Committee also calls for government to ‘trial’ new mechanisms on New Towns
A cross-party committee MPs has published a series of recommendations for overhauling land value capture mechanisms to boost housing delivery.
The Housing, Communities and Local Government committee in a new report said there is scope to to reform the current system of developer contributions in England to capture a greater proportion of land value uplifts to deliver affordable housing and public infrastructure.
When a site is granted planning permission for housing, the value of the land often increases dramatically. The report said agricultural land in England (excluding London) which is granted planning permission for residential on average increases in value from around £23,000 per hectare to around £2.67 million.
The report said there is a “compelling case” to reform mechanisms such as section 106 or the Community Infrastructure Levy to capture more value for new homes. It said, however, that a radical departure from CIL or Section 106 “would risk a detrimental impact on supply in the short term”, so argued that an iterative process is needed.
The report calls for the government to introduce new template clauses for Section 106 agreements to focus negotiations on site-specific factors rather than legal wordings; reinstate access to funded Level 7 planning apprenticeships for students over the age of 21; establish a statutory dispute resolution scheme to settle deadlocked negotiations between local authorities and developers fairly; and to publish updated land value estimates data, which have not been updated since August 2020, to inform future reforms to land value capture.
At-a-glance: land value capture models
Section 106
An agreement between a housing developer and a local council where the developer provides money, land, or services to support the local community (e.g., schools, parks, affordable housing) as part of getting planning permission.
Community Infrastructure Levy (CIL)
A set charge that developers pay to local councils when they build new projects. The money is used to fund local infrastructure such as roads, schools, and parks.
Tax Increment Financing (TIF)
A way for councils to borrow money now to improve an area, and repay it later using the extra tax money that results from the area’s increased value and development.
It also calls for local authorities in England to set a minimum percentage target for affordable housing in their local plan, with a ‘fast-track’ planning route for developments which meet this local target. It said ministers should publish a national interactive map of CIL charging schedules.
The report also said the government’s new towns are an opportunity to experiment with new land value capture models. It said Tax Increment Financing, under which local authorities borrow money for infrastructure projects against the anticipated increase in tax receipts resulting from the future infrastructure, should be used for new towns.
It said: “The government should enable greater use of Tax Increment Financing—a model which has delivered successfully in London—to fund infrastructure in cities and in new towns.”
The report also called on the government to publish its Long Term Plan for Housing as soon as possible.
It said: “There is scope to reform the current system of developer contributions in England to capture a greater proportion of land value uplifts from development to deliver affordable housing and public infrastructure. There is a compelling case for such reforms—especially in the context of a deepening housing crisis and with public finances currently under strain.”
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