Mr Boles I have an answer for you : It is the land value that stands in the way of development- whether that is development accompanied by infrastructure, development accompanied by affordable housing, or in some cases just development in the spatially appropriate place.
In the PAS courses that I run on viability – viability is ‘all about delivery’ (my catchphrase). But in some places is this actually possible on paper, and/or in reality?
The existing community will do everything they can to resist development, holding up plan making and development schemes for years, if they consider that new development will only be a drain on existing already overburdened infrastructure, or that it won’t make anything better for their existing community (e.g. no affordable housing for local people). So even where you have proved the viability sums on paper- so what – development still isn’t being delivered (or not quickly). That is because those viability sums have either already built in an understanding of the return the land owner considers ‘competitive’, based on their world view and previous expectation. This level of landowner return leads the council to accepting a low level of ‘expensive’ affordable housing, and/or accepting that it is not possible to get the level of infrastructure that will actually mitigate the scheme in both the local and wider community. The Local Authority has to set their policies at the viable level based on ‘the’ view of a ‘competitive’ land owner return. The authority need to provide for their objectively assessed need and try to make sure they have their 5 year housing land supply. So on this basis, housing is allocated, resisted, appealed, resented, built and resented more. This makes each development, particularly in the south, south east and other high value areas, increasing difficult to achieve in a timely manner through the planning process.
Another scenario is where the viability level is low. In many parts of the country, there is no ability to provide infrastructure to support development at the land value that the land owners expect. In some cases, in terms of the build costs alone at the land value the owner expects means the development is not viable.
In places where the large landowners have held their land for generations – the view seems to be that unless they get their view of a ‘competitive return’ they will wait another generation or two before they sell. So if their land is necessary to meet the objectively assessed need, and/or because it is spatially appropriate, it appears that the authority has to allocate it regardless and accept a poorer quality of development without the infrastructure support. Can this really be right? What is the communities’ view of this? What are the long term implications? In some cases it may not be possible to address the Authorities objectively assessed need if development would not be viable – at today’s costs and values – when one of those costs is the landowners expectation. So this brings me to a PBA event I attended in December on Infrastructure Investment, where Nick Boles was speaking. What was particularly interesting was his last comment and the question that he threw to the audience.
He was very clear – the granting of planning consent creates value. So, Government essentially creates value for the land owner. Without the planning permission the land does not have even a fraction of the value.
He went on to say ‘the right to develop is a public good….’ Give planning permission and the land value shoots up …
Based on this he asked whether ‘landowners should accept a lower level of value on development land?’
So Mr Boles to answer your question – Yes, the value of the land needs to take into account the true cost of development. That cost being the needs of the community, current and future, in terms of infrastructure and affordable housing. This requires the land value expected by land owners, the amount of uplift, to come right down. There needs to be a true realisation that the need for infrastructure to support development is not just a nice to have, it is an essential for the long term functioning of communities and the short term acceptance by communities of development.
The landowner may say they only have one chance to sell the land, to make their money, but the community only has one proper chance to put the infrastructure in place.
So landed folks, to deliver development to meet the severe housing shortage, that is sustainable and provides the infrastructure and affordable housing the community need, review your ‘expectations’
I also think that the UK’s centralised tax system stands in the way of new housing development. New homes are a burden. The New Homes Bonus and the CIL provide financial incentives to Local Government to build new homes. However these inducements are inadequate to cover the cost of the infrastructure needed to service the new homes.
The Government could go further in decentralising tax raising powers to make it in Councils’ financial interest to support new homes in their area. When communities stand to benefit from housing growth it is more likely that local Councils will deliver that growth.
Apart from CIL, S016 agreements and the recent depression in the housing market, viability is a huge problem as we make development more sustainable. The basic problem is that higher levels of sustainability benefit home occupiers, but cause developers to incur unrecoverable costs. In essence, sustainability is not yet being valued by the key players in the housing market (surveyors, lenders, mortgage brokers, solicitors, the Land Registry, etc). Changes to the embedded practices of these players requires specific government interventions, if only to align dates when changes must happen. We explored this in detail in a discussion paper entitled “Valuing Sustainability”, which can be downloaded from our practice’s website: http://www.haskerarchitects.co.uk
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