Article by Ian Barnett, National Land Director, Leaders Romans Group (LRG)
Whether it’s a good time to buy or sell land is always an individual decision, impacted by a range of personal and external factors. Furthermore, land value is determined by planning status and generally land with planning consent can be worth many more times the value of land without. The timeframes for achieving planning permission are typically lengthy.
However, emerging changes to the planning system following the general election last July are set to increase the likelihood of gaining planning consent in many circumstances and therefore now could be a good time for a landowner to consider developing land or partnering with a developer.
Changing approaches to planning
From a planning perspective, the final years of the previous administration were characterised by uncertainty – housing targets abandoned, local authorities resisting Green Belt release and planning applications stalled at the final hurdle due to (hugely subjective) concerns about ‘beauty’.
The new government was quick to deliver on its commitment to increase housing development, revising the National Planning Policy Framework (NPPF) for consultation just weeks after taking office and promising a Planning and Infrastructure Bill early in the New Year.
A new NPPF
As promised, the government responded to the NPPF consultation before the end of the year, producing a new NPPF in mid December (and indicating that another may be on the horizon).
The new policy cements what Keir Starmer has referred to as to as an ‘almighty challenge’ of a target, delivering 370,000 houses per year – that’s the equivalent of building 1.5 houses per square km per year nationwide. To bring forward the necessary homes, the government is requiring greater accountability from local authorities on Local Plans and anticipating significant Green Belt release. The ‘grey belt’ definition is very welcome and the property industry heaved a collective sigh of relief when the blanket 50 per cent affordable housing requirement on Grey Belt has been removed.
I have been calling for the removal of politics from planning decisions for years – specifically for those sites which already have a Local Plan allocation or an outline planning consent (and therefore already undergone public scrutiny). Although there was no specific reference to ‘deemed consent’ in the NPPF, it’s encouraging that this is one of the main issues being considered in the recently published Planning Working Paper on Planning Committee, and the English devolution white paper is preparing the ground for a return to regional spatial strategies (or similar).
The new NPPF gives an opportunity for the whole narrative on development and housing delivery to change, giving a new window of opportunity for many sites that are suitable for development and which have been held up by inefficiencies and lack of resources, meddling local politics and NIMBYism.
The impact of the budget
A less palatable change of direction was a main feature of October’s budget: the reduction in Agricultural Property Relief on Inheritance Tax. This may result in some landowners opting to sell land – although, in an unfortunate double whammy, those landowners wishing to sell to avoid higher levels of Inheritance Tax will still be hit by higher levels of Capital Gains Tax.
New Opportunities for Development
However, in circumstances in which landowners plan to release land for development, there are opportunities, partly due to the changes to the NPPF described earlier, which should ease the land sales and development process.
Resources have been allocated for more planning officers to speed up planning consents (though not sure where they will come from given the skills shortage), funding has been committed to resolve the ongoing ‘nutrient neutrality’ issue which has stalled development, and an imminent announcement about future new towns will require substantial amounts of land to come forward albeit over the long term.
Caveats
While the emerging changes in the planning system would suggest that land, specifically greenfield land, is more likely to gain consent for residential development, the process of achieving planning permission remains slow, as a result of significantly under-resourced local authority planning departments (despite funding having been committed, it will take many months to fully address the backlogs). Furthermore, an increased pipeline of planning consent will, in the short term at least, result in increased delays.
And not all Labour planning policies will benefit land sales. Another policy, trailed by Kier Starmer as a bold method of boosting the supply of affordable housing, is that of land value capture. The government has said that it would pass a law to allow local planning authorities in England the power to buy up land, under compulsory purchase, at a fraction of its potential cost. The law would facilitate the acquisition of land at a reduced price by effectively stripping out ‘hope value’ – the price premium that landowners gain when selling land with the potential of planning permission.
Understandably this has raised some concern among landowners, and may be a reason, where feasible, to expedite a land sale. Little is known about the policy to date, and such direct means of land value capture, although frequently aired, are frequently stalled as found by the previous government, which was also very keen on the land value capture policy.
Planning ahead for maximum value
To do so efficiently, landowners are advised to work with strategic land sales teams and developers to structure land sales in a way that minimises tax exposure while maximising the value of the land.
For those considering developing their land, entering into an agreement whereby sale is sold subject to planning consent, with planning consent or involving options and promotions agreements, can significantly increase the value of the land.
The value can be increased further with a considered approach to the various tenures that make up a profitable site – from build to rent and the private rented sector through to the best mix of residential and commercial units is the type of planning advice which can considerably increase profitability ahead of a land sale.
Furthermore, identifying the potential for energy-saving solutions which both ‘place a tick in the box’ when it comes to planning consent and also create an attractive and energy efficient scheme will also benefit profitability.
Despite the new opportunities presented by the planning changes, the route to achieving planning permission is likely to remain a long one. Planning is still complex, and it will inevitably take a number of years to successfully navigate the process. Landowners should remain patient and allow developers sufficient time to achieve planning as a longer contractual period typically generates more attractive financial returns.
Thinking ahead
My advice is that bearing in mind the long timescales associated with land promotion, obtaining planning permission and ultimately a land disposals – which can easily exceed a parliamentary term – is that it is always beneficial to plan ahead and consider the bigger picture.
One consistency in the planning system in the last 20 years is that it is often fiddled with. The other is that ultimately the best sites are developed and landowners benefit. Patience, pragmatism are professional advice are all necessary to ensure that you select the best method of disposal for you and your land and crucially that your interests are fully protected.
Ian Barnett is the National Land Director, Leaders Romans Group