How can cities make more of their opportunities
1. Strategic site allocation and densification
As the first section of this report lays out, the UK needs to deliver more housing in high-demand areas where houses are least affordable. There is currently capacity for around 425,000 homes on brownfield land within the ten least affordable cities, and there is political will to develop on these at a national scale and often locally. So what is holding these sites back?
Many brownfield sites are awkward to develop. The most accessible have been used and the least contaminated developed on. The sites that remain after 20 years of concentrating development on brownfield land are often poorly served by infrastructure, expensive, undesirable or risky to build on.
Cities therefore need to work pro-actively with partners to strategically identify the sites appropriate for housing and, where appropriate, assemble the land to make them viable. To create desirable communities will also require strategic planning of transport and infrastructure with new housing.
Cities can also unlock specific sites by using financial and policy instruments that make it viable for developers to build housing in these places. Where cities choose to increase the density of housing, it is important that they can and do plan strategically, so that housing is appropriately supported by infrastructure. Cities can even develop sites themselves or where appropriate invest in remediation and infrastructure to deliver housing where the market would not.
The following case studies address how cities from the UK and abroad are strategically allocating land and preparing it for development, allowing for the delivery of housing in the places they are needed.
- London – GLA Housing Zones and Opportunity Areas
- Bristol – Bristol Homes Commission
- Ealing – Council-owned Company
Case study London: Opportunity Areas and Housing Zones – strategically designating sites and offering tools to house builders
The Greater London Authority (GLA) is using two complementary strategic tools to try and deliver more homes in the capital.32
Opportunity and Intensification Areas as set out in the London Plan identify areas across London that are suitable for development. 33 brownfield Opportunity Areas and 10 Intensification Areas are claimed to provide the sites for the 400,000 homes needed over the next decade.
The GLA has provided tools to deliver housing on these sites through London Housing Zones, which enable local authorities to identify and package up brownfield land, remove unnecessary planning restrictions and partner with a builder or housing association to deliver housing.33 They are also flexible enough for local authorities to ‘come with a problem’ which the GLA and national partners can address, such as the piloting of stamp duty retention by HM Treasury.34
The London Housing Zones Prospectus suggests that most Housing Zones are likely to be in Opportunity Areas. This allows for development to take place strategically without restricting the potential of the scheme.35 However, the separation of the two instruments lessens the ability of the Opportunity Areas to act as a single guide to where development would be most appropriate. Furthermore, the Housing Zones that have been announced for the rest of the country lack any strategic overview like that of the Opportunity Areas.36
Case study Bristol: strategic and joined-up working to deliver homes
Bristol suffers from a long-term under-supply of homes, held back over the last few decades by what what academics have described as weak strategic planning and a lack of co-ordination between authorities,37 following the abolition of Avon County Council in 1996, which previously held strategic powers.
Nevertheless, a new pro-development approach, led by Mayor Ferguson and backed by the 2013 Bristol Homes Commission, aims to enable the city to strategically identify both its needs and the sites that have the potential to best meet those needs. It also provides a framework for the establishment of partnerships to deliver homes in the right places.
The council has been actively re-assessing its own extensive land holdings and releasing suitable sites for development. They are looking to co-locate council services to free up land for housing, and recently moved the Pest Control Depot out of the city centre to a less high-demand area for the same purpose.38 They are also targeting ‘greyfield’ land – under-utilised public amenity land close to or within existing communities, which can be used to deliver housing but also improve the environmental quality of the local area.39
The city is using the powers it already has to deliver housing and infrastructure. This leadership on infrastructure is crucial for inner-city brownfield land, much of which is technically and financially challenging to develop. The Commission has proposed a Revolving Investment Fund to support infrastructure, investing upfront but recouping receipts and re-investing those funds into new projects. This approach should also improve certainty for developers.
Through the Bristol Property Board the city has called on Whitehall for the powers to create a ‘specialist unlocking team’ to release major development sites – such as Hengrove Park – without the need for central government intervention. The Commission is also calling on central government to reform a cheaper, quicker and simpler CPO process to assemble land.
The Commission is supporting cross-boundary collaboration, emphasising the need for the four local authorities around the city to strategically plan on a sub-regional level, reflecting the geography of Greater Bristol’s economy. They are also working with the HCA, harnessing capital investment to unlock previously unviable development at Filwood Park, and using a £12 million loan from the HCA to overcome the lack of available loan finance that stalled development at Wapping Wharf.
It is still too early to see a tangible effect in Bristol; however the policy innovation and clear priority for building more homes means this remains ‘one to watch’.
Case study Ealing: acting entrepreneurially to meet housing needs
Ealing Council identified an acute lack of family and middle income housing as well as social rented housing in their borough.34 To tackle this challenge, the council decided to directly deliver homes for this under-served group. The first challenge was to fund a £58 million council estate regeneration scheme, but aspirations have since expanded to social housing more generally. 41
Ealing established a wholly council-owned Company (CoCo) that borrows money from the Public Works Loan Board against the council’s balance sheet and uses it to fund housing investments. This remains separate from both Housing Revenue Account (HRA) and Whitehall borrowing constraints, an aspiration of many councils who seek to use housing revenue receipts to invest.42 As a result, Ealing plans to deliver 5,300 new homes through the CoCo over the next 15 years.43
The CoCo allows Ealing to assemble land for developer partners, such as housing associations, and directly deliver the housing tenures needed by the local community. The council will also develop market housing directly to cross-subsidise social and affordable housing and fund further deals.44
Since most of the council-owned land in Ealing is in use, the CoCo enables Ealing Council to invest in other under-used land and act more entrepreneurially regarding site acquisitions.45 This includes considering buying light industrial sites and changing planning conditions for housing, thus benefitting from the uplift in land value.45 The model is also being used by other large councils in high demand areas (e.g. Croydon) and is supported by preliminary findings from the independent review of local authorities’ role in housing.47
2. Building new suburbs
Continuing to favour building on brownfield land will not provide enough homes in the places that need them. In addition, as laid out in NPPF supporting documents, it is not even desirable to do this.48 House-building starts when house prices reach a high enough level to make development viable. This is now the case for most brownfield sites in our most successful cities, but as land comes with a high – and volatile – premium, developers must price in both the cost and future risks (which are greater in these typically complex sites) to their sums. This means more expensive, smaller houses, slower build out rates and considerable public subsidies to make sites viable for a private developer.
Favouring previously developed land to the exclusion of considering other available sites raises costs and will not, in all cities, provide the amount of homes that the most successful cities need.
Many of Britain’s least affordable cities are constrained from building housing by their green belt. For those cities, there are significant opportunities to build more homes by re-designating green belt land – often of poor quality- close to transport links for housing development. While there is often rational opposition from existing communities to building on the green belt, this is often about undermining the policy, or blanket assumptions made about the benefits of greenfield land, or land with public access. However, much of the green belt is not green, nor does it offer public access. Communities are also concerned about undermining the benefits of containment that the green belt offers. However these are not fixed, and with development in many of the most successful cities ‘leapfrogging’ the green belt, in many areas the original green belt is no longer fit for purpose.
The following section will discuss how cities are trying to meet the challenges associated with building new suburbs in the UK and internationally: finding the land, financing new infrastructure, capturing value for communities, and protecting valuable green spaces in and around the city. The following case studies will show how other cities, in the UK and abroad, have achieved this.
- Unlocking development through investment: Milton Keynes Tariff
- Recycling investment: New Towns and Garden Cities
- Pro-active land management: Milton Keynes Development Company
- Using receipts to fund infrastructure: Ørestad, Copenhagen
- Compulsory Purchase Orders: Paleiskwartier, Hertogenbosch
- Green belt swaps: Cambridge and Cheshire East
- Strategic designations: Leipzig-Halle
Case study Milton Keynes Tariff: funding infrastructure upfront
Milton Keynes stands out as the only city in the UK that has seen near constant economic growth over the last ten years while maintaining stable and consistently affordable house prices. This is partly due to its consistent delivery of homes and infrastructure.49 Milton Keynes, benefitting in part from its status as a former New Town, has also benefited from innovative ways of funding infrastructure to make these new homes viable.
In 2004, to fund social and physical infrastructure in its strategic expansion areas, the city set a building tariff, or Strategic Land and Infrastructure Contract. Developers agreed to pay standardised contributions of £18,500 per residential dwelling and £260,000 per hectare of commercial land, using the legal framework of a section 106 agreement. Unlike a typical Section 106 agreement, Milton Keynes was able to borrow money from the Homes and Communities Agency to forward-fund infrastructure against expected tariff receipts, as HM Treasury was confident about the long-term certainty of receipts.50
Under the tariff model, the developer pays 75 per cent of the charge on completion rather than upfront, reducing their need for borrowing and allowing for greater certainty for both partners. Some payments can be delivered ‘in kind’ if developers provide specified infrastructure or public space. 51
Despite its effectiveness, this model, which is providing a way of introducing property taxes on a local scale, is not used elsewhere in the UK. However, the community infrastructure levy offers a similar power, and will replace the tariff in Milton Keynes. The tarrif provides a way of capturing the value of new residential rather than just commercial development (through business rate retention) which is the mechanism used for the funding of infrastructure at the Nine Elms redevelopment.52 However, the piloting of stamp duty retention could be a new mode of capturing value.
Case study New Towns and Garden Cities: recycling money for infrastructure
A change of use class from agricultural to residential around the country’s most successful cities can result in land values rising by 400 fold.53 Where the city is a landowner, it is set to gain the most from that value uplift. This was the thinking behind the New Towns model, in which public-owned corporations were set up with strong powers to buy and sell land, provide infrastructure, utilities and housing. Crucially, they were able to purchase land at existing use values. 54
The New Towns model emerged from Ebenezer Howard’s proposals for the garden city, in which the development corporation retains ownership of the land and rents property to lease holders. The upfront provision of infrastructure is provided by borrowing against future revenues, and once the development is complete, rents go into a sinking fund. The sinking fund is first used to repay loans, and is then recycled into the community as they see fit, providing a long-term income stream for the provision of housing and community facilities.55
Case study Milton Keynes Development Company
In purchasing public land assets from national agencies, Milton Keynes recognised the value of local authority held land. This has enabled the city to benefit from uplift in land values and deliver housing more effectively.
In 2008, between 20 and 25 per cent of the HCA’s assets by value were located in Milton Keynes. The city set up the wholly council-owned Milton Keynes Development Company in order to buy back the land. Acting at arm’s length to the council, the Company was able to operate on commercial principles. The city used this to secure £32 million of borrowing against HCA and other government funds such as the New Homes Bonus. Although separate from the council, half the board is appointed by Milton Keynes Council, who ensure that the priority is development quality rather than the selling of land for the highest price.56
Case study Ørestad, Copenhagen: using public assets to fund infrastructure
Ørestad, a large urban extension to Copenhagen, demonstrates how cities can use their own land assets to deliver major infrastructure, making land more viable for developers.
In 2000, a new bridge was built which connected Copenhagen to Malmö in Sweden. Leading up to this, the city identified the area between the city and the new bridge as suitable for high density housing. The Ørestad Development Corporation, created in 1992 as a joint venture between central and municipal government57, masterplanned the area and provided the infrastructure, including the new Copenhagen Metro, before selling plots to private developer partners in phases. The first two phases of the Metro were funded through 30-year government loans, and the increased land values achieved by its construction allowed the city to recoup the costs on sale and repay the loans, while the provision of infrastructure de-risked the site for private developers. 58
The captured finance eventually proved insufficient to pay for the whole of the Metro, with a €1.6 billion shortfall paid for through additional taxes, and an extended payback period.59 Even though the city regards Ørestad a success, the example demonstrates some of the long-term risks of Tax Increment Finance mechanisms.
Case study CPO powers fit for purpose: France, Netherlands and Germany
Many development sites in the UK on brownfield land are hampered by fragmented land ownership, which delays land assembly. Delays can also be due to ‘hope value’, particularly on greenfield sites, where landowners hold out from selling at market value in lieu of a possible use class change, as significant value is gained from a change to residential use. Current CPO powers do not sufficiently address either delay. Furthermore, the city must also make individual cases with each landowner and much of the land value uplift goes to the existing landowner rather than the local authority buying the land.60
In the Netherlands, France and Germany, local authorities have a set of tools for land assembly which allows them to purchase land quickly at existing use values. The German Umlegung, for example, allows cities to assemble land from fragmented owners for new infrastructure. French pre-emption rights, meanwhile, give the local authority priority in buying land where it is required for public needs. Key to their successful land assembly is the common use of CPO powers, which are efficient and allow land to be acquired at existing use values. In Germany some of the uplift in value is shared with landowners in the form of shares in the future development, with the majority going to the city for further investment.61
Although some cities, such as Liverpool for the Anfield Project62 and Croydon Council63, are using CPO for land assembly, the UK does not currently use CPO powers to their full potential. The Urban Task Force reported in 1999 that the reluctance of cities to use their CPO powers were a result of its “complex bureaucracy, the loss of land value, but also a lack of skills and confidence”64 and this is still relevant in 2014. The CPO process can take 18 months, much longer than international comparisons. The delays come from the need for confirmation from a government minister who must ensure that the powers are used for their proper purpose, often involving a formal inquiry.65
Case study Paleiskwartier, ‘s-Hertogenbosch, Netherlands
The creation of Paleiskwartier – a new neighbourhood in the Dutch town of ‘s-Hertogenbosch – was enabled by proactive land assembly, which demonstrates the benefits of streamlined land assembly tools.
The Dutch active land policy – similar to the New Towns model – enables local authorities to buy land at existing use value. They then invest in infrastructure and services, subdivide the serviced land into plots, and sell them to house builders after which they can re-invest the profits. 66
In Paleiskwartier, the city assembled the land before selling it onto a public private partnership for development. The efficiency of Dutch tools of pre-emption and CPO meant that these could be used as bargaining tools to buy land from landowners. One site was bought from a building company in exchange for a building claim; another was bought by threatening the landowner, a developer, with CPO. These voluntary modes of land assembly are made possible and retain value for the municipality through the threat of compulsory purchase.67
Case study Strategically releasing green belt: Cambridge and Cheshire East
Re-designating the green belt is politically fraught. This is because of the assumptions made by local communities and voters that all green belt land is of high quality and that building on any green belt land would undermine the benefits of containment, access and green space that the policy is known for. However there are ways of ensuring that areas of green belt with the highest value to the public are protected whilst providing land for homes on areas with less value.
One example is green belt swaps, a policy supported by Government.68 Under this approach, green belt land is released for development on the basis that an equivalent area is protected elsewhere.
Green belt swaps were a scheme originally proposed by Cambridge Futures, a pro-development collaboration between business leaders, politicians, government officers, professionals and academics which in 2000 provided a series of options for how to manage growth in the Cambridge area.69 Cambridge has the third least affordable housing in the UK (see Figure 1). The demand for housing has resulted in development ‘leapfrogging’ the green belt, resulting in – by 2000 – 40,000 daily commutes over it.70 Attempting to meet this need and build homes closer to the city, the city council released 215 hectares of green belt land through the 2006 local plan,71 and the city council and South Cambridgeshire released a further 272 hectares between 2006 and 2013.72
However, the swap element of the approach has not been adopted.73 Attempts to extend the green belt around Waterbeach Village were rejected by the Planning Inspectorate.74 It is also unlikely to be present in the next local plan.45 However, the actions of Cambridge in strategically releasing a section of the green belt following a rigorous consultation and evaluation process, demonstrate an alternative to the piecemeal ‘nibbling’ that cities are often accused of.
Cheshire East also proposed green belt swaps in its draft local plan. The plan proposes the release of 80 hectares of green belt land for a new community, as well as the designation of a new green belt area around a different historic town, preserving the openness that contributes to local character.76
The release of green belt land, if approved, will enable a new settlement at Handforth East, which will allow the council to deliver infrastructure and facilities that would be impossible with numerous small scale developments.77
The proposals for a green belt swap came following a strategic Green Belt Assessment which, as in Cambridge, judged the value of green belt land according to its functions, and identified areas that would be appropriate for development. 78
Case study Communities allocating land for homes and parks – Leipzig-Halle green ring
An alternative designation that protects well used green space while releasing land for housing is the Green Ring. In the 1990s, Leipzig in Germany needed new homes but was at risk of urban sprawl. The green ring initiative was established in 1996 to identify poorly kept sites around the city which it strategically developed for homes or enhanced for high quality recreational spaces. It allows for strategic housing development on some land while protecting and improving other ‘green’ areas.
Under the programme, partners collectively agree on housing or environmental improvements in specific areas.79 In Leipzig, fourteen municipalities, two rural districts and various other organisations, firms and individuals coordinate the programme, ensuring stability and a balance of priorities across a number of interest groups.80 By engaging different parties in allocating under-used land for housing, amenities and environmental improvements, development is more likely to be supported.
3. Working with neighbouring authorities to meet demand
The housing markets of Britain’s most successful city economies extend far beyond the city boundary. Around half of urban workers live and work in different local authorities.81 And it is often in these neighbouring authorities where the opportunities to deliver new homes exists.
In many instances neighbouring authorities are, often rationally, unwilling to meet this spill over demand for housing. Addressing this reluctance is of vital importance. Where this doesn’t happen through shared interest, national interventions to help incentivise or even enforce agreements will be needed.
For cities to get the housing they need, it is important for them to work strategically across their borders, reflecting where people travel in to work and their true economic area. In the UK there is no longer any strategic planning above the local level, except for LEPs, whose priority is economic development. As it stands, individual local planning authorities allocate a certain volume of housing according to SHMA forecasts which can underestimate the spillover housing required from neighbouring authorities.
While the ‘duty to co-operate’ calls for cross-boundary co-operation, it is too weak as it does little to support negotiations without an existing shared vision.82 The Lyons review has called for a ‘right to grow’, in which the planning inspectorate is able to mediate between local councils to deliver new housing across boundaries.83 However the power that this or other policies have will rely on the incentives being used and being strong enough.
Planning for housing at the travel to work (city-region) level would allow for a strategic view on how to develop homes that is aligned with economic growth patterns. This could be combined with incentives that cover the localised costs of infrastructure and services associated with building new homes.
As it stands, some local authorities are collaborating to reflect their house-building needs. Where others are failing to meet their collective housing needs under the duty to co-operate, central government could consider a firmer incentive-led approach (as in France), or nationally allocating housing targets to areas, where upon specific sites are decided locally (as in the Netherlands).
The following case studies illustrate how cities in the UK and internationally are working with their neighbouring authorities:
- Cambridge and Oxford
- Montpellier, France
- VINEX, Netherlands
Case study The duty to co-operate is not enough: contrasting Cambridge and Oxford
Some cities have better relations with their neighbouring authorities than others. Cambridge and Oxford are of comparable size, history and character, with tightly bounded centres, development that has ‘leapfrogged’ the green belt,84 and some of the least affordable housing in the UK. However, while Cambridge is working closely with its neighbours, Oxford’s relationships are less successful.
Cambridge’s ability to deliver housing changed in the mid-2000s with the establishment of the Cambridge sub-regional housing board, supported by Cambridge Futures. This collaborative approach (including the legacy of Cambridge Futures) resulted in a consensus on the need to both increase the density in the city and expand through transport-oriented urban extensions.85 The city and its neighbouring authorities now strategically plan for housing together, including the recent Market Needs Assessment which assessed green belt land, supplying a pipeline of sites across the sub-region. They are assisted by various coordinating authorities: the Joint Development Control Committees allows Cambridge City Council, South Cambridgeshire District Council and Cambridgeshire County Council to make joint decisions on planning applications.86 Additionally, the non-statutory Cambridgeshire and Peterborough Joint Strategic Planning Unit coordinate on strategic plans.87
This cross-boundary co-operation will be enshrined in the next Local Plan, intended to be drawn up jointly with the city council, South Cambridgeshire District Council and the county council on transport matters.45 These measures demonstrate how the councils moved towards agreement that growth could only be achieved by joint working, and moved beyond the weak duty to co-operate.89
In comparison, Oxford and its surrounding local authorities work less well together. Neighbouring authorities have frequently opposed the city wide Strategic Housing Market Assessment, despite recognising the need for more housing in the area.90 These repeated challenges concerned Oxford City Council’s selection of several sites outside the city for housing, on the grounds that there has been a lack of consultation.91 Meanwhile, Oxford has developed small pieces of urban land with significant local value to the public because of a lack of alternatives within the city. 92
This is affecting the city’s economy. The shortage of housing in Oxford was identified by local businesses as restraining recruitment, with expansion of the city essential to support their growth.93 The 2014 Oxford Futures report also highlighted the poor co-operation of local authorities in particular as a significant hindrance to economic growth.94
Case study Incentivising local authorities to form planning partnerships – Montpellier
Montpellier has had the largest population growth of any French city over the last 50 years.95 Through a national scheme that incentivises joint working with neighbouring authorities, it has developed and implemented a long-term plan for the city-region’s housing requirements.
Since the 1960s, France has been devolving powers to city-regions and empowering city mayors.96 In 1982, Montpellier formed a joined authority, initially limited to 14 communes and primarily focused on city-regional transport infrastructure.96
Through the 1990s, the Public Establishment for Intermunicipal Cooperation (EPCI)98 continued to strengthen regional governance structures with financial incentives to encourage municipalities to form city-region governments. In 2001 the Montpellier Agglomération was formed through the EPCI as a partnership of 31 communes led by the city’s Mayor. Although the Agglomération does not cover the entire city-region, it allows for strategic planning, a forum for co-operation and a means of delivering infrastructure for new development.
The Agglomération develops a 15 year spatial development plan (SCOT) for both local communes and the city-region as a whole. This covers housing and infrastructure, stipulating categories of density, growth areas and transport, and a long-term delivery plan for city growth.99
Prior to the Agglomération, local councils worked independently with little co-ordination. Now the Agglomération provides strategic leadership, and the SCOT provides a comprehensive plan and delivery framework to provide housing across the metropolitan area. Montpellier can now plan for growth with the appropriate infrastructure, using pre-emptive land assembly to coherently develop across bureaucratic boundaries.
Case study National strategic planning to enforce co-operation – VINEX, Netherlands
The Dutch VINEX policy, from a report issued in 1991 for the period 1995-2005, strategically designated sites for delivering housing nationally over the long-term. The policy has delivered compact neighbourhoods close to existing cities, in areas well-connected to services and jobs.
Neighbourhoods included inner-city brownfield sites, urban extensions and semi-independent satellite towns; but all were compact and well-connected to existing cities. 750,000 homes were built nationally during the VINEX period, 60 per cent of which were through the scheme. Most (61 per cent) have been on suburban sites just outside of the city.100 The development sites were chosen by national government through working groups of national, regional and municipal authorities.101 This three-tier system has been embedded in national spatial development since 1958 and enshrines cross-boundary co-operation into the planning process.
As in the UK, around 80 per cent of funding for local services in the Netherlands comes from central government, but in the Dutch context it is administered through central plans.102 Central government provides subsidies to the region to cover land acquisition, decontamination and public transport infrastructure costs. Regions then sign covenants with national government, which outline their spatial plans, but the local authorities implement the development with independent planning powers.103 This requires local authorities to work together under the regional authority.
Conflict over whether or not development would take place was taken out of local authority hands as strategic decisions were taken nationally. Furthermore, money for the local costs of development was allocated nationally and decisions made in working groups. Therefore there was a strong incentive to carry out the development and a strategic decision making process.104
VINEX was replaced in 2006 by the Nota Ruimte which is a more decentralised policy. Projects are still nationally co-ordinated, but there is more provincial decision-making in which local authorities are encouraged to bring about small-scale housing developments.104
Where visions or priorities do not align, national strategic planning can ensure that housing is delivered by backing local authorities with a clear plan and the tools to deliver homes where they are needed most.