Memorandum by the Commission for Architecture
and the Built Environment (CABE) (PGS 40)
1. INTRODUCTION
1.1 CABE welcomes the broad objective of
recouping the uplift in land values deriving from planning permission
to provide for community infrastructure.
1.2 Planning obligations, or section 106
funding, have proven inadequate for delivering all the infrastructure
that developments need to grow into successful communities. In
particular they cannot ensure infrastructure outside the development
site. S106s are often ad hoc, involve protracted negotiations
and lack certainty for developers and local authorities alike.
There is also anecdotal evidence to suggest that s106s are responsible
for helping to reduce money spent on the developments themselves—both
because of the resources used in negotiating agreements and the
lack of transparency and certainty. We would therefore welcome
a new funding arrangement based on openly set costs which can
be passed onto landowners.
1.3 However, we are not convinced that PGS
is necessarily the most effective alternative to the existing
s106 model. The tariff, or "roof tax", model currently
being trialled by Milton Keynes and Ashford does, we believe,
merit further examination.
1.4 The tariff model provides greater certainty
by setting out required contributions for an area. Developers
are able to build these costs into their negotiations on the purchase
of land. Although indirect, this effectively acts as a localised
tax on uplift in land value. The core benefit of tariffs over
PGS is that they can be based on local infrastructure need—not
local land values. As well as better reflecting local infrastructure
priorities, being locally set means that LPAs can adjust tariffs
to incentivise forms or locations of development they would like
to see. CABE would value a further discussion around tariffs in
the near future.
1.5 Turning to the current consultation,
we are concerned that PGS contains significant flaws as currently
proposed. If it were to be retained as a model we suggest that
the following issues be considered.
2. THE RIGHT
DEVELOPMENT?
2.1 Since one of the core objectives of
PGS is to help stimulate development, it will be judged to have
failed if it actually provides a barrier to building or distorts
the planning system.
2.2 For example, although CABE welcomes
the suggestion that the rate should be set lower for brownfield
sites, we would urge caution in this area. Depending on how PGS
is recycled; a lower rate may act as a disincentive to LPAs to
promote brownfield development. It is also likely that the difference
between current use value and value deriving from planning permission
may be slight for brownfield sites—affecting likely receipts
for LPAs.
2.3 In order to balance the likelihood of
a lower PGS rate discouraging LPAs from bringing forward brownfield
sites, CABE would suggest that LPAs be allowed to retain more
PGS revenue generated from brownfield land development than from
other sites. Such a measure would act to provide a powerful financial
incentive to both LPA and developers to take on brownfield sites.
2.4 The issues relating to brownfield land
should also be seen in relation to the weakening of the sequential
test in the draft PPS3. CABE would not wish to see a situation
where the PPS3 and PGS worked together to discourage brownfield
development and the renewal of our urban areas.
2.5 If there is scope for PGS to be utilised
as a tax to promote "goods", as suggested by the proposed
lower rate for brownfield development, CABE would also suggest
that a lower PGS rate might be introduced for homes which meet
the Code for Sustainable Homes.
3. RIGHT FUNDING,
RIGHT PLACE,
RIGHT TIME
3.1 Dependant on the revenue recycling method,
the PGS could help to create an important new funding stream for
new and improved community infrastructure and open space. Additionally,
it presents an opportunity to increase community support for new
development and move the debate on from arguments about numbers,
helping to promote a more sophisticated discussion about quality
and impact.
3.2 CABE believes that a careful balance
needs to be struck between how much PGS revenue would be recycled
directly back to the local authority and how much is redistributed
on the basis of infrastructural and community need.
3.3 If the balance is tipped too heavily
in favour of the source local authority, funding would be unfairly
distributed to authorities that are capable of generating it,
and where there would already be good infrastructure provision,
which helps produce the high land value uplift in the first place.
Conversely, areas where the difference in land value between existing
and proposed use is small would not generate adequate funding
to improve the quality and economic success of the area. Such
a system would leave many authorities in clear need of infrastructure
funding but without the means to provide it.
3.4 Additionally, permitting LPAs to keep
PGS revenues they are responsible for generating might lead to
authorities promoting sites on the basis of how much PGS might
be generated, not the most sustainable option. Examples might
include prioritising greenfield over brownfield sites or favouring
housing development over important supporting uses including those
that create employment.
3.5 Alternatively, a system which was based
solely on the redistribution of revenues would provide insufficient
incentive to local authorities and communities alike to bring
development forward.
3.6 Although a redistributive system would
provide for the funding of infrastructure in a strategic and well
planned manner, based on need rather than the ability to generate
funding, it would be unlikely to receive popular support. Drawing
such funding up into the exchequer would risk it being mined for
uses other than that originally intended which were unrelated
to the delivery of development or enabling infrastructure.
4. POTENTIAL
HAZARDS
4.1 The Government needs to ensure that
PGS is calculated in such a way as to take account of hope value,
or the potential for uplift in value when land is allocated for
development. This means that the calculations would have to be
based on the value of the land at its current permitted use—not
any potential development value.
4.2 However, doing so may act as a potential
brake on development sites coming forwards as many developers
will have agreed a price for land which includes some element
of hope value. It would be rare for a landowner sitting on farmland
allocated for development to agree to sell it for agricultural
use value.
4.3 There is also an issue surrounding the
"banking" of planning permissions by developers and/or
landowners in a rising land market—ie gaining planning permissions
before 2008 for land they have no intention of developing in order
to minimise the gain for an application post-2008. Whilst
developments have to be commenced within 3 years, they may even
decide to make a technical start, pay any PGS due and wait until
development values increase to a level where profits can be maximised.
There is even some chatter in property and development circles
about a market emerging in trading pre-2008 planning permissions
or sites where a technical start has been made and PGS paid. This
will clearly not help the delivery of development and this loophole
will need to be addressed in order for the system to work properly.
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