Planning - the value, incidence and impact of developer contributions: research

7. Summary of the Evidence, Implications and Conclusions

7.1 Introduction

In this chapter, we first bring together the evidence presented in the preceding chapters and their associated appendices, to integrate our findings from the range of methods employed. We then bring out the implications of these findings and present conclusions with respect to the topic of this report: the value, incidence and impact of developer contributions.

It is worth noting that many of the themes that have run through the survey, the case studies, the roundtables and the interviews are not new They have been discussed in many different ways at many different times – as is reflected in our literature review. This report however goes further by bringing the themes together in a systematic way; setting out additional evidence on how the system is working; and providing estimates of the value of developer contributions for both affordable housing and infrastructure over the last three years..

7.2 The Evidence

7.2.1 Policies and Plans

Our survey showed that over of 90% planning authorities (PAs) have policies with respect to developer contributions. Some apply across the PA others to specific areas. Some 80% use contributions on a regular basis and all but six authorities have used them at least once in last three years. Our survey results indicate greater use of developer contributions as proportions of all planning permissions than in earlier surveys. Eight percent of permissions had agreements over our survey period (2017-18 to 2019-20), with an average of 51 agreements per PA over the three years. There was a big range in these numbers, with seven PAs reporting fewer than five agreements over the three years but another six having 100 or more. The majority of PAs have policies embedded in local development plans (most adopted in the last four years) and in supplementary guidance. Affordable housing requirements are set out in local development plans whilst infrastructure needs are often also dealt with in supplementary guidance. Our case-study PAs tended to use an approach which assesses what is needed for each individual development to calculate and specify the contributions that are required. Developers generally support this approach because the system then gives certainty and transparency. Also, just under two thirds of PAs use standard charges for many requirements such as education.

Our case studies showed that developer contributions are shaped by the political priorities of planning authorities, the land values/house prices in their areas and existing infrastructure capacity. The four case-study PAs considered as part of this research, reflective of the range of urban morphologies across Scotland, have policy and guidance on developer contributions that have evolved over many years with changing priorities and markets. However, some PAs where developer contribution policy is much less established rely on other mechanisms particularly planning conditions. For example, three of the four case-study areas make extensive use of Section 75 Agreements (S75s) to obtain developer contributions, but the fourth principally uses planning conditions.

Our survey confirmed many PAs use planning conditions extensively, partly as a substitute for S75 agreements which may take time to be negotiated and completed before planning permission can be granted. Conditions impose implicit rather than explicit financing obligations on developers and (in the case of suspensive conditions) must be met before development commences. Many PAs said planning conditions were better than S75 for securing transport improvements made necessary by the development, especially because they avoid the need for negotiation and therefore save time.

Looking at types of agreement, planning authorities generally preferred to use S75 over S69, as it was thought that only S75 can 'run with the land' and therefore bind successors to title when development land is sold on by the original applicants for planning permission. In the case-study PAs, S75 is the main means of securing developer contributions and tends to be used on sites where education contributions/provision and/or affordable housing are required. On smaller and less complex sites, S69s were also used. This was confirmed by our survey, with PAs reporting that S69 was used for smaller contributions (often paid 'up front' by developers), while S75 was used for more complex negotiation and where agreements needed to 'run with the land'.

Most PAs have policies to seek new affordable homes through contributions, often seeking a 25% contribution on development sites; those that do not have these policies suggest that the subsidy is adequate for them to meet their affordable housing targets or that supporting economic activity must take priority or that viability problems preclude securing them through developer contributions. Some insist on which affordable housing provider developers should partner with and some specify tenure, and transfer prices of land and completed units. But more generally, while the contributions are negotiated between the PA and the developer, the amount that affordable housing providers pay for land or completed units is normally left to discussion between developers and providers.

The survey shows that PAs have given permission to around 33,000 new affordable dwellings over our three-year study period (and on a rising trend), of which a quarter to a third were to be delivered by developer contributions. The affordable housing delivered through developer contributions was mainly social and mid-market rent and contributions were mainly in the form of discounted land, but also discounted completed units and commuted payments. These are agreed almost wholly on residential development sites, with little coming from commercial developments.

Overall, only between 8% and 10% of all new homes permitted were new affordable homes to be delivered via developer contributions, suggesting that the 25 percent target was only being secured in a few PAs with high need for these homes and possibly only on larger sites. When we analysed the figures by house-price quartile, we found that PAs in the highest house-price quartile secured about 25%, a figure which rose over the three years we studied. However, in the PAs in the three lower quartiles, the percentages of affordable homes via developer contributions were in low single figures.

The survey also suggests there has been more integration of development plans with infrastructure plans than earlier studies examined in the literature review. Eight in ten PAs now have infrastructure action plans and two-thirds of these were costed and evolving over time. Half of all PAs also have an infrastructure plan. But whilst PAs state that they always involve other council departments when drawing up plans, they only sometimes involve infrastructure providers. On infrastructure, PAs seek contributions principally for schools, roads, open space and sporting facilities. Developer contributions were expected to contribute only a small amount to overall infrastructure needs in the year succeeding our survey, but PAs indicated that they expected these contributions to grow over the next decade so as to eventually cover over 40% percent of needs.

7.2.2 Practice

All those involved in affordable housing (PAs, developers and housing associations [HAs]) made it clear that what made developer contributions so important was access to land through on-site contributions – they saw it as the core issue. We also heard evidence that negotiations were between developers – who had to decide what could be afforded for the land – and planning authorities; HAs were not usually involved in detail. In general, there was agreement that there was reasonable clarity about affordable housing requirements (although there is also a problem about estimating housing needs as local authority boundaries did not coincide with housing markets and thus risk understating need). There was seen to be far less clarity about other infrastructure.

Our evidence identified several challenges to the integration of plans and infrastructure. These include establishing a logical timeline for needs, costs and expenditure commitment. In addition, some requirements can be difficult to justify, for example, formulae requiring contributions for education from housing that is mainly for single persons.

Our case studies showed that local authorities' action plans and those of infrastructure providers are not as well integrated as they could be. We heard, for example, about allocated sites having insufficient water infrastructure, which impacted on site viability.

Many of those we spoke to complained of inadequate planning and cooperation on infrastructure of all types, saying this was partly because government money was needed to make sub-regional and regional infrastructure plans work and City Deals only very partially addressed these needs. In addition, PAs' local development plans and supplementary guidance were often not well evidenced on infrastructure in relation to site allocations. This created serious problems for integrating land use with infrastructure providers' capital programmes and for case work on planning applications (including on windfall sites). We heard that local authorities need better databases and to make better use of GIS.

A different issue related to the scale and complexity of sites. Where there are multiple landowners and developers and many lawyers are involved, the negotiation process is particularly difficult. Equally, however, these are often large-scale sites where the amount potentially available depends on getting the details right.

PAs tend to see S75 as appropriate only for site-specific mitigation, such as improvements to local junctions and educational facilities. Many referred to 'creep' compared to earlier periods, with imposition of S75 requirements that were neither in adopted plans nor supplementary guidance. These extra demands – made comparatively late in the planning process - could compromise agreements made between developers and landowners based on the original specification. Participants said this added complexity and delay to discussions and negotiations. There was uncertainty about the legitimacy of using S75 agreements for some forms of infrastructure such as primary health care provision.

Some authorities have used S75 to secure contributions towards sub-regional infrastructure which deals with the needs of a wider area than just those related to the specific site being developed. Even where developers have been prepared to pay for this sub-regional infrastructure, some Reporters, on appeal in relation to other counts, have struck down such agreements.

Existing mechanisms including S75 were also felt to be ill suited to addressing the cumulative impact arises from series of small-scale developments, where each may individually have a limited impact but together, over time, their effects (particularly on the demand for transport infrastructure) are significant.

The case studies demonstrated the importance of negotiation, especially on complex sites where viability is weak or has weakened, or on sites where PAs especially want to encourage development, perhaps because they are important for future housing supply or employment. Our case-study authorities sometimes interpreted policy flexibly, particularly to support development viability. For example, some were willing to consider allowing developers to reduce their affordable housing requirement below 25% or to contribute to affordable tenures other than social housing, which is of course consistent with government guidance and should reflect housing needs.

Although negotiations (and re-negotiations) can cause delays, the case study evidence shows that they are by no means the only reasons for delay. In any case, there is a distinction between delays caused by the normal negotiation of developer contributions (which may be unavoidable), and those arising from strategic negotiation or a lack of PA capacity (which possibly are avoidable).

Because of the importance of negotiation (especially of S75 agreements), personal relationships are critical. PAs with greater resources, experience and skills, as well as a good knowledge of the development process, tended to have better relationships with developers/landowners, which facilitated reaching agreement. Similarly, developers and landowners who appreciated local politics and priorities found it easier to engage with PAs.

There was some evidence that Small and Medium Enterprise (SME) developers found the system more difficult than larger firms. The system's reliance on negotiations, and the consequent costs, disadvantaged smaller builders who have a different financing model from the major house builders. In particular, they must usually pay for the land upfront before any negotiation can take place and cannot spread risk by diversifying across a range of sites.

Not all developers accept PA policies without demur. Even where policy seemed clear and provided the basis for engagement by the development industry, some developers and their advisers have challenged underpinning evidence--citing, for example, changes in circumstances and timing considerations.

7.2.3 Delivery

The survey showed that only half of PAs have staff specifically tasked with monitoring the delivery of contributions. Over half of local authorities responding said they checked delivery of contributions through site visits while 20% had a digital alert system. PAs reported several other monitoring methods including liaison with building standards departments, requiring developers to provide sales statements and cross-checking council tax payments. Our survey responses also indicated how challenging this monitoring of contributions is. This was reflected in the difficulty many authorities had in answering questions about numbers of agreements and the value of contributions.

Nonetheless, nearly two-thirds of PAs said contributions were mostly delivered and a quarter that they were always delivered. Only a minority of agreements (just over 1 in 10) had been renegotiated, and in those cases this was mainly in relation to revised planning applications. About 80% of requests for renegotiations were granted. Renegotiations have not become more common. PAs said their key challenges were in addressing viability, seeking contributions to deal with cumulative developments, getting payments made when development was delayed and the fact that the market was not strong enough to support what they needed. Only a minority of PAs thought putting agreements in place was difficult (although a third did think so), although most thought the process did delay the granting of planning permission.

Our survey painted a picture of a system that was broadly working well, but the case studies, roundtables and interviews suggested a more complex and challenging landscape in which there was tension about both requirements and viability. In terms of affordable housing, those involved with developer contributions see the system as also one that works reasonably well – although it could always be improved. Contributions are well embedded and understood, and what was agreed was largely delivered, unless a site did not go ahead or there were major changes in the specification for the site. However, developer contributions did not work everywhere – notably on complex, brownfield sites and in low land-value areas.

Approximately 12,000 new affordable homes were completed over our three-year survey period, of which just under 5,000 were via developer contributions. Our evidence of what was delivered in that period indicated that the equivalent of 60% of what had been agreed via S75 etc. over the three years was delivered during those years. Our survey evidence from local authorities suggested that it took about two years for agreed affordable homes to be delivered. Where we had data from PAs on both agreed and delivered affordable housing via developer contributions, these percentages were as high as 80%. Half of the homes that were agreed were for social rent and 17% percent for intermediate rent; 61% were to be delivered via discounted land and almost all the rest via discounted completed dwellings.

The case-study evidence confirms the survey findings that developers in areas with higher land values can and do contribute more affordable housing. Variations in market conditions explain differences between PAs in what is sought, what can be agreed and what is ultimately delivered.

Our evidence thus shows that securing affordable housing through developer contributions is relatively straightforward in high-value areas because of land values, policy clarity and (generally) consistency in application, plus the availability of grants. Market conditions in some PAs mean they can get more than the national target of 25%. In other areas, grants are high enough to avoid the need for S75 contributions, but these are often insufficient on brownfield sites, notwithstanding the flexibility that enables higher grants to meet such costs. Grants for affordable homes are important to delivery, but the grants regime is separate from the system for securing developer contributions, with benchmark grant rates varying little across the country. This generates the risk that grants may in part be substituting for contributions which results in land not bearing the full cost. This can arise when the combination of grants and debt financed by rents enables providers to pay a sum for land or completed homes above that which developers would be willing to accept. In these cases, grant might be better focused on helping to fund provision where land values are inadequate or development costs are high. Some PAs did not seek developer contributions towards affordable homes because they had other priorities, especially in terms of developing brownfield sites and other areas needing regeneration and increased economic activity.

The most effective way of using developer contributions for affordable housing was seen to be through the provision of on-site serviced land, which was normally transferred to a housing provider (ie a housing association or council) at nil price, although sometimes with a small payment. Alternatively, the dwellings might be built by the developer and the affordable housing transferred as completed units at an agreed price. Without this opportunity to access cheap land, housing providers felt they would be unable to find suitable land at acceptable prices, especially in higher value areas.

Developers may be required to contribute not only to affordable housing but also to various types of infrastructure. We found no evidence of trade-offs between the two categories: affordable housing requirements were generally clearly specified, and any infrastructure requirement would not result in less affordable housing being provided.

The survey indicated that renegotiations were rare, that reaching agreement generally caused little difficulty and that most agreements were delivered. However, much of our other evidence suggested that getting agreements and contributions on infrastructure was more problematic than securing affordable homes. This may in part be because the survey covers all PAs, while evidence from the case studies, roundtables and interviews was more specific. Further, 'creep' may bring in additional requirements and increases complexity and negotiation.

Renegotiations can be caused by market changes, so that what was once possible in some areas became no longer possible. Contributions are normally paid out on a 'drip of sales' basis, so developers could face difficulties meeting agreed payments when market conditions changed; this could cause difficulties where PAs had already committed to providing, say, a new school. As a result, some PAs are extending their use of forward funding, while others are exploring new front funding mechanisms. However, more general constraints on local government finance limit their capacity to use such mechanisms.

Some developers (especially in high value areas with buoyant markets) wanted to reach agreement as quickly as possible, even if that meant accepting higher contributions, so as to get on site faster. But in all cases, they wanted 'certainty' and 'no surprises' so the land value could be adjusted accordingly.

Despite the occasional problems of renegotiations leading to lower contributions, PAs responding to our survey said that they were optimistic that contributions would cover more infrastructure needs in future (often considerably more) than they do now. However, we have seen no clear evidence of successful planning and implementation to secure those higher aspirations up to now – except in those areas with both good cross-boundary collaboration between PAs and high land values.

There was general agreement that contributions were basically paid by the landowner provided there was clarity about the required affordable homes and/or infrastructure in local development plans and guidance. If plans were unclear, it made it more difficult for developers to structure their estimates of what to pay for land.

Where there is policy clarity and consistency in its implementation and a limited number of 'players', the evidence suggests that agreements are readily reached by the parties involved, but when the market changes and where there are many parties this can be much more difficult.

Our research focused on the decisions taken by planning authorities and developers. Equally important, but not covered as extensively in this study, are the questions of how landowners decide when to sell; how they assess how much their land is worth; and whether these vary by landowner type. Our evidence does show that residual values were generally far above current use prices for agriculture.

7.3 The Value of Developer Contributions

The available data made it possible to estimate the value of contributions to the provision of new affordable housing with reasonable confidence. However, it was more difficult to do so for contributions to infrastructure with the exception of direct financial payments made by developers. We were able to make an estimate of the proportion of land value that was 'captured' for developer contributions to affordable housing as we had enough information to estimate all these latter contributions. We could not estimate the proportion of land value captured from contributions to infrastructure as we only had limited information on these contributions.

Developers contributed to new affordable housing in four ways: (i) the sale of serviced land to housing associations and other registered providers; (ii) the sale of completed homes for social rented and mid-market housing; (iii) the sale of market homes to homeowners at a discount; and (iv) commuted payments where developers made direct financial payments that local authorities could use to secure affordable housing in other ways and on other sites.

Our estimates suggest that developers agreed in 2019-20 to contribute just over £300m in land, completed units and discounted market homes through developer contributions and that, in addition, small sums were agreed (and delivered) in commuted payments.

A significant proportion (40% plus) of each type of contribution was agreed by just five local authorities (all in the central belt of Scotland) and in these authorities we estimated that 30% of the market land value for housing was captured for these affordable housing contributions. These are also the authorities where 25% targets were generally being agreed. In other authorities achieving such targets would mean securing very much higher proportions of land value. What was achieved was therefore much more limited either to maintain viability or because affordable housing needs were much lower.

We estimated that local authorities also agreed with developers that they would make financial payments towards infrastructure of just under £180m in 2019-20 and that in the same year they received just under £190m in such payments (from agreements made in all preceding years) towards the provision of infrastructure.

Taking these two estimates (for affordable housing and infrastructure) together suggests that nearly £500m worth of contributions were agreed in 2019-20. On the top of that total there will have been other contributions specifically through the provision of land for infrastructure and in-kind contributions (e.g. of a completed building such as a community hall or a new school) but we are unable to make estimates of such contributions.

Taking account of the elements that cannot be included which are included in the English figures our estimate of £500m is in the same ballpark per head of population as the total of £7bn agreed in England in 2018-19 from all developer contributions - suggesting that a fairly similar system generates fairly similar results.

7.4 Implications

7.4.1 Are contributions an acceptable approach?

The contribution approach is clearly acceptable to PAs; only two authorities did not have formal policies, and all but three had these policies included in their development plan. Moreover, among those who had formal polices all but one had used the contribution system in the last three years.

The contributions approach was also acceptable to developers, although they had concerns about complexity, uncertainty and delays.

While they also accepted the approach, infrastructure providers were the least comfortable with it. This was partly because they had no direct involvement in developing the plans, but more generally because their priorities were different. Their focus was often on sub-regional provision or meeting the cumulative impact of several developments – both of which make the system more complex.

More generally, after many (often mentioned as fifteen plus) years of professional experience of developer contributions most parties felt that the approach was fully embedded. There were however some systemic concerns (discussed below). It was also felt that practice often differed between authorities and consistent good practice could improve outcomes and lower costs of negotiation.

7.4.2 Are contributions easy to negotiate?

Affordable housing appeared to be far more straightforward than infrastructure to negotiate, in part because of the government 25% guidance and because of the Scottish Government commitment to affordable housing delivery through the Affordable Housing Supply Programme. It is most difficult in some rural areas, where on-site may not be appropriate. However, the most fundamental issue is that of viability. In low-priced areas, especially if the site requires some remediation, there may simply not be enough land value to make negotiations worthwhile. In these circumstances affordable housing will only be delivered if the subsidy available makes it viable.

The issues around infrastructure vary depending on the type of infrastructure required. In some cases, notably education, a formula makes it relatively easy to negotiate subject to viability. More generally, contributions made directly to authorities rather than ultimately to third parties appear to be easier to agree.

Where there was no formulaic approach, and those who would ultimately use the funding were not directly involved in negotiations, there were more obvious problems. A particular issue was seen to be that of 'scope creep' – that is, expansion of the types of infrastructure contribution sought (e.g. health services and sub-regional requirements). There were similar 'creep' concerns about additional requirements not included in the plan or supplementary guidance and a feeling that some PAs were 'pushing boundaries'.

In higher priced areas, where developers wanted to get on site as soon as possible, negotiations were generally easier. In cases involving accumulating funding and uncertainty about timing, the negotiations were particularly problematic.

7.4.3 Are negotiations successful?

The matrix below (Table 10) sets out some of the site-specific reasons why success in achieving developer contributions might vary. It sets out the researchers' assessment of the ease or difficulty of reaching agreements on contributions based on all the evidence presented in this report. At one extreme, small simple sites with one developer and a clear policy framework should be almost automatic. But the greater the number of stakeholders and requirements, especially with respect to infrastructure, the wider the range of uses for contributions, and the longer the development timescale the more difficult negotiations may become.

Table 10. Site attributes and ease of negotiation

	One developer	Multiple developers	Site specific*	Sub-regional/ cumulative	Local plan Clear	Affordable housing need clear
Large site	2	3 - 4	1	4	2	1 – 2
Small site	1	3 -4	1	4 - 5	1	2
High house prices	1	2	1	3	1	1
Low house prices	2	4	2 - 4	4 - 5	2 – 5	3 – 5
Greenfield	1	2	1	3	1-2	1 -2
Brownfield	2 – 3	4	2-5	4 -5	2- 3	2-5

Scale: 1 = Easy; 2 = OK; 3 = Hard; 4 = Very hard; 5 = Nearly impossible
*Depends on viability.

In general, success relates to the ease of obtaining contributions – which is partly about the clarity of national policy and of local arrangements (including political attitudes); partly about experience of negotiation; and significantly about how much potential there is within the site's land value.

7.4.4 Are contributions delivered?

The evidence suggested that the majority of contributions were delivered. For those that were not, there were three main reasons:

• The scheme did not go ahead;
• The scheme was modified, involving renegotiation of contributions; or
• The scheme was delayed or the infrastructure took longer to build so funds had to returned to the developer.

More generally there were concerns around the timing of infrastructure provision in relation to the delivery of funding and concerns when PAs had to frontload payments which could impose significant costs on authorities.

7.4.5 Are there adequate data?

There are considerable concerns about the availability of data that can enable effective monitoring of the developer contribution programme sometimes at PA level and particularly for central government. Each PA had its own collection methods and its own range of variables. Some aspects of the process were sometimes not covered and there was little consistency between authorities in their different approaches. While some of the issues that we encountered were a function of the pandemic others were simply because each PAs system had been put in piecemeal and for their own purposes. We note that the Planning (Scotland) Act 2019 contains powers (sections 35 and 36) that, once commenced, would require authorities to publish and report on planning obligations.

7.4.6 Are the contributions raised worth the effort?

The proportions of planning permissions on which contributions are agreed remains low, at around 7%, but is considerably higher than in earlier years.

The proportions of affordable housing to which contributions are made is now running at around 20%. Contributions are also important in broadening the mix of affordable homes particularly to affordable homeownership.

Perhaps more importantly, all those involved in providing affordable housing (PAs, developers and HAs) made it clear that what made contributions so important was access to land through on-site contributions. This is particularly important in high land value areas where much of the provision is obtained.

One research finding that stands out is that the value of contributions was heavily concentrated in just five PAs. This raises the question of whether the system is valued in other areas. However, the very general prevalence - and acceptance - of contributions suggests that across the country it is seen to be a worthwhile approach, because of its contribution to site specific mitigation.

There are perceived to be three fundamental types of contribution:

• site specific mitigation which is well addressed via contributions and must be done to make the development acceptable. If these costs cannot be covered because of viability issues the development should not go ahead;
• affordable housing, which again is generally accepted and implemented. However a number of authorities do not ask for affordable housing because they do not have the required evidence base; available subsidy is enough to deliver what is required; or requiring contributions may adversely affect economic activity; and
• broader based infrastructure contributions which again will depend on viability as well as the extent to which such contributions, eg towards sub regional requirements, are consistent with the legal and policy framework.

Our evidence suggests that even authorities that can achieve only the first type of contribution find the approach valuable.

7.4.7 Are there other means of achieving the same objectives?

Some authorities, although they may use contributions for some purposes, are more inclined to employ planning conditions both to achieve site-specific mitigation and also somewhat more broadly with respect to transport by making provision in kind such as improving safe access to a site.

While policy on planning conditions means that it not normally advisable to use planning conditions to specify financial matters per se to be a condition of a permission they do 'run with the land' and do, in the case of suspensive conditions, have to be met (for example by providing a road junction) before development can start (even if the land changes hands). In this context planning conditions are just as effective as S75. However, S75 sets out formal financial or in-kind arrangements directly and can also set revenue as well as capital obligations.

7.4.8 Is there adequate coordination/consultation?

The formal process of negotiation typically involves only the developer and the PA – and usually the planning department within the PA. Where what is being negotiated is straightforward, and those involved on both sides are experienced, this should work well. In some cases, there are early meetings between all relevant stakeholders. This is seen as highly desirable. Where this does not occur, stakeholders, including infrastructure providers and local-authority departments with a stake in the outcomes (notably housing departments), often feel that the outcomes would have been better if they had been involved at an earlier stage.

HAs also made it clear that the negotiations were between the developer (who had to decide what they could afford for the land) and the PA – and therefore the associations were not always involved in detail even where it would be helpful. Stakeholders suggested that internal protocols should be put in place to ensure consultation.

Similar issues were noted at a policy level. At the 'local' level participants in our roundtable and case studies wanted to see more liaison both within PAs to assist co-ordination of the spending of developer contributions and also between PAs and infrastructure providers particularly to secure more integration between provisions in Development Plans and infrastructure providers' capital programmes. Similarly some respondents thought that central government's determination of housing subsidy and available funds for infrastructure should take account of how far developer contributions could substitute for public funds and enable the latter to go further.

7.4.9 Who pays the contribution?

There was general agreement that the contribution is basically paid by the landowner if there was clarity about the ask. If there were less clarity, it was more likely that some of the contribution would come from other stakeholders – at the limit endangering viability.

What was far less clear was how landowners made decisions about what land price would be achievable, as in many areas that price would be significantly above the current use value. How much land may be held off the market in the expectation of higher values /changes in policy is unclear and was not a question for this research.

The relationships between subsidy, contributions and land values are not always clear and depends on the nature of the negotiation. One issue which appears to be of importance is the nature of the landowner, eg in rural areas where there are large landowners with very long-term perspectives.

Some commentators argued that the incidence of payment did not always fall on the landowner. This was especially the case when subsidy was involved: affordable housing subsidies could in effect benefit the landowner or the developer--or indeed enable more infrastructure to be built--dependent on the clarity of the system and the relative capacity of those involved to negotiate.

Where contributions do come out of land value, there is a maximum amount that can be taken in contributions of all types without affecting viability. We expected to hear that PAs accepted trade-offs between affordable housing and infrastructure within this envelope. However, some research participants suggested that the two types of contribution were sometimes negotiated entirely separately.

7.4.10 Do contributions work for infrastructure?

The data we were able to obtain on infrastructure contributions (and indeed more generally) were very limited, and PAs collect their data in authority specific ways. The limited availability of data within PAs restricted what we could say with confidence, notably about the amounts collected. However, many more general issues are very clear cut.

First, and fundamental to attitudes, PAs generally see S75 as for site specific mitigation, something that conforms to the original statutory and policy frameworks. They therefore tended to be far more comfortable using it for site specific requirements; local junctions; open space and educational facilities. Some were unclear whether other types of contribution, such as health care, fell within the remit of S75 contributions.

While many participants in the research suggested that using S75 for sub-regional or especially regional infrastructure was going too far the survey suggested that PAs have high aspirations to use developer contributions to fund more infrastructure in future. If this ambition is to be achieved there will need to be better planning greater coordination of funding sources and more integration of plans with those of infrastructure providers.

There is clearly tension between PAs and some infrastructure providers. This seems to relate mainly to what types of infrastructure should be regarded as eligible for developer contributions. However, it is also associated with lack of interaction between development and infrastructure planning and uncertainties particularly around the timescales for the collection of funds by the PA and their use by the providers.

One quite fundamental issue relates to the different interpretations among PAs, developers and infrastructure about what can legitimately be sought through contributions or unrealistic assumptions around Infrastructure First. Some assumed the latter meant that infrastructure should take priority over other uses for contributions; others that any development should not go ahead until the infrastructure was in place. Given much of the required funding does not come from contributions both of these interpretations would magnify uncertainties.

To summarise: almost everyone we spoke to implied that there was inadequate planning and cooperation in this context and that this was mainly because it required government money—not just developer contributions--to make sub-regional and regional infrastructure plans work. Some discussed whether private funding could be enabled to deal with both emerging requirements and backlogs arising from earlier developments.

7.4.11 What does everyone want?

What everyone was looking for was greater certainty both with respect to the requirements and to timing of delivery and payment. In particular, they wanted to streamline negotiation and ensure that all parties understood the costs and therefore the effect on land values.

The Scottish arrangements, with some well-defined targets, appear to be subject to less uncertainty than in England. Partly this reflected the extent to which most parties have been in it for the longer term and there were benefits to ensuring that arrangements agreed were comfortable for all parties to help continued collaboration.

Overall, everyone wanted more clarity and certainty. They also felt that contributions in the main were not an appropriate source of funding for most sub-regional and regional infrastructure. Equally they did not think there was enough available in developer contributions to fund such infrastructure unless other funding linked to clear-cut infrastructure plans was also in place.

They saw the way forward being more government funding in addition to City Deals, but also, given the current low interest rates, private institutional finance.

7.5 Conclusions; the Value, Impact and Incidence of Developer Contributions

7.5.1 Value

Our estimates are inherently based on partial evidence although importantly this includes high quality evidence from the five authorities that generate the largest amounts of revenue.

The data we were able to collect were enough to provide a reasonable estimate of the contributions agreed towards affordable housing at a minimum of £307m in 2019/20. Around 40% of these contributions came from the five largest contributing authorities and, under reasonable assumptions, this accounts for about 30% of the land value included in the developments within these five local authorities.

We had less information on infrastructure. However, the evidence on financial contributions was enough to make an estimate of this element at around £180m agreed in 2019/20 across Scotland as a whole.

Overall, therefore we estimate that identified developer contributions agreed totalled £486m. In addition, there were contributions that could not be identified from the available data. Overall, these figures are comparable to those collected in England. The proportion agreed for infrastructure is somewhat higher than achieved in England. Affordable housing was rather less probably in part because of the lack of subsidy in England when contributions are involved.

7.5.2 Impact

The major impact is that, for a relatively small but significant proportion of planning applications, funding was made available to address site specific mitigation of the impacts of developments and to support affordable housing. Contributions enabled significant numbers of additional affordable homes to be agreed as well as a broader range of affordable homes.

They have also made significant contributions to local needs with respect to education, transport open space and sporting and leisure amenities. However, they are less effective in addressing sub-regional and regional infrastructure needs.

7.5.3 Incidence

Developer contributions are used in all but two of the 34 PAs. Large scale contributions are limited mainly to high house price/high land value areas. But, contributions to mitigate site specific infrastructure impacts are almost universal. Affordable housing is also being agreed via developer contributions in around 75% of authorities.