This topic is one at the core of discussions around development and regeneration. In the Queen’s Speech last week, you could see attempts to address it in the new Levelling-up and Regeneration Bill. That agenda and the complete reorientation of our city centres, driven recently by both the impact of Covid and increased online retail, means our cities are likely to undergo redevelopment at a rate not seen for a long time.
The challenge is how to embed the elements within that redevelopment that we know benefit us all in the long-term. The social space, beauty, the green space, the transport infrastructure and micro-mobility services, the local stewardship and involvement that seeds successful communities.
Some drivers of immediate value and commercial returns diminish long-term value, particularly when housing supply is so constrained. Commercial demands which impact on the form and design of new development, such as car parking provision, the scale of green amenity space, the mix of units and reduction of complexity and character, are all driven by an understandable need to maximise numbers of homes and the resulting immediate sale or rental value, after a great deal of capital has been invested.
Looking outside the new bill, what can we do?
Local planning policies are increasingly prescriptive and ambitious in what they expect from new development. Section 106 agreements and the Community Infrastructure Levy – or new Infrastructure Levy – are also levers to ensure that the value arising from development (and uplifts in land values), is shared with communities.
Other requirements for transport provision, green space and education are often required, and it is clear that new development is getting better.
Still, there is a natural tension with a developer taking the risk and seeking to maximise immediate returns and the best outcome for the long-term. The core of it is capturing value. Investment in green space, mixed communities with retail, commercial and social space, civic space and beautiful architecture deliver value for the community and beyond.
Developments that reduce water run-off and emit no greenhouse gas emissions have a value even further beyond. The problem is that the value is realised slowly and not by those doing the investing, sometimes not even the people and businesses that occupy the site.
Land value capture is a subject of much debate. In some locations there is no doubt that the uplift in land value caused by planning permission presents an opportunity to be used better. It is a gift of a prescriptive planning system and therefore the value allocation could also be directed by policy.
In many cases this would not cost a developer anything, as all that would happen is that the amount paid for the land would reduce, or more of it be captured for investment, in those elements that enhance the long-term quality of a place. There are then challenges around incentivising the right land in the right locations to be brought forward for beneficial development, and in some places – particularly marginal brownfield sites – there isn’t going to be a lot of value to share around.
Another opportunity is for the developer to have a long-term interest in the place. If I have an investment in a location that will be in place for decades, there is a natural incentive to consider the quality and impact on health and wellbeing, productivity and other long-term issues.
The increasing Build-to-Rent sector is a good example of this. I have seen on my own projects that the sector has a concern for what will be valuable for the long-term. A shiny new development may attract residents today, but it also needs to be attractive in 10, 20 or 30 years. Can we use taxation or policies to link long-term performance of a place to returns, more generally?
More subtly, the corporate perspective on social value is gaining traction. Patient money is increasingly seeking investments that provide a return and add to social value.
We need to be careful around social value, on two levels. First, the process of calculating social value is complex and so open to dispute and debate. Secondly, we need to be careful that we don’t entrench the perspective that making money and social value are opposites. Most of the time, what is profitable is also what is beneficial to us all. Still, the social value perspective is an opportunity to engage the corporate world, which is increasingly thinking more carefully about what serves a place best and them overall.
Another area of strong political interest is home ownership. Traditionally home ownership has been a strong route to engaging people in improving their environment. Contrary to popular belief, the UK doesn’t have particularly high home ownership rates, compared to similar countries, but the passion for home ownership and its role in our national psychology is unusual.
There is a consensus that if I own where I live, I am more likely to be there for the long-term and interested in how my neighbourhood works, whether that is residential or commercial property. Declining home ownership rates have been identified by the government as an issue, (and is probably an electoral risk).
Talk of reintroducing the right-to-buy for social housing may play a role here, but isn’t relevant for regeneration. Instead, perhaps there could be a requirement for local ownership requirements? If so, how does that interact with the growing social housing and Build-to-Rent investment?
There are other issues and opportunities that could be discussed, but the fundamental point is that we need all stakeholders in regeneration to be incentivised for the long-term success of a place. That is the challenge for policy and regulation.
All of which assumes that the economy will recover from the oncoming recession and de-growth will be avoided.