Budget proposals for land auctions
10/10/2011
By Gilbert Green, Partner and Head of Commercial Property & Development.
The last Budget produced the expected announcement to pilot a land auction model.
It is understood the scheme is intended to:
- allow local authorities to benefit financially from increases in land value generated by the grant of planning permission
- generate more land available for development
- provide greater certainty for developers
- reduce risks involved in applying for planning permission
- discourage developers holding back land from development
- encourage competition.
Without any detail it is difficult to comment with any certainty on either what is actually proposed or the likely result.
If the intention is that development land will generate funds which will in turn stimulate economic growth, particularly by providing much needed investment in infrastructure, it is at this stage difficult to see how land auctions will achieve this.
Funding infrastructure
It must be beyond dispute that such investment is needed. The provision of extra infrastructure arises as a direct result of development. It is, therefore logical that the cost of that infrastructure should be funded by that development. Successive Governments of differing political hues have sought to tackle this thorny problem since the introduction of national planning policy in the post war years.
Both central and local Government lack the financial resources to fund the infrastructure new development requires. It must therefore follow that if there is to be new development then the cost of that infrastructure must be borne by the developer. This requires sensible acceptance by landowners that the net value of development land has decreased.
Community Infrastructure Levy
Leaving aside for the moment its complexities and possible difficulties, the proposed Community Infrastructure Levy (CIL) might just have provided the means by which this investment in infrastructure could be funded. In particular, if applied across the board to all new development it would provide a fair means of levying funds without in any way affecting or influencing the planning system. It did away with the uncertainties of 106 contributions and, more importantly, the delays involved in negotiating and documenting these. It really appeared to be a means of simplifying one aspect of planning. As presumably CIL will not apply to land auctions how can it be expected to work on other developments? If it does not, then the potential benefits it offers will be lost.
We need a means to accelerate the planning process, to remove uncertainty and inequality over financial contribution to local improvements and to provide direct investment in infrastructure to enable delivery of development. The first is achieved by simplifying the planning process; the other two by a fair and across the board system of levy. It is not achieved by trying to transform local authorities into developers.