Growth and Infrastructure Bill

Memorandum submitted by RICS (GIB 08)

RICS Briefing

Growth and Infrastructure Bill Committee Stage

Clause 5 (S106 Renegotiation) and Clause 22 (Business Rates)

Clause 5:

· Whilst it is clear that affordable housing is often difficult for developers to make viable, potentially reducing obligations on developers to provide much-needed affordable housing risks reducing provision at a time when need is great and Government are unable to fund affordable housing delivery due to fiscal constraints. Private sector investment in affordable housing as outlined in the recent Montague Report will take time to have a significant effect in plugging any gap.

· The processes put in place to renegotiate S106 agreements made before 6 April 2010 must be robust and efficient to prevent further delay through appeals.

· Those renegotiating S106 agreements must have the right skills to assess viability. Anecdotally, RICS suggests the Planning Inspectorate’s expertise in this area is uneven.

· Access to an independent, impartial adviser during the negotiation process would efficiently deliver robust renegotiations. RICS suggests that the Expert Advisers in Planning Service (EAPS) established by RICS, RTPI and The Planning Officers Society could be developed to provide independent viability expertise, accessible to all parties.

· Clear guidance which has broad industry agreement is essential to correctly and robustly assess viability. Without this, the Government risks introducing greater uncertainty and an even more cautious approach from developers concerned about appeals.

· RICS has produced Financial Viability in Planning Guidance, consulting widely with the public and private sectors, to provide an objective test of the ability of development to meet its costs including the cost of planning obligations, while ensuring an appropriate site value for the landowner and a market risk adjusted return to the developer in delivering that project. This guidance will provide an agreed framework to ensure the delivery of local development without undermining the developer’s business case. RICS developed its guidance alongside and in consultation with the area-wide guidance developed by the Local Housing Delivery Group led by the HCA and under Sir John Hanham.

· Government endorsement of this guidance would provide the public and private sectors with the clarity they need to quickly make robust assessments and get development moving.

Clause 22

· Rather than creating certainty for businesses the postponement in fact creates uncertainty. Since 1990 businesses have been able to plan ahead for the 5 yearly revaluations with certainty. A break in the 5 yearly revaluations in itself creates uncertainty and introduces doubt as to when the next revaluation will in fact take place. A delay till 2017 will also result in even greater changes in values and larger swings in liabilities creating even more uncertainty;

· Property taxes need to have regular and reasonably frequent revaluations to maintain fairness and acceptability – the 5 year gap has been accepted since 1990 and is generally viewed as the maximum appropriate period;

· Throughout the consultation surrounding the business rates retention scheme the Government has accepted that the 5 yearly revaluation cycle would be retained for the foreseeable future. The first resets was planned to coincide with the 2020 revaluation and the calculation of top ups and tariffs were to be recalibrated following the planned 2015 revaluation;

· If the Government has a concern that a revaluation would produce large swings in liability, as has been claimed, this can be cushioned by transitional relief as at every quinquennial revaluation since 1990;

· The stated purpose of the revaluation "is to maintain fairness by ensuring rateable values are based upon up to date rental values". The purpose of revaluations is to redistribute liability in line with relative movements in property values since the previous revaluation. Delaying the revaluation creates unfairness by requiring struggling businesses to subsidise those that have fared relatively better.

· Retail, particularly High Streets of the type targeted by the Portas Review and other Government initiatives, is one of the sectors which has been hit hardest by the economic downturn and would have benefited most from the 2015 revaluation (particularly outside of London). Open market rents in many High Streets are substantially lower than those prevailing in 2008.

· With the significant fall in rental values of many High Streets, the 2015 Rating Revaluation would have been expected to in turn significantly reduce retailers’ business rates bills. Rates being kept at the current high levels will act as a deterrent to attracting investment back into many town centres. Struggling businesses will in effect be penalised by excessive rates for a further two years, subsidising relatively more prosperous businesses.

· Clause 22 should be removed from the Growth & Infrastructure Bill. If, however, Parliament wishes to postpone the 2015 revaluation, Clause 22 should be amended such that revaluations following 2017 should be at intervals of ‘no more than 5 years’ rather than at fixed 5 yearly intervals. This would allow a shorter revaluation cycle as suggested by Sir Michael Lyons, without having to obtain primary legislation for such shorter period.

About RICS

RICS is the leading organisation of its kind in the world for professionals in property, construction, land and related environmental issues. As an independent and chartered organisation, RICS regulates and maintains the professional standards of over 91,000 qualified members (FRICS, MRICS and AssocRICS) and over 50,000 trainee and student members. RICS has 22000 UK members in the Planning and Development Group with 5000 also qualified as Building Surveyors. RICS regulates and promotes the work of these property professionals throughout 146 countries and is governed by a Royal Charter approved by Parliament which requires it to act in the public interest.

November 2012

Prepared 14th November 2012