In affordable housing development, the word viability carries both financial weight and social responsibility. It sits at the intersection of commercial discipline and community purpose. Getting it right is vital if we want to deliver homes that remain both sustainable and affordable over time.
At SDS, the question that often comes up is simple: when does a scheme become viable? The answer lies not in a single financial metric, but in how well a project aligns with strategy, maintains financial integrity, and supports long term business sustainability.
A viable scheme is not just one that balances its books. It is one that strengthens the organisation’s mission and future position.
In practice, a scheme is generally considered viable when it meets several key conditions. It fits with the organisation’s development strategy. Its cost to value relationship is acceptable. It can repay its loan, adds value to the organisation, and any internal subsidy required is within tolerance. The necessary grant or subsidy must be available, the project must not undermine the business plan, and its risks must be acceptable.
Only some of these questions can be answered through a financial appraisal. Tools like ProVal can test the numbers, but not the narrative. The rest depends on organisational context, decision making and risk appetite.
On paper, this can dramatically improve results, making a scheme appear far more viable. But it also assumes the eventual sale or disposal of the asset in order to realise that value. That introduces a commercial way of thinking which sits uneasily with the ethos of affordable housing, where homes are intended to be retained for long term community benefit.
Affordable housing providers usually value their stock on the basis of rental income and available subsidy. Loans are secured on rental streams, not on capital appreciation. Any growth in asset value is recorded separately through the asset register and long term business plan, rather than in individual scheme appraisals.
Private developers, on the other hand, base viability on sales values and capital growth. They measure success by what can be sold and what profit can be realised.
In short, affordable providers build to hold, while developers build to sell. Mixing the two approaches risks diluting the social purpose at the heart of the affordable housing model.
Including asset value growth in an appraisal can make a project look stronger, sometimes even reducing the apparent need for capital grant. It can also make the organisation’s position appear more robust in the short term.
However, it can distort the long term reality. If the homes are not intended for sale, then the capital growth cannot be realised, and the viability picture becomes misleading. Over time this could push decision making toward a more commercial, less socially focused direction.
For registered providers and housing associations, the sector norm remains consistent. Viability should be assessed primarily on rental income and subsidy availability. Capital growth should be tracked in the asset register and long term business plan, not within ProVal’s core viability appraisal.
This approach ensures that financial modelling reflects the true economics of affordable housing and supports responsible investment decisions.
True viability goes beyond the spreadsheet. It reflects the balance between financial prudence and social mission.
As the housing sector evolves, the goal remains clear: to balance financial realism with social responsibility. The most viable schemes are not just those that work on paper, but those that continue to work for people and communities for generations to come.
Disclaimer
The information in this article is provided for general guidance and educational purposes only. It does not constitute financial or investment advice, nor should it be relied upon as such. Organisations should seek independent professional advice before making any financial or development decisions based on viability assessments or appraisal outcomes.