This is the review set up by the Labour party when Ed Miliband announced they proposed to introduce a “Use it or Lose it” provision to counter hoarding of development land. Brock Consulting’s response to the call for evidence has gone in and can be found here.
Strangely, the call for evidence opens with the statement that “the high cost of housing is largely driven by the high cost of land”. That goes contrary to how I understand residual land valuations are done (put simply, the landowner gets what’s left from the purchase price of the finished development after all the construction costs, financing costs, developer’s profit and professional fees are paid). There is a danger with Lyons’ assumption, because it would fail to apply the laws of supply and demand – the price of the finished development is influenced by the numbers of such developments in the market and the amount of money available to buy them. So easier lending to house-buyers is inflationary, and will give the landowner a better price. Once we understand that, we can see that if planning permissions are not granted for housing development that will also drive up the price of housing. (Of course, when times are hard, potential buyers tend to stick with the accommodation they have, so demand drops off and the price of housing ceases to rise, and in extreme cases, drops, leading to negative equity issues.)
I have blogged before on Use it or Lose it (here) . We already have Use it or Lose it powers – planning permissions expire, completion notices can be served, and there are powers to acquire land compulsorily for planning purposes. I hope Lyons will look into breathing new life into the rarely used completion notice and CPO powers before embarking on more legislation in the area. I have often wondered why completion notices are rarely served. Could it be that they just create the need for a new permission? If an authority has a housing shortage, revoking the permission won’t help. In which case, Use it or Lose it would need to focus on compulsory acquisition. But how will that be funded? And how will local authorities do the development? Selling back into the private sector doesn’t sound the way ahead – the new buyer will be driven by market forces and if it was better for the old owner not to develop (for example because the development was not profitable enough) how will things be different for the new buyer?
One of the questions Lyons asks is whether the system is fit for purpose. That is a wide-ranging question. The existing system was hammered out by a Royal Commission and three special committees, the last of which was the Uthwatt Committee. Its brief was to ensure that redevelopment was not held up. But it is difficult to say that a positive attitude to development prevails at the moment. Far from being a means of enabling development and providing homes, the popular attitude sees planning as a method of control, even prevention. And MPs are not immune from those attitudes, as January’s Commons debate on planning showed. If we could regain the positive approach, change hearts and minds, we might see an increase in housebuilding to the levels needed to meet the need.
Lyons is also asked to look at sharing the benefits of development with local communities. The history of post-war town planning is punctuated with attempts to do this. From betterment levy to DLT they have all been counter-productive, complex and eventually repealed. Now we have CIL, conceived by the last Labour government. This seductively simple levy (it would replace the need for complex s.106 agreements and their lengthy negotiations) is proving to be pretty complicated. It has been amended every year in attempts to correct errors in the original regulations. Even the final draft of those had to be amended at the final hour when DCLG and the Treasury at last woke up to what the Law Society had been telling it, that the regulations as drafted were retrospective and would catch planning permissions granted before the regulations were made. The basis for giving credit for existing development has proved to be a thorny problem. The latest amendments – passed on 23rd February this year – amend the very formula for calculating the amount payable. And CIL has not been, and will not be, the end of section 106 agreements.
It is popular to claim that the grant of planning permission gives the landowner a windfall. But this ignores the fact that but for legislation (notably the Town and Country Planning Acts 1947-1990) the landowner could develop without the need for planning permission. The 1947 Act nationalised development land rights, and whilst it originally created a compensation regime, that was effectively abandoned in 1953 (ironically by the Conservative government of the day) and finally abolished (again by the Conservatives) in the Planning and Compensation Act 1991. Little compensation for the expropriation of development rights has ever been paid.
We already have a tax on capital gains, Capital Gains Tax, introduced in 1965, by the then Labour government, and still going strong almost 50 years later.
We already have a well developed planning system, it would be sensible to explore whether its existing legal framework has tools to address the difficulties which have been identified. Sadly however, the Lyons panel contains no lawyers, let alone planning lawyers.
Leave a Reply