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RTPI: Approach to capturing development gain not adequate

Words: Laura Edgar
Capturing land value / iStock

The current measures to access rising land values do not benefit the public enough and are stalling housing delivery, according to the RTPI.

The institute has commissioned new research to look at how other countries can offer the UK a different way of funding infrastructure through capturing the uplift in land value resulting from the granting of planning permission and public investment being made on or near a piece of land.

Current land value capture mechanisms used in the UK – section 106 and Community Infrastructure Levy (CIL) – will be compared with the three other mechanisms. The RTPI said this would be a simple tariff mechanism and two variants of the North American Impact Fee approach.

The ability of each approach to raise money, its attractiveness and ease of implementation will be tested against a hypothetical site. Planners will be interviewed, as will planning consultants, lawyers, valuers and developers.

Stephen Wilkinson, president of the RTPI, said the existing measures have their role but they “essentially ‘claw back’ some land value uplift to mitigate the impact of development, rather than allowing local authorities to be proactive by using rising land values to fund land assembly and deliver housing”.  

“S106 and CIL are often subject to lengthy negotiations and are not capable of producing the game-changing effect local authorities need to push forward projects,” said Wilkinson.

The institute has expressed disappointment that the government’s housing white paper did not produce a more effective and fairer land value capture mechanism to fund local transport and infrastructure, such as doctors’ surgeries and schools, without incurring public debt.

The Centre for Progressive Capitalism suggests that the current model will miss capturing a potential £185 billion of total land value increase over the next 20 years, with the RTPI saying “change is urgent”.

Wilkinson said: “Infrastructure is critical to housing delivery and economic growth. At a time when public finance is squeezed we have to look at new funding models to ensure infrastructure can be built at the speed and scale we need.

“We are missing a trick by not accessing the vast potential of rising land values which currently go directly to landowners. Rising land values are a reasonable place to look for infrastructure funding and international evidence suggests there are fairer, more effective ways of sharing this gain.”

The RTPI will carry out the research with Professor Craig Watkins, Dr Sarah Payne, Dr Richard Dunning, and Emeritus Professor Tony Crook from the Universities of Sheffield and Liverpool with funding from the Crook Public Service Fellowship.

An interim report will be published in the summer, with a full report expected to be published in September 2017.

The abstract for the project, The Use of Alternative Land Value Capture Mechanisms to Deliver Housing in England and Wales, can be found on the RTPI website.

Image credit | iStock