A methodology for assessing the economic viability of urban housing development

This paper reports on an ESRC funded research project Assessing the Viability of Urban Housing Development. ESRC Award Reference Number: R000223799. The Urban Task Force report Towards an Urban Renaissance (DETR, 1999) made many detailed proposals for improving the quality of urban living and the sustainability of urban development. In order, specifically, to achieve a target of 60% of house building on previously developed land it urged the government to ÏOblige all local planning authorities to carry out regular urban capacity studies on a consistent basisó. In Tapping the Potential: assessing urban housing capacity: towards better practice (DETR, 2000) a review of published housing capacity studies concluded that studies of physical availability produce an ÎunconstrainedÌ capacity figure and that to predict how much of the unconstrained capacity will be developed some ÎdiscountingÌ is required. This discounting includes a consideration of the market viability of the housing. It is evident from the studies reviewed that current economic evaluations are sometimes completely absent or are afterthoughts to a physical capacity study driven by design considerations. The economic evaluation is then somewhat cursory in nature. For example by ranking sites according to developer preferences or simply formulating ÎoptimisticÌ and ÎpessimisticÌ scenarios about market conditions. The ESRC funded research aimed to develop a methodology for assessing the economic viability of urban housing opportunities identified as part of urban capacity studies. This paper reviews both the ÎtheoryÌ and the ÎpracticeÌ of assessing economic viability. The methodology adopted and applied in the research proposes that viability can be judged from indicative residual values for identified sites. The values are generated from secondary data informed by professional opinion.