Letters from London

For decades, UK legislators have used the planning system as a way of taxing development, via ‘Section 106’ or its predecessors, essentially a planning condition which constitutes a tax. From one point of view, these payments are a useful way of providing community benefit, which recognises the increase in land values that planning permissions often entail. From another, planning gain contributions are a form of legalised blackmail, which have the additional malign effect of injecting uncertainty into what should be a stratightforward system of building permits.

The sad fact is that here, at least, there are two diametrically opposed world-views about property development: either it is a necessary good, or an unnecessary evil. The latter view explains the extensive application of section 106 to pay for everything from public realm improvement in the area affected by development, to entirely unrelated projects within the borough boundary.

The architect and planning consultant, Brian Waters, has sagely commented that planning too often acts as a rationing system, a last bastion of the post-war command economy which made its mark on land use from 1947 onwards, through the Town and Country Planning Act. Rationing means shortage; thus what becomes available becomes more valuable, triggering an irresistible urge to tax it. Why not ease up on the rationing?

In any event, planning authorities are now beginning to realise what happens if development slows or stops. Where are all those planning gain benefits going to come from? On the supply side things are even more uncomfortable. Why take the risk of spending money on submitting a planning application, when the likelihood is that it will be difficult to build anyway?

A good example of where it all goes wrong is in relation to housing. Many overseas investors, while enjoying the benefits of tax-free gains as capital values rise, must be baffled as to why an advanced country such as Britain cannot manage to building enough new homes to satisfy both private and social markets – even though we always used to in past decades.

The truth is that if you load too much of a burden on house-builders they will stop building or build less. London’s last mayor, Ken Livingstone, thought he could fund a social housing programme on the back of private housing development, but all that happened was that starts and completions plummeted.

The thought occurs that given the credit crunch, empty rates, slashed asset values and rental non-movement, it might be time for planning authorities to reverse section 106s, and replace them with  . . . well let’s call them 601s. This would be where the l,ocal planning authority contributes, in cash or in kind, to make development easier, or at least possible. After years of private sector contributions, you reverse the flow: the local authority assembles sites, donates buildings, waives planning charges, and gives properly designed schemes fast-track permissions.

We have become so accustomed to regarding planning as an advanced form of  development control that we have lost sight of its creative potential, to add value in advance, to enable and stimulate rather than regulate and stifle. The best planners have always been natural enablers and encouragers, and it is time to promote this aspect of the system.

At MIPIM last year, there was an excellent stand, outlining the way the London Borough of Croydon had worked with contractor John Laing to generating activity and value in the borough, by creasting a  joint venture where public assets could be used to underwrite financing of big new development. Croydon’s pursuit of innovation represents the sort of silver lining you need in the cloud of recession affecting the property industry. If cash exists but is difficult to access, the task is to find the key to the lock.