NPPF Question 38. How and at what level should Government set benchmark land values?

The consultation of the NPPF asks us how and at what level should government set benchmark land values [BLVs]?”.? By way of background para 30 of the consultation says:

Benchmark land values are generally set as a multiple of agricultural use values, which are typically in the region of ￡20,000 - ￡25,000 per hectare... We also note that views of appropriate premia above existing use values vary: for agricultural land, a recent academic paper[1] suggested BLVs of three times existing use value; the Letwin Review of Build Out suggested ten times existing use value; Lichfields found that local planning authorities set BLVs of between 10- and 40-times existing use value. These BLVs do not necessarily relate to Green Belt land, which is subject to severe restrictions on development, and Government is particularly interested in the impact of setting BLV at the lower end of this spectrum.

I think it is being convenient with its words to say a recent academic paper suggested BLV’s of 3x.? ?The academic paper referred to by Glen Bramley offers the following commentary but did not provide any justification for this figure, only floated it as a number to pose a discussion:

“Three Dragons have given ‘benchmark’ figures which they indicate reflect current / recent practice, effectively 15 times agricultural value for greenfield… It may well be that prices at that level are needed to persuade long term (and other) landowners to sell, although some of the surprisingly large figure for greenfield land may go into the process of getting sites into or through the planning system.? It is clearly way in excess of what a working farmer would need to move to a different farm.? I would hope and expect that an incoming Government would change expectations clearly in this respect, certainly for greenfield land, so in my version I have reduced the mark-up from 15 times to 3 times.? This may be an area for further discussion, as we do not want the supply of sites to dry up.”

No Mr Bramley, we certainly do not want the supply if sites to dry up.? So, what is the appropriate uplift?? I would be very interested to hear the opinion of any readers that promote land.? I would be interested to know:

1.?????? How much, on average, it costs to promote land for every developable acre? and

2.?????? What their investors require as a return on equity from one site given they will be achieving successes and failures across a portfolio?

The answers will, I’m sure, vary wildly and the fact that the answer to 1 varies so much is half the challenge to investors.? I would expect that an average planning cost is ￡25k per net developable acre, but I am working on a number of projects that have suffered a cost equivalent to ￡50k to ￡85k per developable acre.? My own experience tells me that investors seek in the region of c.5x on their money on one site given the costs and risks involved.

The point to make here to Mr Bramley and to the Government’s consultation is that the value uplift is not just there to convince a working farmer to move to another farm, it also needs to achieve a value the satisfies the following conditions:

1.?????? It must provide a satisfactory return on the risk capital invested in the planning application

2.?????? It must achieve a value that provides sufficient security for a loan to deliver the infrastructure that enables the development

My own hypothesis is:

·???????? The costs of planning are far greater than the Government appreciates.

·???????? The risk of not achieving planning within a timeframe are far greater than the Government appreciates.

·???????? The cost of servicing the land after planning permission is achieved is far greater than the Government appreciates.

·???????? The financial cost:benefit of investing in land promotion and development is already squeezed to the point that many operators are leaving the sector.

The unintended consequence of a Benchmark Land Value of below 15 times agricultural values is that the supply of sites will dry up.

I know the Government shares my view that we desperately need more truly social housing but it would do well to focus on the areas that will make a difference:

·???????? Reducing the cost, time, and risk of planning

·???????? Alternative models for funding infrastructure and public services

·???????? Alternative models for funding social housing

I am available should they be interested to discuss what can be done on each of these.

[1] ??https://pure.hw.ac.uk/ws/portalfiles/portal/113960635/Bramley_G._HOUSING_REQUIREMENTS_IN_ENGLAND_REVISITED.pdf

?