For decades, local authorities largely stepped back from direct housing delivery, leaving the heavy lifting to housing associations. That landscape has changed. Rising housing need, new government funding programmes, and the pressing demands of net zero mean councils are once again front and centre in development.
But with this opportunity comes risk. Whether delivering directly, forming partnerships, or negotiating planning obligations, understanding development appraisals is now essential for every authority. Financial viability is no longer a specialist bolt-on, it is the foundation for credible housing strategy.
The new Social & Affordable Homes Programme (SAHP) 2026–2036 has committed £39bn nationally, with at least 60% of homes required to be for Social Rent. This is a welcome shift, but inflation has eroded grant power.
According to the BCIS All-in Tender Price Index, build costs have increased by 25% since 2021. In London, the GLA’s 2023 monitoring report showed average grant per unit rising to £167,000, up from below £150,000 just four years earlier.
Authorities need robust appraisals to avoid underestimating subsidy and to prioritise where scarce grant funding will stretch furthest.
Large post-war estates are reaching a tipping point. Stock condition surveys regularly highlight unsustainable investment needs. Achieving EPC Band C by 2030 can cost £25,000+ per home, especially for hard-to-treat stock.
For some estates, demolition and rebuild unlocks better long-term outcomes, but only if appraisals demonstrate viable cross-subsidy from private sale or mixed tenure.
By testing options early, authorities can avoid over-promising outcomes to communities or over-burdening development partners.
Some councils are returning to direct delivery, often through wholly-owned companies. In this scenario, the financial risk sits entirely with the authority.
Without rigorous financial modelling, councils risk tying up scarce borrowing headroom in schemes that underperform, or worse, destabilise wider finances.
Policy decisions carry financial weight. Prioritising family-sized homes, supported housing, or zero-carbon design requires different grant levels. A 4-bed house costs significantly more than a 1-bed flat, but not in direct proportion.
Supported housing often requires 30–40% higher subsidy due to specialist build, higher management, and restricted rent levels.
Appraisals allow councillors and officers to understand the true financial trade-offs behind policy ambitions, ensuring strategy is matched by deliverability.
Section 106 remains vital: over 50% of new affordable homes delivered in 2023 came via s106 agreements. But the negotiation is a balancing act:
A well-prepared appraisal provides the evidence base to resolve this three-way tension, ensuring that developments are deliverable, policy-compliant, and fundable.
Local authorities cannot afford to treat viability as a back-office technical exercise. In today’s environment of rising build costs, tighter borrowing, and ambitious policy targets, development appraisals are a strategic tool that determine success or failure.
Authorities that invest in appraisal capability will:
In 2025, the councils that master viability will deliver more homes, at the right tenures, with greater resilience. Those that don’t risk disappointment for their communities, and potentially, serious financial strain for their organisations.