Following on from my Brief and Myopic History of Viability, I thought I would follow up with a review of it’s executioner – The Planning Reform White Paper.
I have an image of how government policy is made.
I see huge oak panelled double doors opening into an opulent panelled conference room strewn with Constables (the artist rather than law enforcement) . In the silence, the sun beams through the Georgian windows past the heavy, full length embroidered drapes – more tapestries than curtains. The room is silent and empty with the scent of high polish but, even though it is spotless, tiny dust particles play randomly in the sunlight.
Either side are two highly polished, antique tables with Louis XIV style upholstered chairs facing inwards to allow serious and considered cross-table debate. The tables are set with silver coffee pots, gently steaming to ensure the contents will be tepid when taken. Cold, highly decorated bone-china cups will ensure the beverages are all but undrinkable. Crystal decanters are filled with (on this serious occasion) water with upturned matching glasses for each setting.
There are footsteps, growing in number and volume. Noisy gaggles of governors burst in, discussing, arguing and debating until the very last. Each clutches a bundle of notes with the really important stuff facing outwards for the benefit of any passing photo- journalist. There is a scramble for seats as territory is staked out with jackets, handbags note pads and tablets. Each pours a hot drink, winces and reaches for the water. The chatter dies naturally and they are ready to govern.
There are two main items on the agenda today.
- Covid Testing Centres
- Planning Reform
Agenda Item 1 – Provision of Covid Testing
The chairman introduces Agenda item 1 by two quick claps of the hand at which signal a side door immediately opens. Two immaculate, white-gloved lackeys strain to slowly push in the government’s main decision making tool – The Wheel of Fortune.
On each segment of the wheel is a town or city in England. Before the first spin there is debate about those areas with the highest infection rates. Ergo, they have already had their “fair share” of tests and so are removed from consideration. Greater Manchester, Birmingham and Leicester are therefore out of the running.
Now to the decision making and the Chairman spins with gusto (pun intended). As the wheel turns in rapid staccato, there is hushed but urgent discussion between decision makers as they place their bets. As the spinning slows the noise level crescendos in anticipation of the first “decision”. It grudgingly slides over Luton, slows past Keswick, and looks as if it might get past Truro. But no! It doesn’t make it, it falls back. All testing resources are immediately diverted to the ghettos of urban Truro.
There is uproar as the governors settle their individual wagers and then relief that such a difficult and important decision has been so effectively dealt with. This is how governments should work.
Agenda Item 2 – Planning Reform
I have waited a while to write about this for two reasons:
- Most of our developer clients have summered on their yachts, sailing to international waters every Thursday to see which territory to enter next to avoid quarantine. In doing so they have been out of internet range and I wanted to make sure this post was fully up-to-date when read.
- I wanted to see what the “professional” reaction was to the proposals. After all, everyone has an opinion nowadays and I thought it worth considering the wide-range of feed-back from all the (very many) interest groups. So I have – and completely ignored it.
The Government released its White Paper “Planning for the Future” on August 6th. It covers a lot of ground but our interest revolves around viability and that is the focus of this diatribe. There is plenty to consider.
Planning Reform – The Three Pillars
Many readers will know the proposals in great detail, but for those who are not familiar with it, the White Paper sets out three “pillars”:
Pillar 1 – Simplified local plans and providing greater certainty as to what land can be developed for.
Pillar 2 – Planning for beautiful and sustainable places – this is so interesting that re-naming it Pillow 2 would be appropriate.
Pillar 3 – Taxing developers and land owners by replacing CIL and developer contributions through Section 106 agreements with a single, consolidated, flat-rate “Infrastructure Levy”
Clearly, our interest is in Pillar 3. I am all for simplified plans and beautiful, sustainable places, but our clients are interested in delivering development and making enough of a return to reflect the risk involved.
However, before getting into the detail of the developer contributions and in the spirit of subversion, the forwards presented by the PM and the SoS for Housing are, if nothing else, entertaining.
“Radical reform unlike anything we have seen since the Second World War”
|In a Covid/Brexit economy unlike anything we have seen since the Second World War|
|“Makes it harder for developers to dodge their obligations”||
|“Opens up housebuilding to more than the current handful of “massive corporations”||
We welcome incentives to bring SME’s into the sector but as for “massive corporations” – oh the hypocrisy….
There is also a forward by Robert Jenrick saying pretty much the same things – or whatever else Dominic has told him to say.
The Infrastructure Levy
The Planning Reform White Paper proposes a fundamental change to town planning but we are only concerned with Pillar Three – the objective of which is to replace all current planning contributions in the form of Section 106 and CIL with a single flat rate charge – the Infrastructure Levy.
This will not be negotiable – the government intends to “sweep away months of negotiation on S106 agreements and the need to consider site viability” and by doing so, it says it will:
- Raise more revenue than the current system
- Deliver “at least as much” on-site affordable housing as at present
- Capture a greater share of land value uplift
- Set more ambitious targets for affordable housing through planning gain
- Allow Local Authorities to secure more on-site affordable provision
This is true alchemy. It appears that politicians have re-discovered the bottomless pot of gold that is developer profit. From the list above, it appears they have spent it already – twice.
As we have said in our A Brief and Myopic History of Viability, we welcome the replacement of the current developer contributions system. The White Paper gives an excellent critique of the current system (para 4.1 – 4.4) and even the government now admits that planning obligations are uncertain and opaque. This is surprising as a key tenet of the NPPF 2018 was that developers are assumed to know what contributions are required when purchasing land. Clearly the government now thinks otherwise.
We would certainly not be sad to see the back of the current form of CIL. What a ridiculous, ill-conceived, badly implemented and inefficient tax. Think of the money that has been spent on preparing and delivering the various iterations of CIL across the country. 343 area-wide viability studies, planning inquiries and the rest would have paid for a small town of affordable housing.
Replacing S106 and CIL with the Infrastructure Levy is a positive idea. In theory, a simple tax on development is easy to understand, calculate and collect. It has the added advantage of being flexible. It can be increased when the market is good and decreased when it is not. The trick is clearly getting the rate of tax right.
The White paper outlines that the new Infrastructure Levy ” would be based upon a flat rate, valued-based charge, set nationally, at either a single rate, or at area-specific rates” set as follows:
- It would be charged on the final value of development
- Be levied at the point of occupation
- Include a value based minimum threshold below which the levy is not charged. This threshold will be based on build costs and a small, fixed allowance for land costs. (BLV anyone?)
I know this is only a consultation paper, but there are some massive holes in these viability proposals.
The biggest “hole” is the complete lack of understanding of what actually drives private development – that dirty “P” word – profit. If land is over-taxed, it will not get released for development. If developer profit is over-taxed, released land will not get developed. Short of nationalising land and housebuilders, there is not much the government or any politician can do about that.
But political expediency will always trump practicality. Which is sad.