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Developers back plans to pay councils to build

The British Property Federation (BPF) along with the UK’s biggest property firms have today backed moves put forward by the Conservatives to improve the planning system, kickstart housebuilding and promote local community development.

The BPF, along with Land Securities, British Land, Grainger and pension fund Hermes have welcomed proposals to give local authorities greater decision-making power and bonus payments equal to tax income generated by newly built homes and commercial property in their jurisdictions.

They hope this policy, known as localism, will incentivise councils to streamline planning processes and encourage development, which could relieve the national housing shortage and help property firms grow their portfolios.

In its new report entitled ‘Making Localism Deliver’, the BPF says that localism could work if the right measures are put in place and new funding initiatives are explored.

Under localism, council tax and business rates would be matched by central government for six years. These funds would not be ring-fenced and could be used for anything.

The BPF has tabled four key points which it wants to see political leaders take on board:

(1) Clear planning guidance – clear national planning policy and guidance on how councils should work together on region-wide projects

(2) Right people and skills – support for councils so they can handle increased powers and guarantees that proper training will be provided

(3) Capturing local growth – introduction of innovative funding concepts such as tax increment financing to kick-start mothballed schemes.

(4) Rental homes built by pension funds – amending stamp duty to encourage institutions to fund professionally managed rental developments

Allowing councils to benefit directly from new investment is one of the key drivers behind tax increment financing (TIF), which has been widely used in America. Current and future income streams from new developments are explicitly tied in to financing bonds or an investment vehicle to pay for new infrastructure associated with the development.

The much-delayed Battersea Power Station development could be one of the first to benefit, as it is being considered by the government officials as a TIF case study.

Quotes

Mike Whitby, leader of Birmingham Council, said:

“By making use now of future increases in non-domestic business rates, we can maintain our competitiveness and ensure we attract foreign investment. This would require the Treasury to come to agreements with councils but would not actually cost them anything,”

Liz Peace, chief executive of the BPF, said:

“If done properly, localism could mean a smoother planning process, quicker decision-making and better engagement. The property industry is committed to working closely with councils, but they will have to be given significant support to make this work.

“Poorly implemented localism – as a result of inadequate resources – could lead to greater delays, ultimately reducing the attractiveness of the UK as a place to invest. This is of particular concern in relation to smaller councils when faced with the challenge of delivering large one off regeneration schemes.

“Given that every major city council supports tax increment financing,it would be an easy-win for the Tories to cement their localism agenda with a tool that would enable councils to pay for new infrastructure even through public funding will be pretty non-existent over the short-term.”

Rupert Clarke, chief executive of Hermes and BPF president, said:

“Regeneration projects do not always respect local boundaries and nor should they have to. If we want good transport and regeneration, local authorities must be able to work together, across boundaries to make sure the UK in not riddled with bridges to nowhere. Joined up thinking and cross boundary working is imperative for a localism agenda to work.”

Francis Salway, chief executive of Land Securities, the country’s biggest property firm, said:

“Assurances over carrying forward the Killian Pretty recommendations and of removing bureaucracy from the system are welcome, but it’s vital that any new legislation does not try to wholly rewrite the planning system. We take on board Bob Neill’s comments about ‘taking communities with us’, but this can only happen if those representing these communities fully understand how development works, and so training will be necessary, especially given the added responsibilities that councils might have under a Conservative administration.”

Chris Grigg, chief executive of British Land, said:

“Removing burdens to development and growth has to be near the top of the agenda whoever wins the next election. The benefits of commercial property can be seen in the thousands of jobs created and communities re-shaped over the last few years. As the property industry continues the recovery shown by recent IPD figures, it will need to be supported by a public sector prepared to work with us and a government prepared to help councils make the right decisions. Low interest rates and a cheap pound make the UK a great investment proposal and it is vital that we do not let out-dated planning laws hinder recovery.”

Shadow communities secretary Caroline Spelman MP welcomed the BPF report.

“We welcome the support of the BPF and its members and recognise the role that property has to play in regenerating Britain out of recession,” she said. “We need developers to work with us to make this happen, but recognise the many challenges that exist in the current planning system. We are looking at a variety of proposals to encourage the new development we need so that we get the right homes built in the right places. It is vital we support local business growth and we look forward to working with the industry to discuss how we maximise the benefits and opportunities of localism.”

Charles Mills, head of planning at estate agents Knight Frank, said:

"Localism can only be as good as the locals. We need to ensure that those that will be leading locally are the right people, and that as well as the right skills, they have clear guidelines over what we need and where. Moves to water down RDAs or get rid of targets could work, but only if there is sufficient thought given to how we guarantee delivery."

Andrew Pratt, managing director for development at Grainger, the UK’s largest FTSE-listed landlord, said:

“We’ve heard a lot of talk about a ‘radical’ housing agenda but little new policy. The Tories have a real opportunity to unlock billions of new funding if they can support small changes to the way stamp duty is charged on bulk purchases of homes. Any new administration will be judged in years to come on the number of housing starts and with home ownership still not an option for millions, ushering in professionally managed, quality rental homes could be the radical hallmark to truly make a difference.”

Sarah Whitney, head of regeneration at CBRE, said:

“Existing funding mechanisms are insufficient to finance the infrastructure we need. Developers’ profits are no longer available to take the strain and empowering local authorities to set up TIF schemes is precisely what is needed.”

Cecily Davis, partner at DLA Piper, said:

“Cross-boundary decision making needs to be decisive. Local enterprise partnerships could be a useful vehicle for driving investment, but not if we see infighting among local authorities. They must be able to take long term strategic and often difficult decisions for the greater good of the area and the country. Any government must ensure that these partnerships have the power and deliver localism successfully.”

For more information and all PR and media queries, please contact Andrew Teacher, Head of Media, on 020 7802 0113/ 07968 124545/ ateacher@bpf.org.uk