draft planning gain submission
chapter7 at tlio.org.uk
Mon Feb 19 17:04:37 GMT 2007
Thanks for the helpful response from many people to my previous e-mail.
Here is a draft response from Chapter 7. I would be very grateful for
any comments on this. The three documents are pretty long and I could
well have missed something.
You are welcome to paste any or all of this into your response,
though watch out for changes in the next week. Responses to Paul
Martin, planning.obligations at communities.gsi.gov.uk and
julie.dufty at hmrc.gsi.gov.uk Deadline 28 February.
We are grateful for the opportunity to reply to the current
consultation papers on Planning Gain, namely:
Changes to Planning Obligations (DCLG);http://www.communities.gov.uk/
Valuing Planning Gain (HMRC) http://www.hmrc.gov.uk/consultations/
Paying PGS (HMRC)http://www.hmrc.gov.uk/consultations/paying-pgs.pdf
Our response focuses on one particular aspect of the proposed
legislation, though this is spread across all three consultation
papers. Rather than deliver our submission in three separate
responses, it seems more sensible to lay it out in one (fairly short)
response covering all three documents simultaneously, so that the
full depth of our concern can be appreciated.
The nub of our concern is highlighted in Question 1 of Chapter 8 of
Paying PGS where it is stated that the forms of development exempted
from Planning Gain Supplement (PGS)include small-scale home
improvements, development carried out under the GPDO and possible
other small-scale non-residential thresholds.
We submit that there are certain classes of residential development
where it would be counterproductive and/or inequitable to impose a
PGS; and that planning authorities, appeal inspectors or the
Secretary of State should have the discretion to exempt a residential
development from the charge where a case for exemption has been
substantiated. Without the discretion to grant exemptions, the PGS
becomes a “blunt instrument” whose impact in some circumstances
could be counterproductive .
The following are some classes of developments where an exemption
might be beneficial:
(1) Affordable housing. We appreciate that ( as stated in Question
and Answers No 5 on page 33 of Valuing Planning Gain) the PGS for
affordable housing will be lower than the amount levied on market
housing, because the Planning Value (PV) valuation will be reduced.
However we question the value of raising any PGS on housing that is
destined to be affordable, particularly that which is not delivered
through developers contributions, but through a rural exception site
scheme or a self-build scheme. The provision of affordable housing
is one of the main objectives of the overall planning gain programme,
so what is the point of levying a tax on it?
Even without a levy, and where land has been acquired at less than
market price, it often remains difficult to provide housing at an
affordable rate. Much of the housing now classed as affordable, is
still beyond many people’s budgets. Some people find themselves
excluded from any mainstream housing and resort to extra-legal
housing, while in others it is paid for by the taxpayer through
housing benefit. There seems little point in extracting a tax on
affordable housing which will either serve to make it less
affordable, or else have to be paid for through another form of
(2) A similar issue relates to tied agricultural dwellings. These are
conventionally assessed at 25 to 30 per cent less than market value,
but even this is often far too high to be paid off by someone
working full time in the agriculture industry. For example, a tiny
1980s farmworker's bungalow near our office, formerly part of a
county farm but without any tie, is currently being marketed at
£550,000 with 17 acres (it was sold last year by Somerset County
Council by sealed tender with a guide price of £350,000, but is known
to have gone for a good deal more than that.) With a 30 per cent
discount the same cottage with an agricultural tie would fetch
£385,000. This is well in excess of what most farmers can afford
through their agricultural enterprise — especially new entrants. To
pay off 6.5 per cent on a loan of £385,000 would be £25,000 per year,
whereas the rent charged by Somerset County Council for its farm was
around £9,000 per year, and that was with 90 acres, not 17.
In other words tied agricultural dwellings command 70 to 75 per cent
of market price, not because farmworker's can afford that much, but
because of the hope value derived from the possibility of getting the
agricultural tie removed — and a lot of buyers of agriculturally tied
dwellings attempt to do just that. Farmers anxious to sell to
somebody who is committed to farming the property would be advised to
sell the dwelling not “at arm’s length” but at a reduced price. This,
unfortunately, does not often happen, and many new entrants into
farming,finding that they cannot possibly afford even a tied
agricultural dwelling, buy a bareland plot and apply for a new
agricultural dwelling, which they will be given if they meet the
financial and functional tests in PPS7.
This is a deeply unsatisfactory state of affairs which needs to be
addressed by measures which are outside the remit of this
consultation. But it is important that PGS does not place a
disproportionate burden on new entrants into farming, for that is the
last thing that such people need. If hope value is not to be included
in the Current Use Value of developments, equally it should not be
included in the Planning Value. We submit that new agricultural
dwellings should either be exempt from PGS, or else pay at a very low
rate. If we are concerned to support farmers (and that of course is
the purpose of agricultural ties) PGS should be imposed only when
the agricultural condition is removed and the dwelling acquires its
full market value.
(3) In residential developments where profits from planning gain are
already being channelled into the provision of socially or
environmentally beneficial infrastructure or activities, levying full
PGS will be inequitable because in effect the tax will be being paid
For example, in the Lowland Crofting schemes in West Lothian,
profits from increased land value went into planting large areas of
the Central Scotland Forest — this planting, secured by a Section 50
agreement (Scottish Section 106), did not diminish the value of the
houses, but it significantly increased their costs.
Similarly, there are a number of eco-developments, such as the the
Hockerton Housing Project in Newark and Sherwood, where much of the
profit from planning gain has been funnelled into providing highly
sustainable and zero carbon developments which cost more to build
than conventional developments.
It would clearly be unjust and counterproductive to levy PGS on any
development which already provided community benefits from the
profits derived from planning gain. Indeed reduction of or exemption
from PGS is an obvious financial incentive to encourage developers
to strive towards the zero-carbon houses which the government
(bravely but optimistically) wishes to see across the board by 2016 —
and a justifiable one too, because reductions in carbon emissions
will help reduce the future expense of community infrastructure
designed to address and mitigate the effects of climate change.
A similar dynamic may occur in connection with travel arrangements.
Highly sustainable developments normally formulate travel plans which
impose limits on car use, and provide infrastructure to support this
in the form of car share clubs, collective deliveries, school runs
etc. There are several examples of this approach already in the UK
and there will no doubt be many more as responses to climate change
become a priority: indeed in some years’ time we may see larger car-
free developments providing a public transport service which is made
accessible to other members of the public in the neighbourhood.
Again, there may be costs to the developer associated with developing
car-free infrastructure, and at the same time the reduction in car
trips would be reflected in reduced demand on the community
infrastructure. These costs to the developer and benefits to society
clearly need to be reflected in the level of PGS applied.
Question 8 of Changes to Planning Obligations asks ’Do you agree that
measures to implement travel plans and demand management measures
directly related to the environment of the development should remain
within the scope of planning obligations.”
Indeed we do. The current draft PPS on Climate Change states:
“Planning authorities should engage constructively and imaginatively
with developers to encourage the delivery of sustainable buildings.
They should be supportive of innovation.”(para 30).
Imaginative and sustainable innovation, if it has to be maintained
continuously as for example a car pool or a bus route does, must be
secured otherwise it is of little value. In many cases it is hard to
see what mechanisms could secure these benefits better than a
planning obligation. Such innovations are unlikely to be provided by
“the use of PGS as a revenue stream held by local authorities”
however desirable this stream may be for dealing equitably with
mainstream developers who “impose costs upon the transport network”
instead of coming up with solutions (Changes to Planning Obligations,
para 72). Imaginative, sustainable innovations tend to come in the
first instance from small-scale developers rather than from large
developers or local authorities, because when the development is
small the risks are small. If the Climate Change PPS wants to
encourage such innovation it needs to supply a suitable mechanism to
secure them, and the obvious mechanism is a planning obligation.
Statutory imposition of a blunt instrument such as PGS will only act
as a deterrent.
We therefore submit that exemptions from PGS (or reductions) should
be allowed where profits from increased land values are ploughed into
the provision of affordability or other social or environmental
benefits for the wider community — provided that these benefits are
secured by a condition or a Section 106 agreement. PGS would be
payable on removal of the condition or legal agreement — this would
help to make these conditions and agreements more robust. And
exemption would provide an incentive for developers to come up with
more sustainable solutions.
Hats: Chapter 7, The Land, The Scythe Shop
The Potato Store, Flaxdrayton Farm,
S. Petherton, Somerset TA 13 5LR
chapter7 at tlio.org.uk
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