Town Planning Review

The taxing problems of land value capture, planning obligations and viability tests: some reasonable models?

Town Planning Review (2019), 90, (4), 429–451.

Abstract

Given their importance in the formation and implementation of planning policies in the UK, this paper focuses on the use of development-viability tests to determine how land value uplifts could be distributed between landowners and the community. Following a discussion of planning obligations as a quasibetterment tax that can both capture and create land values, alternative approaches to operationalising benchmark land value (BLV) are evaluated. The effects of different approaches to BLV on potential land value capture are simulated to identify and compare implied betterment tax rates and to estimate viable affordable-housing proportions. It is concluded that different approaches to BLV have a range of strengths and weaknesses. The susceptibility of viability models to error and bias renders planning processes based on them vulnerable to opportunistic behaviour and prone to miscalculation.

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References

ALTERMAN, R. (2012), ‘Land use regulations and property values: the “windfalls capture” idea revisited’, in N. Brooks, K. Donaghy and G. Knaap (eds), The Oxford Handbook of Urban Economics and Planning, Oxford, Oxford University Press, 755–86. Google Scholar

BOWERS, J. (1992), ‘The economics of planning gain: a re-appraisal’, Urban Studies, 29, 1329–39. Google Scholar

CAMPBELL, H., ELLIS, H., HENNEBERRY, J. and GLADWELL, C. (2000), ‘Planning obligations, planning practice, and land-use outcomes’, Environment and Planning B: Planning and Design, 27, 759–75. Google Scholar

CORKINDALE, J. (2004), The Land Use Planning System: Evaluating Options for Reform, Institute of Economic Affairs. Google Scholar

CROOK, T. and MONK, S. (2011), ‘Planning gains, providing homes’, Housing Studies, 26, 997–1018. Google Scholar

CROOK, A. D. H. and WHITEHEAD, C. M. (2002), ‘Social housing and planning gain: is this an appropriate way of providing affordable housing?’, Environment and Planning A, 34, 1259–79. Google Scholar

CROSBY, N. and WYATT, P. (2016), ‘Financial viability appraisals for site-specific planning decisions in England’, Environment and Planning C, 34, 1716–33. Google Scholar

EVANS A. (1983), ‘The determination of the price of land’, Urban Studies, 20 119–29. Google Scholar

EVANS-COWLEY, J. S., FORGEY, F. A. and RUTHERFORD, R. C. (2005), ‘The effect of development impact fees on land values’, Growth and Change, 36, 100–12. Google Scholar

GLA (GREATER LONDON AUTHORITY) (2015), Housing in London 2015: The Evidence Base for the Mayor’s Housing Strategy, London, GLA, https://www.london.gov.uk/sites/default/files/housing_in_london_2015_v3.pdf (accessed 29 May 2019). Google Scholar

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HCA (HOMES AND COMMUNITIES AGENCY) (2010), Area Wide Viability Appraisal: Transparency of Assumptions (draft working notes). Google Scholar

HEALEY P., PURDUE M. and ENNIS F. (1996), ‘Negotiating development: planning gain and mitigating impacts’, Journal of Property Research, 13, 143–60. Google Scholar

HENNEBERRY, J. (2016), ‘Development viability’, in A. D. H. Crook, J. Henneberrry and C. Whitehead (eds), Planning Gain: Providing Infrastructure and Affordable Housing, Chichester, John Wiley & Sons, 115–39. Google Scholar

KEOGH, G. (1985), ‘The economics of planning gain’, in S. Barrett and P. Healey (eds), Land Policy: Problems and Alternatives, Aldershot, Avebury, 203–28. Google Scholar

McALLISTER, P. (2017), ‘The calculative turn in land value capture: lessons from the English planning system’, Land Use Policy, 63, 122–29. Google Scholar

McALLISTER, P., SHEPHERD, E. and WYATT, P. (2018), ‘Policy shifts, developer contributions and land value capture in London 2005–2017’, Land Use Policy, 78, 316–26. Google Scholar

McALLISTER, P., WYATT, P. and COLEMAN, C. (2013), ‘Fit for policy? Some evidence on the application of development viability modelling in the UK planning system’, Town Planning Review, 84, 495–521. Google Scholar

MINISTRY OF HOUSING, COMMUNITIES AND LOCAL GOVERNMENT (2018), National Policy Planning Framework, London, OGL. Google Scholar

PEEL GROUP (2018), Written Evidence Submitted to the Parliamentary Select Committee on Land Value Capture, http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/housing-communities-and-local-government-committee/land-value-capture/written/85908.html (accessed 29 May 2019). Google Scholar

PIDD, H. (2018), ‘Housing crisis: 15,000 new Manchester homes and not a single one “affordable”’, The Guardian, 5 March 2008, https://www.theguardian.com/cities/2018/mar/05/british-cities-developers-affordable-housing-manchester-sheffield (accessed 29 May 2019). Google Scholar

WHITEHEAD, C. M. (2007), ‘Planning policies and affordable housing: England as a successful case study?’, Housing Studies, 22, 25–44. Google Scholar

WYATT, P. (2017), ‘Experiences of running negotiable and non-negotiable developer contributions side-by-side’, Planning Practice & Research, 32, 152–70. Google Scholar

ALTERMAN, R. (2012), ‘Land use regulations and property values: the “windfalls capture” idea revisited’, in N. Brooks, K. Donaghy and G. Knaap (eds), The Oxford Handbook of Urban Economics and Planning, Oxford, Oxford University Press, 755–86. Google Scholar

BOWERS, J. (1992), ‘The economics of planning gain: a re-appraisal’, Urban Studies, 29, 1329–39. Google Scholar

CAMPBELL, H., ELLIS, H., HENNEBERRY, J. and GLADWELL, C. (2000), ‘Planning obligations, planning practice, and land-use outcomes’, Environment and Planning B: Planning and Design, 27, 759–75. Google Scholar

CORKINDALE, J. (2004), The Land Use Planning System: Evaluating Options for Reform, Institute of Economic Affairs. Google Scholar

CROOK, T. and MONK, S. (2011), ‘Planning gains, providing homes’, Housing Studies, 26, 997–1018. Google Scholar

CROOK, A. D. H. and WHITEHEAD, C. M. (2002), ‘Social housing and planning gain: is this an appropriate way of providing affordable housing?’, Environment and Planning A, 34, 1259–79. Google Scholar

CROSBY, N. and WYATT, P. (2016), ‘Financial viability appraisals for site-specific planning decisions in England’, Environment and Planning C, 34, 1716–33. Google Scholar

EVANS A. (1983), ‘The determination of the price of land’, Urban Studies, 20 119–29. Google Scholar

EVANS-COWLEY, J. S., FORGEY, F. A. and RUTHERFORD, R. C. (2005), ‘The effect of development impact fees on land values’, Growth and Change, 36, 100–12. Google Scholar

GLA (GREATER LONDON AUTHORITY) (2015), Housing in London 2015: The Evidence Base for the Mayor’s Housing Strategy, London, GLA, https://www.london.gov.uk/sites/default/files/housing_in_london_2015_v3.pdf (accessed 29 May 2019). Google Scholar

GLA (GREATER LONDON AUTHORITY) (2016), London Industrial Land Supply and Economy 2015, https://www.london.gov.uk/sites/default/files/appendices_-_london_industrial_land_supply_economy_study.pdf (accessed 16 July 2019). Google Scholar

HCA (HOMES AND COMMUNITIES AGENCY) (2010), Area Wide Viability Appraisal: Transparency of Assumptions (draft working notes). Google Scholar

HEALEY P., PURDUE M. and ENNIS F. (1996), ‘Negotiating development: planning gain and mitigating impacts’, Journal of Property Research, 13, 143–60. Google Scholar

HENNEBERRY, J. (2016), ‘Development viability’, in A. D. H. Crook, J. Henneberrry and C. Whitehead (eds), Planning Gain: Providing Infrastructure and Affordable Housing, Chichester, John Wiley & Sons, 115–39. Google Scholar

KEOGH, G. (1985), ‘The economics of planning gain’, in S. Barrett and P. Healey (eds), Land Policy: Problems and Alternatives, Aldershot, Avebury, 203–28. Google Scholar

McALLISTER, P. (2017), ‘The calculative turn in land value capture: lessons from the English planning system’, Land Use Policy, 63, 122–29. Google Scholar

McALLISTER, P., SHEPHERD, E. and WYATT, P. (2018), ‘Policy shifts, developer contributions and land value capture in London 2005–2017’, Land Use Policy, 78, 316–26. Google Scholar

McALLISTER, P., WYATT, P. and COLEMAN, C. (2013), ‘Fit for policy? Some evidence on the application of development viability modelling in the UK planning system’, Town Planning Review, 84, 495–521. Google Scholar

MINISTRY OF HOUSING, COMMUNITIES AND LOCAL GOVERNMENT (2018), National Policy Planning Framework, London, OGL. Google Scholar

PEEL GROUP (2018), Written Evidence Submitted to the Parliamentary Select Committee on Land Value Capture, http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/housing-communities-and-local-government-committee/land-value-capture/written/85908.html (accessed 29 May 2019). Google Scholar

PIDD, H. (2018), ‘Housing crisis: 15,000 new Manchester homes and not a single one “affordable”’, The Guardian, 5 March 2008, https://www.theguardian.com/cities/2018/mar/05/british-cities-developers-affordable-housing-manchester-sheffield (accessed 29 May 2019). Google Scholar

WHITEHEAD, C. M. (2007), ‘Planning policies and affordable housing: England as a successful case study?’, Housing Studies, 22, 25–44. Google Scholar

WYATT, P. (2017), ‘Experiences of running negotiable and non-negotiable developer contributions side-by-side’, Planning Practice & Research, 32, 152–70. Google Scholar

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Author details

McAllister, Pat