How Much Is Land Worth With Planning Permission? The Residual Method, Explained

Why there is no single multiplier for land value with planning permission

Landowners are often told that planning permission multiplies the value of a field or a yard by a round number. It does not. Permission removes one risk, the risk of refusal, and leaves every other variable in place.

Two consents on the same plot give two different land values. One allows ten flats, the other four houses. Each has its own sales value, build cost and planning obligations. The land is worth whatever is left after each, and the two figures can be far apart.

Location changes the answer again. The same scheme costs more to build on a tight corner site than on an open field. The finished homes sell for more in one postcode than in another. A multiplier knows none of this. A residual appraisal knows all of it.

The residual method: how land value with planning permission is calculated

The residual method starts with the finished value and works backwards. Surveyors value development land this way under the RICS standard for development property. Developers use the same arithmetic to decide what they can offer.

Then take off the costs of buying the land: stamp duty land tax, legal and agent's fees. The remainder is the price a developer can actually offer. Tax rates can change, and there is a Budget on 28 October 2026, so check the current rates with a tax adviser.

The line-by-line mechanics are in our guide to development appraisal, GDV and residual land value explained. This article is about what the lines look like for a London site today, and what moves them.

Each line of the residual in London in 2026

The method is the same everywhere. The numbers are not. These are the lines that decide a London land value this year.

Gross development value: the top line sets everything

Every line below GDV is a cost. GDV is the only line that puts money in. It should come from recent sales of comparable homes in the same postcode, not from an average price per square foot. A forecast built on hope overstates the land value, and the sale falls over when the buyer's lender runs the numbers.

Build cost: the line a contractor should price, not a spreadsheet

Build cost is the biggest deduction and the one most often guessed. Costs in London vary with the site: access, ground conditions, party walls, a basement, a listed neighbour. They have also moved since the last index many appraisals still use.

A cost plan priced from the drawings by the team that will build the scheme is worth more than any benchmark. Our guide to abnormal costs in construction lists what a desk estimate misses.

Planning obligations: what the consent gives back to the council

Affordable housing lowers GDV, because affordable homes sell to a registered provider for less than open-market homes. The Community Infrastructure Levy is a fixed charge per square metre of new floorspace, with the Mayor's levy on top of the borough's. Section 106 adds site-specific obligations. Our guide to CIL and Section 106 explained covers how each is calculated.

Finance, fees and profit: the lines the lender writes

Finance depends on how long the money is out, so a slow consent or a slow build costs land value. Professional fees are a proportion of build cost.

Developer's profit is set by what a lender will fund. For plan-making viability, national guidance treats 15% to 20% of GDV as a suitable return to developers. Real schemes are priced on the risk of the site and the terms of the lender.

What reduces land value with planning permission

The consent you hold decides the price more than the land under it. These are the things that cut the number, and most of them are set before the application goes in.

1. Affordable housing. Affordable homes sell for less, so they lower GDV and the land value with it. In London, schemes offering at least 35% affordable housing without public subsidy use the Mayor's Fast Track Route and skip a viability assessment. On public land the threshold is 50%.
2. CIL and Section 106. Both come off the land line. If nobody assumes CIL liability it defaults to the landowners, and it is due as soon as development starts.
3. Abnormal costs. Contaminated ground, a culvert, piling, an asbestos strip-out or a party wall award all reduce what is left for the land.
4. Conditions and the clock. Pre-commencement conditions delay the start, and a permission lapses if work does not begin in time. Both cost finance and both cost land value. Our guide covers how long planning permission takes.
5. An undeliverable consent. A scheme the council approved but no builder can deliver at the assumed cost is worth less than its drawings suggest. Price it before you consent it.

A time-limited London route published in March 2026 sets a lower bar until 31 March 2028. Private-land schemes with at least 20% social and affordable housing by habitable room can apply, with at least 60% of that at social rent.

National guidance is blunt about the other direction. The price paid for land is not a reason to cut affordable housing or any other policy requirement. Overpay for a site, and the appraisal does not get adjusted. The loss is yours.

Hope value, benchmark land value and the price before planning

Before planning, land has two values. Its existing use value is what it is worth as a field, a yard or a depot. Hope value is the extra a buyer will pay for the chance of a consent.

The gap between hope value and the residual after planning is the uplift. It is what our land value uplift and planning gain page is about.

Hope value is not a right. Since 30 April 2024 a compulsory purchase order in England can direct that the prospect of planning permission is ignored when compensation is assessed. The power, in section 190 of the Levelling-up and Regeneration Act 2023, covers schemes delivering affordable housing, schools and health facilities. A permission already granted still counts.

Three figures, three questions. Hope value is what land might fetch before planning. Residual land value is what a developer can pay after it. Benchmark land value is what the council assumes when it tests whether your scheme can afford more affordable housing.

What your land is worth with planning permission: sell, option or promote

How you reach the consented value matters as much as the value itself. There are three routes, and each shares the risk and the gain differently.

Sell now, without planning. You take hope value and the buyer takes the planning risk. It is the fastest route and the lowest price. An overage clause can give you a share if the buyer later does better than expected. Our guide to the overage clause on a land sale explains how it is drafted.

Option agreement. The developer pays for the planning and holds the right to buy at a discount to the consented value once permission is granted. You carry no planning cost, but the buyer is also the party setting the price. Read buying land with or without planning permission to see how the other side thinks.

Promotion agreement. A promoter funds and runs the planning, then the land is sold on the open market and the proceeds are shared. Both parties want the highest price. Our comparison of option vs promotion agreement vs joint venture sets the three side by side.

Under an option or promotion agreement with us, we fund and run the planning. The terms are written for each scheme before anything starts. We never quote a value for your land before a director has looked at it. A value without a costed scheme behind it is a guess.

Why a land value calculator gets it wrong, and what to use instead

Online land value calculators work from a price per acre, or a fixed share of sales value. Neither knows your consent, your build cost, your planning obligations or your lender. A number from a calculator is a conversation starter at best. It is not a figure to sign heads of terms on.

The calculator that works is a costed scheme

The calculator that works is a development appraisal and feasibility study built on a costed scheme. At Allitsen Road in St John's Wood we drew four options for one vacant corner building. They ranged from four apartments to seven, using the basement and roof.

Each was costed, tested against Westminster and London Plan standards, and had its affordable housing, CIL and vacancy credit quantified. We advised the client against our own most expensive option, around £240k of excavation, because the residual did not support it.

That is the difference a builder's number makes. Our Development Director acquired more than £225M of land and delivered more than 4,000 homes in his previous housebuilding roles.

Craftex has built since 2016, keeps about 60% of its labour in-house and has delivered every project ahead of programme and on budget. We work on development schemes from £3M to £150M GDV and construction from £100,000.

Send us the site and the consent, or the idea. Get a free site appraisal and a director runs the residual on a costed scheme. You see every line and what the land supports.