Adams (2010) recognises that planning is set into objectives to achieve a successful place. The main objectives that he picks out of several as the most helpful in achieving the goal is; shaping, regulating, and stimulation. Shaping involves making sure requirements are met such as housing requirements. Making sure stock levels for different needs are met and that there is not a shortfall or surplus. Regulating is making sure there are standards and contributions from the property market such as supply of affordable houses. Stimulation is trying to instigate specific production in specific areas through policy and subsidies to promote development.
The winners and losers in the introduction of planning are debatable. The community at large and even the country as a whole benefits however there are arguments against planning harming the growth of the country and that it is too restrictive and that the public is still a looser. The designation of land can help in the distribution of uses and avoid incompatible uses such as heavy manufacturing and sewage treatment plants next to residential and central shopping areas. Other positives from planning through intervention is that it promotes welfare gains, increase of public services and provisions, open space, promoting the re-use of brown-field sites, better building standards, and helping the country to be environmentally and economically sustainable. The introduction of green-belts to reduce urban sprawl and protect the countryside becoming one big built up area is a success however there are some adverse effects such as: the reduction of land stock means that the land prices are rising, there is an increase of density in the cities, reduction of open spaces in the city, and reduction of the space per person available in housing. Couch (2006) states that the Government is strongly committed to this restriction on urban sprawl however the restriction is creating a demand for houses at the periphery leading to price rises. This will segregate society through the creation of areas of different wealth this is given weight by McLaughlin (2012) who also recognises that the land user regulations act as a barrier to regional housing balance and affordability.
A major downfall of the planning system is its ability to react to market activity. Due to restrictions there is a low responsiveness to information. A major cause of the low supply elasticity of the housing in the UK may be found within the process of development control as well as in allocations of house building land within the strongly restrictive land use planning regimes and Developers desire to build can be severely dented when faced with slow uncertain processes involved in planning authority decisions (Ball, 2009).
There is a view that planners need a foundation in economics to deal with market realities that they are faced with in decision making. Adams (2010:P118) states “Even when engaged in market realities, planners tend to adopt a detached view of the market that is implicitly grounded in mainstream economics” and Campbell also similarly states “planning has tended to view its mission as different and separate from economics”. Campbell (2008), Mohamed (2006) both take the view that Planners need to possess the knowledge and understanding of individual and corporate decisions, profit margins and investments that are designed to attract developers to promoted locations as well as having the art of argumentation. Without the knowledge the planner will be making decisions blindfolded and that if they are armed with the knowledge they have greater capacity to challenge and re-form agendas (Campbell, 2008). A more interactive relationship with the private sector is extremely important in areas of significant urban change (Adams, 2010).
Levies
When land gets planning permission or the zoning changed the value of the land could potentially rise to an extraordinary level. The owner of the land would greatly benefit from the rise in value without actually doing anything him/her self to earn the economic rent in having their land allocated for a different use such as agricultural to residential. Land will always be available to developers so long as the purchase price exceeds the present value to the owners in agricultural use (Bowers, 1992). With the price of land and property rising and the increasing gap in wealth with the capital market system favouring the wealthy over the poor, the planner needs a tool to try and make the system fairer and to provide public goods for society. There are various taxes and levies that have been introduced to combat the rising unearned profits to land owners and developers through gaining planning permission to help in the construction of society. Agreements can be made to capture some of the unearned profit to help in the provision of affordable housing, local facilities, and infrastructure such as transport, leisure, education facilities, and open space. The levies should have a direct link between the development and local need. The levies lift the burden from tenants and general tax payers having to pay for the entire infrastructure while the developers reap all the rewards.
The two main ‘taxing’ systems that this section will focus on are Planning Gain and the Community Infrastructure Levy (CIL). Both are levied entirely on economic rent which should not affect the resultant output and price (Crook, 2002).
Planning Gain is an alternative means to tax the capturing of betterment for the community (Bowers, 1992). Planning gain was introduced to make sure that the developer does not gain financial benefit from gaining planning permission. Bowers,(1992:p1331) also states that it is to “exact compensation for the social costs imposed on the community by departures from the development plan”. Planning gain is not so much a tax in a strict monetary sense. It is an agreed obligation between the authority and the developer to provide an asset or service to the community that it otherwise would have not received if the development was let to develop without any restrictions. The Agreement that is most commonly used is for the provision of affordable housing. This helps the authority to create a mixed society as without it there would be a hierarchy of classes creating a segregated society. The problem with affordable housing is that there is no definition of what is affordable and it is up to the local authorities to define the term (Wiltshaw, 1983).
Crook (2002) has noted in his research that the taxes levied are likely to be inefficient and inequitable. The reasons are:
Cost of negotiation.
Negotiation skills of the planner.
Length of time for negotiation.
Lack of information about the extent of economic rent available on a case by case basis.
Uncertainty to determine land prices between landowner and developer.
Inconsistency
Lack of transparency
Planning consent being ‘bought’ (Great Britain. Parliament. House of Commons, 2011)
And most importantly “if the gain is taxed who actually pays for it in the end?” The landowner through capital gains tax? The developer through planning gain/obligations and community infrastructure levy? Or the consumer through the developer passing on their costs?
The Community Infrastructure levy (CIL) is a tax based on contribution to infrastructure. It is a levy for the purpose of providing infrastructure support in a development area rather than individual planning obligations (gains) for a particular planning application. CIL is also a monetary levy. The CIL has to work with planning obligations in a complimentary fashion. There is need to make sure the levies don’t overlap each other (as in contributing twice to the same piece of infrastructure via planning gain and CIL).The CIL Allows the local authorities to raise funds from various developers undertaking new building projects in the area(Department of Communities and Local Government,2011) rather than on-site specific infrastructure. The infrastructure will however compliment the development and society through construction of road schemes, schools, hospitals, green spaces and leisure centres among other public and infrastructure amenities. The CIL is based on a tariff system which is touted as a:
Fairer and faster approach.
It is more certain.
More transparency
The cost is more upfront on the amount of contribution
Development will benefit from the wider infrastructure.
It is argued that the planning authorities could get greedy and impose these levies heavily which would act as a de-incentive for development however Bowers (1992) suggests that there are too many actors in the system for this to happen as architects, lawyers, planning consultants, real estate experts and even other planning authorities can support or reject proposals through the appeal system.
The levies are varied over different market conditions and different areas. An area that is actively promoted for development in an undesirable location (for developers) can be subject to agreements on varying degrees or even a subsidy will be in place. As mentioned earlier an extremely high levy can be used as a de-incentive to halt any development in a sensitive location. An example of tax on green-field sites could be given as subsidies for building on brown-field sites to promote re-generation. It is just not local locations that this levies change in but also on a national scale such as in a time that it is needed to stimulate the economy so development is encouraged in areas of need.
Conclusion
Impact of planning in the property market is a good thing as prevention is better than the cure. The prevention of undesirable externalities and condition of living has been raised or at least standardised across the social spectrum. Unwanted sprawl and other social objectives can be captured through the planning system and levies. It is subjective whether the few major advantages of the planning system with restrictions and levies outweigh the many disadvantages that it has. There is a need for the levies to provide or contribute to infrastructure on and off (complimentary) site otherwise it would be left to the authorities and the regular taxpayer to provide the infrastructure in which over time the facilities and amenities would degrade, money would be scarce, there would be a large delay in development as it needs infrastructure to support itself. Without objectives of planning gain such as affordable housing the division between rich and poor would increase and society as a whole would be poorer for it. The CIL seems to be more accepted than the gains through the speed and certainty of expenditure that they would contribute. Even though there is a need for the levies there could always be a change in the way they are operated especially planning gain. If gain was on the same tariff system as CIL or all incorporated into one levy it could help the system. Instead of the obligation of affordable homes the money can be taken in tax form and used as a subsidy for a new homeowner to retain a mixed society. Planning could/would change objectives and conditions of restrictions and levies in response to the market in order to promote or discourage development in specific areas.
What that is not clear is does all these levies get passed on to the consumer from the developer?
What was also found in this research is the need for planners to have a grounded knowledge of economics and valuation to make educated decisions that have an effect on each community.
References
Adams D,Tiesdale S, (2010): Planners as Market Actors:Rethinking State-Market Relations in Land and Property, Planning Practice and Theory, 11:2, 187-207
Balchin P, Kieve JL and Bull G,(1995): Urban land Economics and Public Policy,MacMillan, London, Fifth Edition.
Ball M, (2010): Planning Delay and the responsiveness of English Housing Supply, Urban Studies, 48:3, 349-362
Bowers J,(1992): The Economics of Planning Gain: a Re-appraisal, Urban Studies, 29: 1329-1338
Campbell H, (2009), Middle-class places...and the Dangers of Leaving Economics to the Economists, Planning Theory and practice 9:1, 3-6
Couch C, Karecha J, (2006): Controlling urban sprawl: Some Experiences from Liverpool, Cities,23:5, 353-363
Crook ADH, (2002): Social Housing and Planning Gain: is this an appropriate way of providing affordable housing? , Environment and Planning A, 34: 1259-1279
Great Britain. Parliament. House of Commons(2011):Planning Obligations (Planning gain or planning contribution) By Christopher Barclay, London: SES.(SN/1298)
McLaughlin RB, (2012): Land Use Regulation: Where have we been, Where are we going? , Cities, 29:1, 50-55
Mohamed R, (2006): The Psychology of Residential Developers: Lessons from Behavioural Economics and Additional Explanations for Satisficing, Journal of Planning Education and Research, 26:3, 28-37
Needham B, (2000): Spacial planning as a design discipline: a paradigm for Western Europe? Environment and Planning B: Planning and design, 27:437-453
RTPI (2007) Position statement on planning and affordable housing : accessed on 26/02/2012
Wiltshaw D.G, (1984): Planning Gain: A Theoretical Note, Urban studies, 21: 183,187
Bibliography
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Balchin P, Kieve JL and Bull G,(1995) Urban land Economics and Public Policy,MacMillan, London, Fifth Edition.
Ball M, (2010), Planning Delay and the responsiveness of English Housing Supply, Urban Studies, 48:3, 349-362
Bowers J,(1992): The Economics of Planning Gain: a Re-appraisal, Urban Studies, 29: 1329-1338
Campbell H, (2009), Middle-class places...and the Dangers of Leaving Economics to the Economists, Planning Theory and practice 9:1, 3-6
Couch C, Karecha J, (2006) Controlling urban sprawl: Some Experiences from Liverpool, Cities,23:5, 353-363
Crook ADH, (2002): Social Housing and Planning Gain: is this an appropriate way of providing affordable housing? , Environment and Planning A, 34: 1259-1279
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