Viability Bulletin
Please see attached Dr Andrew Golland BSc (Hons) PhD MRICS, latest Viability Bulletin – which deals with current issues relating to the assessment of construction costs.
It’s a discussion paper – please tell us what costs you allow in the comments…
The provided document, an April 2026 Viability Bulletin by Dr. Andrew Golland, discusses the complexities of dealing with development costs in viability assessments.
The Challenge of Costs
- Costs are often the most difficult variable to manage in viability appraisals.
- The UK development sector currently faces a static housing market paired with rising costs, creating a risk that land values may fall as developments progress.
- Lenders are responding by requiring higher margins and top-end lending rates.
Local Authority Position and Standard Sources
- Local planning authorities (LPAs) use cost interrogation as a starting point when presented with non-viable cases.
- The RICS Building Cost Information Service (BCIS) is the standard source cited by National Planning Policy Guidance (NPPG).
- While LPAs use industry standards to challenge “high” costs, developers often argue their schemes are not “standard” due to higher specifications, difficult designs, or a lack of fine-grained cost categories in standard databases.
- LPAs may accept detailed quantity surveyor (QS) reports, but this can lead to additional costs and time implications, especially for smaller schemes, as authorities often require their own reviews.
Benchmarking and Non-Plot Costs
- Benchmarking is the preferred method for reaching agreements, though it remains imperfect due to the general statistical nature of the data.
- Costs beyond the “plot” (externals, infrastructure, ground works, and abnormals) are particularly difficult to assess and often lack standardization in appraisals.
- External works: Traditionally 15% of plot costs, but likely closer to 20% for complex sites.
- Infrastructure: Green field servicing costs can range from £10,000 to £50,000 per plot.
- Abnormals: These are site-specific, covering decontamination or demolition.
Future Costs and Regulations
- Viability assessments typically focus on current data, but applicants often want to include projected costs from upcoming legislation.
- Recent updates to UK building regulations include stricter carbon standards (Part L), overheating mitigation (Part O), and electric vehicle charging (Part S).
- The upcoming “Future Homes Standard” is estimated to add approximately £5,000 per dwelling.
- LPAs often argue that the standard 5% contingency in appraisals should cover these future eventualities.
Recommendations for Better Practice
- Improving the “bridge” between industry-standard BCIS data and bespoke scheme assessments is critical.
- The industry needs greater transparency regarding how specification and market sectors impact costs.
- LPAs should gather cost data more systematically to respond robustly to QS estimates.
- Sectors could benefit from sharing anonymized data to improve the overall process.
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