One of its lesser reported, but still significant announcements, was plans for pilot schemes in which public land with planning permission is auctioned off to developers.
The Government is hoping that trialling the land disposal element of the land auctions model will boost development, because it allows for councils to capture most of the rise in land value created once planning permission has been granted. The architect of the land auction model, Tim Leunig, has written that in the South East, the value of one hectare of land rises 400-fold when planning permission has been granted. So the model could, in theory, result in some eye-popping gains for local authorities. Sir Peter Hall notes that in Hong Kong and Singapore (pictured), “controlled land leases are a major source of local revenues”.
So, what’s the problem? Well, there are at least six of them, if you speak to one commercial property development lawyer. Gilbert Green, a partner at law firm Thomson Snell & Passmore who specialises in acting for developers buying land for development, highlights the following “defects” in the model, according to the (admittedly) scant detail known so far. Some of his reservations were echoed by other experts I’ve spoken to.
1. It is in effect a voluntary tax. If landowners do not offer land, then no revenue is raised by local authorities
2. It runs the risk of land being “promoted” for development in conflict with adopted plans and policy
3. It raises the spectre of local authorities being “influenced” in making decisions by the possible amount of financial benefit they may accrue from a decision
4. It does not provide an equal contribution to infrastructure or improvements by each permitted development as the contribution will be the difference (if any) between the “auction” price and the resale price
5. It will tie up even more local authority officer time when local authorities are already overburdened
6. It runs the risk of landowners actually withholding land from development.
There are a couple of other questions, too. The Treasury’s Plan for Growth document said that the model “would work alongside existing mechanism such as the Community Infrastructure Levy”, the levy on development that is intended to raise funds for infrastructure. But how the land auctions model and CIL might work together is not yet clear.
Finally, and perhaps most crucially, is the question of when – if at all – the pilots will be opened up to privately owned sites. When I spoke to Leunig last month, he described the trialling of only the public land disposal element of the auctions model as a “non-announcement”. Increasing the range of land should enhance competition and lower prices. Extending the model to private land would allow councils to buy sites that they want to see developed, grant planning permission and then auction them off to developers. Any uplift could then be recycled into infrastructure and help boost economic development.
These are some of the unanswered questions on the Government’s land auction model. No doubt I’ve missed some, so please post your thoughts below. The Treasury has said that the pilots are still months away, so there remains an opportunity to frame the debate.
Sourced from: PlanningResource