2.0
Main Body
2.1
Problems Developers Face
Brownfield land is by definition very difficult to develop and therefore it is essential that the barriers and constraint that cause any difficulties are lifted to make brownfield redevelopment financially feasible. Developers are all keen to regenerate brownfield sites although with no additional funding any housing developments become non profitable. Presides from government funding developers are forces to focus on high density scheme.
If the demand was there for new spacious property with extensive garden, developers would simply not find this financially feasible. In order to maximise profits when regenerating derelicts land it is essential for the new development to use high density schemes (maximise rooms per acre). Not only are developers forced to produce high density schemes but the same time government will be expecting imaginative and innovative design fitting in with the surrounding environment.
Attractive architectural design for housing is more commonly seen in Greenfield development. Developing this kind of scheme on brownfield sites is financially not feasible, the high building cost and low return leads developers with little option but to develop on Greenfield sites. According to “Prescott’s Greenfield Housing Curb Thwarted” there is Greenfield land in the pipeline for 658,000 houses which is enough to accommodate the demand of the top 80 house builders for 6 years before touching an urban site. Planning permission is continually being granted to developers by nearly half of the local planning authorities for low density schemes on Greenfield sites, which is completely against the governments policy.
This factual information firstly shows that low density housing schemes are not feasible for urban regeneration and therefore proposals of this kind of schemes will only be made on Greenfield sites. This secondly shows us that urban regeneration for housing developments is only financially feasible with high density schemes.
A question arise from this when taking in to account the remediation fee (demolition and removal of contamination), even with a high density scheme a lot of developments still show negative valuation figures. Instead of just pushing for urban regeneration, does the government need to provide funding? Obviously they do and with the correct funding urban regeneration will take off, although with the funding the government would be able to offer, it will still not provide the profit margins that developer are used to with Greenfield sites.
2.2
Factors for High Development Cost on Brownfield sites
Greenfield sites bring little constraints to the early stage of a development. The land at most may have high water tables, soft clay, or uneven ground, all of which are usually easily rectified with low costs. Brownfield sites are some what different carrying multiple constraints. The sites tend to be old industrial plants or warehouses leaving many forms of contamination behind. The environmental hazards found on these sites consisted of asbestos in buildings, smoking, drug abuse, alcohol abuse and vehicle emissions. In the case of old industrial and warehouse sites contaminated soil is regularly found. The clearing cost are very high as the contaminated hazards have to be removed and taken to expensive specialist dumps. In dealing with contaminated soil, the top layer usually the top three meter is removed and once again taken to a specialist dumping ground. Were the soil has been removed a layer of concrete is laid with a top layer of soil. This costly procedure puts off many developers as there profit margin has turned negative as well as facing liabilities in future due to the contamination. The cost of remediation can some what vary from next to nothing to half a million pounds. Although it would be rare to see cost at the lower end of this scale. Example A and B show basic valuation illustrating how the remediation cost effect profit margins.
2.
Example A:
Housing Development on a 4 acre Greenfield site
20 houses built at - £100,000 each
Total Development Cost - £2,000,000
Each house is sold at- £125,000
Total Development value- £2,250,000
_________
Total profit £250,000
Example B:
Housing Development on a 4 acre Brownfield Site.
Remediation of site- £100,000 per acre
Total Remediation costs- £400,000
20 house at- £100,000 each
Total construction costs- £2,000,000
Total Development costs- £2,400,000
Each house sold at- £125,000
_________
Total Profit- -£150,000
To realistically see the urban regeneration of brownfield housing, solutions of some form is needed.
2.3
Mechanism for Regeneration
Some form of mechanism needs to be put into place in order to ensure that urban regeneration is not prevented or delayed. Recent government bodies have come up with a number of suggestions.
- Penalties should be given to developers who continue to build on Greenfield sites. These penalties may include higher taxes on land fees or give something back to the government (contribute to school, affordable housing etc.)
- Imposing taxes to the owners of brownfield Sites,to those who do not clean up their sites
- Award tax relief of 150% in respect of expenditure incurred in reclaiming land determined to be contaminated in accordance with the Environmental Act 1990
- Holder of derelict, vacant or contaminated land need to consider how they may contribute to the urban renewal process, whilst taking advantages to tax benefits.
- Landfill tax exemption should continue to apply where the removal of contaminated soil to landfill is the best or only option for site remediation.
- There is a need for better remediation methods, making remediation easier and more affordable.
- Government will provide better gap funding regimes. A new regime is already in place, the influence of this regime has come from recent success from a similar scheme in America. Where good proposals to the planning office are put forward to receive tax exemption. If accepted on completion of the developments the developers will receive a tax grant slip to add to their Inland Revenue form and therefore become except from paying certain taxes linked to the development.
Government have already put some of these processes in motion and continue to look at more feasible option, not only making easier for the developer but also providing support for land owners.
3.0
Conclusion
Concentrating predominately on the financial side to developers liabilities, it has become clear that development on Greenfield land is far more desirable than Brownfield sites. Although with the government’s implication slowly coming in to place, urban regeneration could look slightly brighter in the future. The government believes there could be up to 4.4 million more households in England between 1991 and 2016 and hope that 60% of new homes will be built on previously used or brownfield land. In order to achieve this it is essential that the government take action to the land owners and developers as well as providing support of there own.
With respect to land owner they should be push in to cleaning up there sites and offer support in the form of tax relief to those who abide with the government. Even though land owners are little to blame for the lack urban regeneration, involving the land owners could cause effective to the process and therefore help add to the government achieving there goals.
As mentioned earlier the government have made many suggestions in order to force developers towards urban regeneration as well as provide those who do with different form of support. Higher taxes for those developers who continue to ignore the government’s plea for urban renewal, will make Greenfield development slightly less desirable although will not completely put off developers.
Further action is necessary from the government’s side in order to help development in urban renewal. As the government are not providing developers with sufficient funds, tax relief of 150% should hopefully be enough of an incentive to make schemes financially feasible.
Finally the government have stated that there is a need for better remediation methods, making remediation better and more affordable. With support from the government this could be the final factor to make urban renewal financially feasible and therefore see the government’s target of 60% of newly built households on brownfield sites.
Urban renewal is sustainable in brownfield house although like every problem the government faces, finding the best solution financially will always take time. With the growing relationship between the government and developers it is import than Greenfield development is slowed down and Brownfield development hits the government’s targets.
4.0
Bibliography
Housing and Regeneration Tax Credit- Urban Regeneration Scheme
Campaign to Protect Rural England- Prescott’s Brownfield Housing Curb Thwarted
Government Office for the South East- Decontaminated land
Local Government Association- Development into Brownfield Sites
House of Commons Report- Memorandum by Local Government Association
RTPI- Brownfield land re-use
Environmental Agency- Brownfield Land Redevelopment
Department of Transport Local Government and the region – Lord Falconer’s speech
Sustainable Renewal of Suburban Areas- Michael Gwilliam
