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Capital Gains

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Dentons, together with URBED and Gerald Eve, were instructed by the Greater London Authority to look at international land assembly practices, to feed into recommendations on those conditions that would best support land assembly for house-building in London.  On 14 May the Deputy Mayor, James Murray, published ‘Capital Gains: A Better Land Assembly Model for London’ which brings together the research evidence and sets out 10 recommendations to support a shift in land assembly practice.

In London, the assembly of land is often seen as one of the main challenges to increasing build-out rates. The report identifies several barriers to land assembly in London, ranging from factors inherent in the sites, such as contamination, to factors associated with ownership, such as the extent of fragmentation and compensation expectations. The research evidence focussed on three European case studies – ZAC Claude Bernard in Paris, Freiburg in Germany and Amersfoort in The Netherlands – and a North American case study focussing on Toronto, Canada and Oregon, USA. The research identified policies, strategies and procedures that have been applied positively to facilitate land assembly and accelerate the pace of delivery. Those measures that we consider are the ‘best fit’ for London form the basis of the 10 recommendations.

A core recommendation is the introduction of a new planning designation termed ‘Land Assembly Zones’ (recommendation 1). These are strategic sites or areas where land assembly will be supported, through interventionist measures if required. The aim is to provide a focus and to encourage land owners to self-assemble, with a designation as a LAZ being accompanied by an ‘in principle’ resolution to exercise compulsory acquisition powers (recommendation 2). This would be a clear signal to landowners, and also an invitation to developers to bring forward proposals in the area.  The measures recognise that limited resources are available for public intervention and we expect the zones will be focused on those areas where housing density can be significantly increased if land is assembled into larger development parcels, where fragmented ownership is a real development constraint and, initially at least, in areas with good transport connections.  We recommend that land values are frozen for CPO compensation purposes on the date of designation, to crystallise the ‘hope element’ of the CPO compensation (recommendation 8).

The second core recommendation is the introduction of statutory land pooling. We recommend that the GLA prepare template documents to support the voluntary bringing together of land, drawing on the Dutch Building Rights model of sharing value uplift. In the longer term we recommend that this voluntary approach be underpinned by a new statutory mechanism (recommendation 7). We see that mechanism covering two scenarios: a private sector model, driven by landowners and a public-sector model led by the GLA or local authority.  In both scenarios the compensation paid to landowners would include part of the marriage value of the assembled site. Although not a formal recommendation in the body of the report we explore the possibility of “density bonuses” where land is masterplanned and assembled, potentially also delivering additional value and an incentive to self assemble.  We see this type of land pooling having application on all scales of site. We suggest the creation of a multi-disciplinary team to support boroughs and developers in tackling strategic and difficult sites, with the devolution of additional finance to support this (recommendation 10).

The report makes further recommendations regarding the acquisition of land, including allowing the confirmation of CPOs in the interests of ‘good planning’ ahead of planning consent being granted. Developers of large strategic sites need certainty at the start of a project that the entirety of the land will be available, even though it may not be built out for several years. Against that backdrop it is unrealistic to expect there to be a fully worked up scheme. We suggest that weight be given to the LAZ designation (which itself will be the subject of scrutiny) when considering whether the confirmation of the CPO is in the public interest (recommendation 4). In order to facilitate this we believe the power to confirm borough CPOs should be delegated to the GLA (recommendation 5).  This would assist in embedding ‘innovative’ approaches to the exercise of CPO powers. For example the introduction of a ‘use it or lose it’ approach to CPO land. If development on land which has been acquired compulsorily does not proceed the GLA or local authority should step in to hold that land, and any other land owned by the proposed developer, to ensure it is brought forward for development.