Sarah Monk, Christine Whitehead, Connie Tang and Gemma Burgess IFHP - PowerPoint PPT Presentation

International Review of Land Supply and Planning Systems Sarah Monk, Christine Whitehead, Connie Tang and Gemma Burgess IFHP 100 Centenary Conference Track 5: Housing and Social Justice UCL June 11 th 2013

Introduction • The JRF Housing Market Taskforce identified land supply as a key issue contributing to housing market volatility and housing affordability problems in England. • It therefore commissioned research to establish whether experiences in other countries could contribute to understanding of the constraints on land supply in England • The research explored whether mechanisms that work in other countries might be introduced to help unlock new housing supply here

The research • Long list of 24 countries with data on population, households, population density, house prices, housing completions, completions per 1,000 population compared • Selected 11 countries for detailed analysis • Literature and data search and review • Advice and critiques from country experts • Round table of stakeholders to test how far the findings could be replicated in the English context • Case study countries:

Why land supply is a vital issue • Record house price increases in early 2000s yet supply of new homes did not increase significantly • This contributed further to affordability problems • Global financial crisis and resultant recession only worsened the supply situation • A review of planning systems and land supply is therefore timely

Current policy and practice The Coalition government has introduced policies to achieve sustainable growth and address housing supply • A strong presumption in favour of development • New Homes Bonus • Speedier planning system • Fast tracking of major infrastructure projects • Duty to co-operate • Neighbourhood planning • Land auctions and green belt swaps

How much land do we need? • Green belt currently covers some 13% of the total land area of England • Urban land covers only around 10% • Planning Minister recently stated that increasing this to 12% would meet all identified future requirements • This could be done while preserving green belts

The problem: perceived constraints on supply • Lack of incentives for local authorities to support new development • Nature of the housebuilding industry • Disincentives to make land available in light of potential future price increases • Mechanisms for funding and providing infrastructure • Availability and cost of finance for development • Risks associated with re-use of urban land • Market volatility and uncertainty

Figure 1 New housing completions, England Completions 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 1992-93 1995-96 1998-99 2001-02 2004-05 2007-08 2010-11 1969 1972 1975 1978 1981 1984 1987 1990

Household numbers England 1951 – 2021 (projected)

Approaches to land supply • Only England has purely planning permission background, although South Korea is moving that way • All the others used zoning with varying degrees of discretion/flexibility • Almost all countries face growth pressures in desirable areas • Most have constraints to curb urban sprawl and protect agricultural and other land • But most did not see planning as a constraint • Many have low responsiveness of supply to price increases • OECD data show that GB (not England) is very similar to France and Germany while higher than the Netherlands. • Several were more responsive – Australia, NZ, Ireland and Denmark

Findings - governance • Most countries have three layers of governance for planning – national, regional and local • England outside London is alone in having no regional strategic layer • The number of local authorities varies enormously – in France there are 22 regions, 100 departments and 3,600 communes • England has no regional layer and 336 local planning authorities • Smaller local decision making areas are thought to help community involvement • Looking to particular instruments we identified five main themes

Findings – Growth management • Growth management boundaries / urban growth limits are used by most countries to prevent urban sprawl • To ensure land and house price stability the limit is revisited regularly • However any limit will affect land prices both within and outside the boundary • There are some examples of successful urban containment and relative price stability over time – Portland, Oregon, at least until recently • Successful management requires planners to be pro-active, not reactive, in monitoring and adjusting land supply

Findings – Land assembly • In many countries local authorities play an active role in land assembly, often using compulsory purchase powers • Germany – address fragmented land ownership by assembling the land so the increase in value following development is shared proportionately among the original owners after repaying the local authority for infrastructure provision • Netherlands – local authorities have traditionally purchased land at existing use value, provided infrastructure and services, and sold it to developers at a price that at least recovered costs

Findings – Infrastructure provision • Several countries have mechanisms to ensure infrastructure is in place prior to planned development • France – tax on employment in larger towns and cities which is hypothecated to transport infrastructure • Netherlands – early provision through municipal land purchase and sale • Germany - land readjustment processes also provide for infrastructure

Findings – Compensation and incentives • Most compensation and incentive mechanisms involve increased benefits to local authorities • Switzerland – cantons retain the tax revenues that accrue to new development – as this is their main source of revenue it acts as an incentive for further development • Tax Increment Financing – hypothecating future local tax revenues has been used extensively in the USA to incentivise inner city regeneration schemes • Density bonuses are used in a number of countries to compensate developers for potential loss of income from providing affordable housing on site. • In the Netherlands there is provision to compensate individuals, but it is not widely used

Findings – Land value capture • Underpinning many of these mechanisms are forms of land value capture (in zoning systems) or planning gain (England) • These include infrastructure charges, inclusionary zoning to provide affordable housing, and land value taxation. • Infrastructure and services, including affordable housing, can often be funded from the increase in land values associated with development • But works best in periods of economic growth – becomes difficult when land values are falling

Implications for England • Most of the mechanisms identified have their equivalent in England • Could they be used more widely or brought together more effectively and on a sufficient scale to ensure a larger and more regular flow of land to meet current and future housing needs? Three interlinked core issues: • How to provide sufficient incentives to bring land forward • How to enable growth without urban sprawl • How to provide infrastructure to support new housing development

Incentives to bring land forward • Land assembly and land readjustment (including compulsory purchase) are powerful tools to enable development – and help stabilise expectations about future land prices • Incentives to enable development work best where the local authority retains local taxes which are spent on local services – and possibly where the authority is small enough for the community to appreciate the benefits of growth • In England neighbourhood planning with community buy-in plus the New Homes Bonus may help to incentivise development • So may the strategic use of public land

Growth management • The green belt has been successful in preventing urban sprawl but at a price • Evidence from other countries suggests it should be operated more flexibly, with boundaries revisited regularly • Planners should monitor land supply and respond to price changes by adjusting potential supply

Infrastructure provision • Provision in advance of, or alongside, development is essential • Funding can come from land value uplift, taxation (including additional tax revenues from new development) and debt finance paid for from a growing tax base • A rolling infrastructure fund has clear potential, provided an initial source is available and the returns are recycled for further infrastructure investment • It can also be used counter-cyclically, enabling development to go ahead during the downturn and be repaid in the upturn • Cambridge provides a case study of how to bring these different elements together pro-actively • Other areas may find it harder, but it is proof that attitudes and incentives can change

Conclusions • There are examples of effective use of the range of instruments available – Cambridge; Milton Keynes • Some government initiatives are in line with international experience • But still need a pro-development cultural change based on a growth agenda • A more stable economy and a more proactive approach to land assembly