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Burden of development close to tipping point

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Burden of development close to tipping point

Written by Paul Adkins
Thursday, 20 November 2008
The financial burden on private landowners and developers to fund the costs of social and public infrastructure projects at a time when land values are falling could jeopardise Government-backed plans for economic growth, according to property consultancy & rural property sales experts Carter Jonas. cccc Falling residential land values of anything between 20 and 50 per cent, depending on location, combined with fixed costs for development plus financial obligations associated with development could deter private landowners and developers from bringing forward enough land to fulfil affordable housing targets and associated public amenities, which have become so dependent on subsidy from the development sector. There is a deficit in funding available to support housing and associated development that will be exacerbated by the slowdown in new housing starts and the moth-balling of sites under construction, given that so much of the financial burden of infrastructure projects which pave the way for and accompany development is borne by landowners and developers themselves, says Carter Jonas. As well as contributing to infrastructure projects through Section 106 Agreements which form part of planning permissions, landowners and developers have to factor-in affordable housing levels of anything between 30-45 per cent on most sites – quotas which are likely to increase. In looking to future development plans, the private development sector now has to consider the financial impact of the proposed Community Infrastructure Levy, the 2016 zero-carbon target for new build and the prospect of legislation in 2013 to make Lifetime Homes’ requirements – features to ensure longevity of occupation to meet the needs of an ageing population – mandatory. Yet the Government is still sticking to its housing targets and its expectation of the private development industry to deliver a share of the costs, together with costs of associated public infrastructure projects. Any further disincentives to bringing land forward for development now will mean a legacy of house-price inflation. Given the time it takes for developers and planning authorities to identify land and take it through the planning process, there is a running undercurrent of undersupply even when the housing market is at its most buoyant. This problem of ‘development lag’ needs to be addressed now at a national and regional policy level to offset the potential for a disastrous undersupply of viable sites at the point when the housing market turns upwards again. Carter Jonas warns that the development sector is close now to a ‘tipping point’ where the viability of developing land under the current fiscal and regularity regime is questionable. This is further exacerbated by the current downturn in the market where developers are reluctant to commit to substantial land purchases. Michael Hudson, a partner at Carter Jonas and head of the development land team in the eastern region, commented: "One has to ask where is the point at which the loading of the kind of costs which used to be met by the public purse and the ramping-up of environmental and social obligations on landowners and developers at the front end, means there is little value left in bringing land forward for development? "If we are reaching that point, then, logically, the next question is where will the funding come from for affordable housing and public infrastructure projects such as schools, local amenities, transport improvements and other public works which are now so dependent on subsidy from the private development sector?" Carter jonas provide the following services: Rural Property Sales UK Building consultancy Marylebone letting agents Minerals and waste planners Bookmark with: Delicious Digg reddit Facebook StumbleUpon What are these?

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