Property giants to pay councils to build

Published:  26 October, 2009

LONDON: The British Property Federation (BPF) has backed moves put forward by the Conservatives to improve the planning system, kick-start housebuilding and promote local community development.

The BPF, along with Land Securities, British Land, Grainger and pension fund, Hermes, has welcomed proposals to give local authorities greater decision-making power and bonus payments equal to tax income generated by newly-built homes and commercial property in their jurisdictions.

They hope this policy, known as 'localism', will incentivise councils to streamline planning processes and encourage development, which could relieve the national housing shortage and help property firms grow their portfolios.

In its new report entitled 'Making Localism Deliver', the BPF says that this scheme could work if the right measures are put in place and new funding initiatives are explored.

Under localism, council tax and business rates would be matched by central government for six years, meaning they would get additional money which would not be ring-fenced.

The BPF has tabled four key points which it wants to see political leaders take on board:

(1) Clear planning guidance: a national planning policy and guidance on how councils should work together on region-wide projects.

(2) Right people and skills – support for councils so they can handle increased powers and guarantees that proper training will be provided.

(3) Capturing local growth – introduction of innovative funding concepts such as tax increment financing to kick-start mothballed schemes.

(4) Rental homes built by pension funds – amending stamp duty to encourage institutions to fund professionally managed rental developments.

Allowing councils to benefit directly from new investment is one of the key drivers behind tax increment financing (TIF), which has been widely used in the US.

Current and future income streams from new developments are explicitly tied in to financing bonds or an investment vehicle to pay for new infrastructure associated with the development.

The much-delayed Battersea Power Station in London development could be one of the first to benefit, as it is being considered by the government officials as a TIF case study.

Mike Whitby, leader of Birmingham Council, said: "By making use now of future increases in non-domestic business rates, we can maintain our competitiveness and ensure we attract foreign investment. This would require the Treasury to come to agreements with councils but would not actually cost them anything."

Liz Peace, chief executive of the BPF, added: "If done properly, localism could mean a smoother planning process, quicker decision-making and better engagement. The property industry is committed to working closely with councils, but they will have to be given significant support to make this work.

"Poorly implemented localism – as a result of inadequate resources – could lead to greater delays, ultimately reducing the attractiveness of the UK as a place to invest. This is of particular concern in relation to smaller councils when faced with the challenge of delivering large one off regeneration schemes."

Rupert Clarke, chief executive of Hermes and BPF president, said: "Regeneration projects do not always respect local boundaries and nor should they have to. If we want good transport and regeneration, local authorities must be able to work together. Joined up thinking and cross-boundary working is imperative for a localism agenda to work.

"Francis Salway, chief executive of Land Securities, the country's biggest property firm, said: "Assurances over carrying forward the Killian Pretty recommendations and of removing bureaucracy from the system are welcome, but it is vital that any new legislation does not try to wholly rewrite the planning system." 

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