infrastructure planning & housing delivery - who pays?
DESCRIPTION
A presentation to a RTPI North West CPD Conference - 30 March 2011TRANSCRIPT
Infrastructure Planning & Housing Delivery –Who Pays?
Samuel Stafford
30 March 2011
The Good Times?
The Bad Times?
The Development Pie
Infrastructure
Infrastructure
Development
Development
The Bad TimesThe Good Times
What makes development viable?
LPAs secure obligations to make development acceptable in planning
terms
Developers secure sufficient return for
cost of investment and for taking on
development risk Landowners secure sufficient value to
meet expectations and release land for
development
Viable Development
Viability & Planning Gain
Residual Land Value
Threshold Land Value
Capacity for Planning
Gain
Completed Development
ValueLessTotal
Construction CostsLess
Developer Profit
- ==
Capturing Land Value
The Barker Review (2004)
“Government should actively pursue measures to share in windfall development gains accruing to landowners
so that increases in land values can benefit the community more widely”
“…the Government should consider the granting of planning permission as a suitable point in the
development chain in which to levy a charge based on local land prices that aims to capture part of the windfall
development gain.”
The Community Infrastructure Levy
"The new Planning Act 2008 will bring about real culture change for deciding the future needs of our
national infrastructure” (John Healey, November 2008).
“…the overall purpose of CIL is to ensure that costs incurred in providing infrastructure to support the
development of an area can be funded (wholly or partly) by owners or developers of land.” (Paragraph 205(2))
Calculating CIL
Calculating CIL Liability Calculating net chargeable area
Calculating CIL
Viability of development
Other funding sources
Level of CILVolume of development
Up-to-date Development Plan
Infrastructure Planning (PPS12)
A Fairer CIL
“Communities should reap the benefits of new development in their area and these reforms will put in place a fairer system for funding new infrastructure
while also providing certainty for industry. Too little of the benefits of
development go to local communities, and our ambition is to correct that with a
reformed levy under genuine local control.”
Greg Clark, November 2010
The Coalition Changes
The Localism Bill• Ongoing costs• Promotional Costs• Spending by other authorities • The role of the CIL inspector• Flexible payment deadlines
Amendment Regulations• Instalments• Threshold for payments-in-kind
The Future of Section 106 Agreements
CIL Regulation 122• Restricts use of S.106 from 6 April 2010• 3 Circular 05/05 tests now statutory. An obligation must be:
1. necessary;2. directly related; and3. fairly and reasonably related.
CIL Regulation 123• S106 Tariffs phased out by 6 April 2014• LPAs effectively forced to adopt CIL
How CIL might look
And then…
The Bad Times - Regeneration
“The next decade looks set to be a difficult one for the urban development sector. A weaker
supply of credit to the private sector will restrict the activity of developers and severe public spending constraints will limit regeneration
expenditure from the public sector. The result will be that far less money is available for
development over the next ten years than has been available over the previous ten”.
All Party Urban Development Group, January 2010
The Bad Times - Residential Land
“Bulk land has traditionally been thekey driver of volume housing delivery, but
it is likely to continue facing significantchallenges in an environment where debt
finance remains limited and regulatorypressures are increasing. As a result, weexpect the markets for serviced and bulk
land to diverge as bulk land values remainstatic. This will, in turn, probably change
the way development of these sites isdelivered and funded.”
Savills Research (September 2010)
Serviced Plots v Bulk Land
Delivering Infrastructure - The Public Sector
The Regional Growth Fund
• Discretionary fund allocated on a competitive round-by-round basis
• £1.4bn available between 2011 and 2014
• Scope limited to ‘basic infrastructure’
Delivering Infrastructure – Tax Increment Financing
“The report seeks to identify new approaches that could be used by local authorities in the Core Cities to unlock city growth…It also
introduces a new concept, ‘Accelerated DevelopmentZones’ based on the principles that underpin Tax Increment
Financing in the United States.”Core Cities Group & PWC, 2008
“We recommend that• the Government should introduce tax increment financing (TIF)
pilots in the UK, using a variety of TIFmodels to see which ones work most successfully
• TIF should only be used for regeneration schemes that would otherwise be unviable.”
British Property Federation, 2009
What is Tax Increment Financing?
Where did TIF come from?
An American Import
• Introduced in California in 1948 to promote urban renewal
• Gained popularity during federal budget cuts of the 1970s
• In use in 49 states
• Scope widened to include affordable housing, pollution clean-up, and public infrastructure projects
Generating Funds for TIF
Repayment• Speculative or secured bonds sold based upon anticipated future revenue with tax incentives for investors
Pay-As-You-Go• Public authority or developers pay upfront costs and are reimbursed from future increments
Reinvestment• Uplift in tax revenue paid into a dedicated redevelopment fund to be reinvested in future projects
Too narrow a model?
The Treasury Prefer…• Funding large scale infrastructure
• Prudential borrowing
• Repaid by uplift in business rates
…, but what about?• Using the broader tax base: sales, income, corporation, etc
• New Homes Bonus
• Using TIF for more than just infrastructure: feasibility, assembly, incentives, etc
Implementing TIF
What next?
• The Localism Bill
• Local Government Resource Review
• TIF Legislation expected 2012…
• .. In advance of Round 1 bids 2013
• TIF & Enterprise Zones
Summary
Who pays?
Who facilitates?