” he said. “Sometimes I would have to agree with you that developers are getting away with it… and it is very frustrating.”

Gavron asked if he thought 20-25% profit margin as an industry norm was “obscenely high”.

Johnson replied: “Of course it is very high now, but do not forget that it was only a few years ago that there were no cranes at all in London.

“There was no building at all because they were all under water and we were facing an absolute crunch of epic proportions. They were not building a thing. It is a very cyclical business.

“We are now in a big upturn and I do not want to see them getting away with it.”

Johnson said viability assessments should be “as transparent as possible”.

“They are shared with planning authorities and I do not see why they should not be shared more widely,” he said.

But he said he would have to take advice on possible unintended consequences.

“What I do not want to do is introduce into the whole planning process, unwittingly, things that give developers an excuse not to go ahead, and that is always the problem. I would not want to see that…

“There is a tragic absence of people wanting to develop in London. We are dominated by a small number of very big corporations, when there used to be before the crash about 8,000 small builders who simply have gone out of business. We need to bring them back to the table.  We need to have them building on sites across the city.”