William Eichler 11 April 2017

UK missing out on £185bn due to mechanism for capturing land value

The current approach to capturing increases in land value could cost the UK a potential £185bn over the next 20 years, planners warn.

The Royal Town Planning Institute (RTPI) criticised the recent housing white paper for not including new measures for capturing the uplift in land value resulting from planning permission being granted or public investment being made on or near a piece of land.

The UK currently uses Land Value Capture (LVC) mechanisms - S106 and Community Infrastructure Levy (CIL) - to capture increased value. However, the planners argue sticking with this model will miss capturing a potential £185bn of total land value increase over the next 20 years.

‘The existing measures have their role but they essentially ‘claw back’ some land value uplift to mitigate the impact of development, rather than allowing local authorities to be proactive by using rising land values to fund land assembly and deliver housing,’ said RTPI president, Stephen Wilkinson.

‘S106 and CIL are often subject to lengthy negotiations and are not capable of producing the game-changing effect local authorities need to push forward projects.’

The RTPI is looking into a project which compares the UK model with those adopted in other countries. It will look at a simple tariff mechanism and two variants of the North American Impact Fee approach.

Each approach’s ability to raise money, its attractiveness and ease of implementation will be tested against a hypothetical site via interviews with planners, planning consultants, lawyers, valuers and developers.

‘Infrastructure is critical to housing delivery and economic growth. At a time when public finance is squeezed we have to look at new funding models to ensure infrastructure can be built at the speed and scale we need,’ said Mr Wilkinson

‘We are missing a trick by not accessing the vast potential of rising land values which currently go directly to landowners. Rising land values are a reasonable place to look for infrastructure funding and international evidence suggests there are fairer, more effective ways of sharing this gain.’

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