The purpose of this paper is to investigate the effect of choices of model structure and scale in development viability appraisal. The paper addresses two questions concerning the application of development appraisal techniques to viability modelling within the UK planning system. The first relates to the extent to which, given intrinsic input uncertainty, the choice of model structure significantly affects model outputs. The second concerns the extent to which, given intrinsic input uncertainty, the level of model complexity significantly affects model outputs.
Monte Carlo simulation procedures are applied to a hypothetical development scheme in order to measure the effects of model aggregation and structure on model output variance.
It is concluded that, given the particular scheme modelled and unavoidably subjective assumptions of input variance, that simple and simplistic models may produce similar outputs to more robust and disaggregated models. Evidence is found of equifinality in the outputs of a simple, aggregated model of development viability relative to more complex, disaggregated models.
Development viability appraisal has become increasingly important in the planning system. Consequently, the theory, application and outputs from development appraisal are under intense scrutiny from a wide range of users. However, there has been very little published evaluation of viability models. This paper contributes to the limited literature in this area.
Byrne, P., McAllister, P. and Wyatt, P. (2011), "Precisely wrong or roughly right? An evaluation of development viability appraisal modelling", Journal of Financial Management of Property and Construction, Vol. 16 No. 3, pp. 249-271. https://doi.org/10.1108/13664381111179224
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