Planning gain

Planning gain

Planning gain refers primarily to the increase in the value of land which results from planning permission being granted for that land. This increase in land value mainly accrues to the owner of the land, but a levy or tax may be applied to divert some of the planning gain to the public sector. In England and Wales, such arrangements are currently negotiated between the developer and the council, and take place under the terms of Section 106 of the Town and Country Planning Act 1990. In Scotland the equivalent is a Section 75 planning agreement (Section 75 of the Town and Country Planning (Scotland) Act 1997).


Criticisms of Section 106 Agreements

The planning obligations put on developers by Section 106 agreements are sometimes criticised for:

  • inconsistency
  • unfairness
  • lack of transparency
  • length of time to negotiate

Obligations may be created that are more than the developer would consider a bare minimum, with local authorities seeking contributions from developers that go beyond the definition originally given in DCLG Circular 1/97.[1]

Section 106 agreements are often used by planning authorities to provide new public realm development or affordable housing in England and Wales.

Typically, a new housing development over a given threshold size (commonly 15 dwellings in many local authorities) would be required to provide a pre-determined proportion of affordable housing - see DCLG Circular 05/2005. This is a source of friction between developers and local planning authorities, because the developers attempt to maximise revenue while the councils attempt to maximise the amount of affordable housing. Many councils have a loosely worded Development or Local Plan to reflect s 54A of the Act, which requires any decision to be reached in accordance with the terms of the Plan unless material considerations indicate otherwise. Circular 6/98 states affordable housing itself is just one material planning consideration, therefore simply meeting a requirement for affordable housing provides no guarantee that other issues may need to be addressed.

One of the reasons that 106 agreements are unpopular with developers is that, at present, the government makes more money from the sale of affordable rented housing (about £5 billion a year) than it spends (about £3.5 billion a year)[citation needed] and it is arguable that the main cause of these proceeds is not ongoing government investment but private sector (developer) investment.

A counter-argument would run that developers seek to maximise revenue and would neither provide services for housing at a subsidised rate, nor subsidised rents for the vulnerable, unless such a provision forced them to do so.

The practice of bargaining for Planning Gain precedes the 1990 Act and a 1981 report by the Property Advisory Group[2] concluded that:

"(with limited exceptions) the practice of bargaining for planning gain is unacceptable and should be firmly discouraged."

However, the report was not acted upon.

The Community Infrastructure Levy

In 2003, criticisms of s106 agreements led to a report for the Government by eminent economist Kate Barker. The report proposed a tax on planning gain, to be known as the Planning Gain Supplement (PGS). PGS was never implemented, and after extended debate on its merits the Government announced in 2007 that a new Community Infrastructure Levy (CIL) was its preferred method of securing generalised contributions from developers. The Government legislated for CIL in the 2008 Planning Act. Implementing Regulations followed, and CIL came into force in England and Wales on 6 April 2010. However at that stage its future was already in doubt because a Conservative Party Green Paper of February 2010[3] indicated that were they to come to power they would scrap it in favour of a different mechanism (though many commentators indicated that they could not see much difference). By April 2010 the UK General Election was less than a month away; so few local authorities took steps to implement CIL until the new Government's intentions became clear.

On 18 November 2010 the new UK Coalition Government indicated that it would in fact be retaining CIL. However, the Government proposed a number of reforms to the instrument that they had inherited.[4] The reforms included a number of selected changes to the primary legislation implementing CIL (the Planning Act 2008) through the vehicle of the Localism Bill, introduced into the UK Parliament in December 2010. The key changes proposed relate to a requirement to be placed on CIL charging authorities to pass money to other bodies (the stated policy intention being to pass money to neighbourhood groups), a clarification of the purposes to which monies raised may be put, and a reduction in the powers of the independent person appointed by the charging authority to advise on whether the proposed charges are appropriate. Despite these proposals, a number of local authorities have already indicated they will be implementing CIL, including Newark and Sherwood District Council, which published a preliminary draft charging schedule in November 2010[5].

See also


External links

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