Government is right to dither over the planning system – for now

The government’s refusal to back a full overhaul of the UK’s land value capture system has received a mixed reception. However, more widely, most see value in its preference to tweak the system before implementing more radical changes. Having rebuffed a select committee’s findings last week, which suggested bigger reforms than the government was comfortable with, it has settled on a gentler approach to make current processes more transparent. The Commons Housing Communities and Local Government committee had called for a substantial proportion of the uplift in land values after planning permission to be accessible to the state to invest in new infrastructure and public services. But the government said these could hamper housing supply and suggested prioritising evolving the existing developer contributions system to make them “more transparent, efficient and accountable”. Historically, land value capture was designed to enable communities to recover land value increases following public investment and other government actions. But as local authorities increasingly sell off land to developers, the developer contributions process has become more opaque, according to planners. Developers are under increasing pressure to step up provisions such as affordable housing on land they buy, but exactly how much and what they should provide is not always clear. As a result, most agree that making this system work better is an immediate priority for the government, beyond exactly how much money developers should hand back to councils. Ian Fletcher, director of real estate policy at the BPF, said: “It is right that the government focuses on improving the existing system of developer contributions to make them more transparent, efficient and accountable.” But he added that the select committee’s recommendations risked undermining “much-needed development and housing supply”. “At a time when the UK must be building more homes, finding land is critical to success and if landowners don’t see the uplift in value from change of use, fewer landowners will come forward with land,” he said. Victoria Hills, chief executive of the Royal Town Planning Institute, agreed that overhauling the current “opaque” developer contributions model was a crucial first step. “Some think we need immediate action to direct more income [from land value increases] into the public domain. But we are giving the government the benefit of the doubt as it has already said that land must be valued post-obligations. That is good. If that does not happen, we will look into this.” The RICS is updating its existing viability guidance to reflect new planning policy guidance and is expected to launch a consultation over these plans with the industry and draw up fresh viability guidelines in 2019. Hills added: “RTPI is helping the RICS to update its existing viability guidance. We are aiming to provide clearer guidance so developers can meet their local plan obligations. “It is too opaque. For years, many viability discussions have been held behind closed doors. But the public wants to understand how things are funded and it wants to have a more honest discussion. We are keen for the planning profession to play a key role in that discussion.” Hugh Ellis, policy director at the Town & Country Planning Association, welcomes the fact that “there is some movement” from the government to address the alleged murky negotiation process. He said: “The issue is the negotiations are ad-hoc and there is little clarity. Each local authority negotiates with developers in multiple ways. “In essence, there are two chunks of money to negotiate: when developers get planning permission, which boosts the land value and the profit they generate from what they build on the land.” However, some planners and politicians have been disappointed with the government’s status quo approach. Green Party leader Sian Berry said: “It is disappointing to see the government cite a short-term commitment to providing more housing quickly as a reason to put off long-overdue reforms to land value capture. “It is nonsense to suggest that this more equitable distribution of land value increases would frustrate housing delivery in the short term.” Berry argued that a land value tax would incentivise landowners to build more quickly after receiving planning permission to ensure the land produced enough revenue to offset the higher tax rates. Committee chair and Labour MP Clive Betts said he appreciated the government’s support in ensuring developers do not “try and avoid contributions for affordable housing”. However, he said he was disappointed the government had not committed to more “fundamental changes”. “More of that increase in land value should be captured for public benefit,” he said. “We think all the infrastructure should be paid for by the uplift in value. It is not anti-development, it is just ensuring that the public purse benefits more than individual landowners.” Meanwhile, Ellis suggested that “underneath the rhetoric”, the government remained partial to boosting developers’ incomes to sort out the housing crisis. In this year’s budget, Philip Hammond aired plans to extend buildings upwards without planning permission. The government revealed it had launched a consultation on the plans, which would also avoid the need for requirements for contributions towards affordable housing and local infrastructure through section 106. The consultation ends in mid-January 2019. Ellis said: “The government is already giving away billions to real estate sector after deregulating the planning system in 2013 to convert offices to housing units in an emergency housing drive.” Evidently, the balance of power between local authorities and developers continues to be a thorny issue. Can the government address this while meeting its housing targets? It is certainly trying, having published several high-profile publications this year on the topic, from Oliver Letwin’s review into build out rates, in October, to the revised National Planning Policy Framework (NPPF2) in July. Given the numerous consultations up in the air over the planning system, Hills suggested it was only fair to judge the government once these become more concrete. “Let’s see how the latest changes bed down,” she said. “If we don’t see positive results we will make the case for more change.” To send feedback, e-mail anna.ward@egi.co.uk or tweet @annaroxelana or @estatesgazette