Planning Gain TheRoyalInstitutionofCharteredSurveyorsis themarkofpropertyprofessionalismworldwide, promotingbestpractice,regulationand consumerprotectionforbusinessandthe community.Itisthehomeofpropertyrelated knowledgeandisanimpartialadvisorto governmentsandglobalorganisations.Itis committedtothepromotionofresearchin supportoftheefficientandeffectiveoperationof landandpropertymarketsworldwide. Real Estate Issues Series Managing Editors ClareEriksson HeadofResearch,RoyalInstitutionofChartered Surveyors JohnHenneberry DepartmentofTownandRegionalPlanning, UniversityofSheffield K.W.Chau ChairProfessor,DepartmentofRealEstateand Construction,TheUniversityofHongKong ElaineWorzala DirectoroftheCarterRealEstateCenter,Collegeof Charleston,USA RealEstateIssuesisaninternationalbookseriespresentingthelatestthink- ingintohowrealestatemarketsoperate.Thebookshaveastrongtheoretical basis – providingtheunderpinningforthedevelopmentofnewideas. Thebooksareinclusiveinnature,drawingbothuponestablishedtechniques forreal-estatemarketanalysisandonthosefromotheracademicdisciplines asappropriate.Theseriesembracesacomparativeapproach,allowingtheory andpracticetobeputforwardandtestedfortheirapplicabilityandrelevance totheunderstandingofnewsituations.Itdoesnotseektoimposesolutions, butratherprovidesamoreeffectivemeansbywhichsolutionscanbefound. Itwillnot makeanypresumptions as to theimportance of real-estatemar- kets but will uncover and present, through the clarity of the thinking, the realsignificanceoftheoperationofreal-estatemarkets. FurtherinformationontheRealEstateIssuesseriescanbefoundat: http://eu.wiley.com/WileyCDA/Section/id-380013.html Booksintheseries Gruis,Tsenkova&Nieboer 9781405181884 Greenfields,Brownfields&Housing Development&Developers: Development PerspectivesonProperty Adams&Watkins Guy&Henneberry 9780632063871 9780632058426 Planning,PublicPolicy&PropertyMarkets TheRighttoBuy: Adams,Watkins&White Analysis&EvaluationofaHousingPolicy 9781405124300 Jones&Murie Housing&WelfareinSouthernEurope 9781405131971 Allen,Barlow,Léal,Maloutas&Padovani HousingMarkets&PlanningPolicy 9781405103077 Jones&Watkins Markets&InstitutionsinRealEstate& 9781405175203 Construction OfficeMarkets&PublicPolicy Ball ColinJones 9781405110990 9781405199766 BuildingCycles: ChallengesoftheHousingEconomy: Growth&Instability AnInternationalPerspective Barras Jones,White&Dunse 9781405130011 9780470672334 NeighbourhoodRenewal&HousingMarkets: MassAppraisalMethods: CommunityEngagementintheUSandUK AnInternationalPerspectiveforPropertyValues Beider Kauko&d’Amato 9781405134101 9781405180979 MortgageMarketsWorldwide EconomicsoftheMortgageMarket: Ben-Shahar,Leung&Ong PerspectivesonHouseholdDecisionMaking 9781405132107 Leece TheCostofLandUseDecisions: 9781405114615 ApplyingTransactionCostEconomicsto TowersofCapital: Planning&Development OfficeMarkets&InternationalFinancial Buitelaar Services 9781405151238 Lizieri UrbanRegeneration&SocialSustainability: 9781405156721 BestPracticefromEuropeanCities MakingHousingMoreAffordable: Colantonio&Dixon TheRoleofIntermediateTenures 9781405194198 Monk&Whitehead UrbanRegenerationinEurope 9781405147149 Couch,Fraser&Percy GlobalTrendsinRealEstateFinance 9780632058419 Newell&Sieracki UrbanSprawlinEurope: 9781405151283 Landscapes,Land-UseChange&Policy HousingEconomics&PublicPolicy Couch,Leontidou&Petschel-Held O’Sullivan&Gibb 9781405139175 9780632064618 TransformingPrivateLandlords InternationalRealEstate: Crook&Kemp AnInstitutionalApproach 9781405184151 Seabrooke,Kent&How RealEstate&theNewEconomy: 9781405103084 TheImpactofInformationandCommunications UrbanDesignintheRealEstateDevelopment Technology Process: Dixon,McAllister,Marston&Snow PolicyTools&PropertyDecisions 9781405117784 Tiesdell&Adams Economics&LandUsePlanning 9781405192194 Evans RealEstateFinanceintheNewEconomy 9781405118613 Tiwari&White Economics,RealEstate&theSupplyofLand 9781405158718 Evans BritishHousebuilders: 9781405118620 History&Analysis ManagementofPrivatisedHousing: Wellings InternationalPolicies&Practice 9781405149181 EuropeanHousingFinance PlanningGain Lunde Crook 9781118929452 9781118219812 DynamicsofHousinginEastAsia Cho 9780470672662 Planning Gain Providing Infrastructure and Affordable Housing Edited by Tony Crook EmeritusProfessorofTownandRegionalPlanning TheUniversityofSheffield John Henneberry ProfessorofPropertyDevelopmentStudies TheUniversityofSheffield Christine Whitehead EmeritusProfessorofHousingEconomics TheLondonSchoolofEconomics Thiseditionfirstpublished2016 ©2016byJohnWiley&SonsLtd Registeredoffice JohnWiley&Sons,Ltd,TheAtrium,SouthernGate,Chichester,WestSussex,PO198SQ, UnitedKingdom. Editorialoffices: 9600GarsingtonRoad,Oxford,OX42DQ,UnitedKingdom. TheAtrium,SouthernGate,Chichester,WestSussex,PO198SQ,UnitedKingdom. Fordetailsofourglobaleditorialoffices,forcustomerservicesandforinformationabouthowto applyforpermissiontoreusethecopyrightmaterialinthisbookpleaseseeourwebsiteat www.wiley.com/wiley-blackwell. Therightoftheauthorstobeidentifiedastheauthorsofthisworkhasbeenassertedin accordancewiththeUKCopyright,DesignsandPatentsAct1988. Allrightsreserved.Nopartofthispublicationmaybereproduced,storedinaretrievalsystem,or transmitted,inanyformorbyanymeans,electronic,mechanical,photocopying,recordingor otherwise,exceptaspermittedbytheUKCopyright,DesignsandPatentsAct1988,withoutthe priorpermissionofthepublisher. Designationsusedbycompaniestodistinguishtheirproductsareoftenclaimedastrademarks. Allbrandnamesandproductnamesusedinthisbookaretradenames,servicemarks, trademarksorregisteredtrademarksoftheirrespectiveowners.Thepublisherisnotassociated withanyproductorvendormentionedinthisbook. LimitofLiability/DisclaimerofWarranty:Whilethepublisherandauthor(s)haveusedtheirbest effortsinpreparingthisbook,theymakenorepresentationsorwarrantieswithrespecttothe accuracyorcompletenessofthecontentsofthisbookandspecificallydisclaimanyimplied warrantiesofmerchantabilityorfitnessforaparticularpurpose.Itissoldontheunderstanding thatthepublisherisnotengagedinrenderingprofessionalservicesandneitherthepublishernor theauthorsshallbeliablefordamagesarisingherefrom.Ifprofessionaladviceorotherexpert assistanceisrequired,theservicesofacompetentprofessionalshouldbesought. LibraryofCongressCataloging-in-PublicationData Crook,Tony,1944-editor. Planninggain:providinginfrastructure&affordablehousing/TonyCrook,JohnHenneberry, ChristineWhitehead. pagescm Includesbibliographicalreferencesandindex. ISBN978-1-118-21981-2(cloth) 1.Realestatedevelopment–GreatBritain.2.Housingdevelopment–GreatBritain.3.Land use–GreatBritain–Planning.4.Cityplanning–GreatBritain.I.Henneberry,John,editor.II. Whitehead,Christine,editor.III.Title. HD596.C7652016 711′.40941–dc23 2015021597 AcataloguerecordforthisbookisavailablefromtheBritishLibrary. Wileyalsopublishesitsbooksinavarietyofelectronicformats.Somecontentthatappearsin printmaynotbeavailableinelectronicbooks. Setin10/13ptTrumpMediaevalbySPiGlobal,Chennai,India. 1 2016 Table of Contents Acknowledgements xiii ForewordbyDameKateBarker xv Preface xvii NotesonContributors xxi 1 Introduction 1 TonyCrook,JohnHenneberryandChristineWhitehead Purposeofthebook 1 Thedevelopmentprocessandthecreationofdevelopment value 2 Thetaxationofdevelopmentvalue 4 Factorsaffectingeffectivedevelopmentvaluecapture 6 Propertyrightsandownership 7 Theneedforfinance 8 Theownershipofdevelopmentrights 9 Taxingvalueorraisingcharges 9 Rulesversusdiscretion? 9 Fixedtaxes,tariffsandnegotiatedcontributions 10 Hypothecationandcontract 11 Keyfactorsbehindthedevelopmentofplanninggainpolicy inEngland 11 Politicaleconomy 12 Theplanningsystem 12 Central–localrelations:Localdiscretion,innovationand adoption 14 Definitions 15 Thestructureofthebook 16 2 TheEconomicsofDevelopmentValueandPlanningGain 20 ChristineWhitehead Introduction 20 Whyislandanditsvaluespecial? 21 Thepotentialtotaxincreasinglandvalueswithoutgenerating inefficiency 22 Theimpactofplanningondevelopmentvalues – thecreationof planninggain 25 Howarethesevaluesachieved? 25 Planningaffectslandsupply 26 Planningaffectsdemand 27 viii TableofContents Planningaffectsdensityofconstructionanduse 28 Planningaffectspricesandquantities 29 Bringingtogetherthepossibilities 29 Instrumentsavailabletocaptureplanninggain 32 Overview 34 3 CapturingDevelopmentValueThroughdejureNational Taxation:TheEnglishExperience 37 TonyCrook Introduction 37 Bettermentanddevelopmentvaluedefined 39 Compensationandbetterment:theUthwattprinciples 43 Taxingdevelopmentvalue:post-warnationalschemes 46 1947:Thedevelopmentchargeandthecentrallandtribunal 48 1967:Bettermentlevyandlandcommission 51 1974,1975and1976:DevelopmentGainsTax,the CommunityLandSchemeandDevelopmentLandTax 54 Lessonslearned 59 4 PlanningObligationsPolicyinEngland:defactoTaxationof DevelopmentValue 63 TonyCrook Introduction 63 Planningobligations:thekeyprinciples 65 Usingplanningobligationstosecurelandandfundingfor affordablehousing 74 Theoverallframework 74 Detailedrequirements 79 Recentpolicyinitiatives 83 Tariffs 85 Optionalplanningcharge 86 Planninggainsupplement 88 Communityinfrastructurelevy 93 ChangestoCILandnewLPAincentives 97 ViabilityandS106 99 CILpolicy:concludingcomments 100 Conclusions 101 5 DevelopmentViability 115 JohnHenneberry Introduction 115 Developmentviability 117 Thresholdlandvalue 120