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

12. Annex 5: Experiences and opinions of roundtable participants

12.1 The importance of developer contributions and mechanisms

All participants emphasised how important developer contributions are to their organisations, but that sometimes, planning conditions were a better means of securing outcomes and that there were also challenges especially the way the types of the infrastructure sought had grown in recent years, the difficulty of using them to secure sub-regional infrastructure, and the growing complexity of the system.

12.1.1 The importance of contributions

All participants from infrastructure and affordable housing providers, as well as professional advisers and local authorities, said that these were important mechanisms for getting financial and in kind contributions.

As someone from a representative body of house-builders said:

"The process may be cumbersome, but the basics are there. Development covers the infrastructure that is specifically needed for and related to the functioning of that development".

Another house-builder enlarged on this:

"It is a benefit for home-builders if they can tell their customers that they will be well served infrastructure and that the current community will benefit from that infrastructure. ……, if it is up front and clear, it allows them to calculate what it's going to cost in relation to a particular development"

A lawyer involved in developer contributions for three decades observed that:

"I have been working in planning over 30 years… and I think it is both important now and will be important in the future. More and more, local authorities, often driven by fiscal constraints as well as the novelty of some projects, are looking towards the planning system to make up the infrastructure gap by delivering money or having the developers undertake it themselves".

A planning consultant stressed that:

"Section 75 contributions are important for developers as a mechanism to demonstrate that they can address problems but at a site specific and local level. Developers are actually quite keen to pay money to address an issue and Section 75 provides them the legal mechanism to do this".

An affordable housing provider emphasised how:

"The importance of developer contributions in terms of land for housing associations cannot be overstated. In 2001 RSLs (SIC) were having difficulty finding land. Over the next few years, the affordable housing policy kicked in and this became the only way for RSLs to actually obtain land and build".

In a later interview another provider stressed how, over the previous 15 years, S75 had become more embedded, consistent and transparent

But as a local authority planning representative pointed out:

"About 5 local authorities don't use developer contributions because they saw it as prejudicial to their developments…... In growth areas where there is potential for development the use is common".

This geographical variation point was also stressed by a participant from a professional institute:

"…We often talk about Section 75s in the context of high demand and high land value areas, where there is an ability to lever in Section 75 agreements. But in some other parts of the country, Heads of planning are wary of using Section 75 because they are trying to attract development and it seems more of a burden than benefit".

A participant from a local authority also reinforced this geographical variation:

"There's a postcode lottery. Our authority has an ambition to have a compact and connected city form, which theoretically looks doable given the amount of derelict land we have. Generally, in [local authority] we ask for developer contributions when it is seriously connected to infrastructure deficiency like in [area] ".

A local authority planner from the same region of Scotland made similar points:

"[local authority] economy has suffered, industry moving out. We have a relatively weak economy and sizeable pockets of deprivation. Historically reasonable house prices, not much developer interest. …..We have taken the direction of investing in new builds to remedy this housing need. This takes pressure off the developers as we are funding these builds through Government help or through council rent (Tenants). So, we made a strategic decision to remove our affordable housing contributions, so we have no developer contributions policy in [local authority] which should attract big developers".

12.1.2 Planning conditions alternative mechanisms

As well as agreements under S75 and other relevant legislation, participants commented on and explained how planning conditions were also used to secure developer contributions to infrastructure.

A local authority planner explained why they were used:

"…. that is something that we developed in [name of authority] ; to have suspensive positive planning conditions. The Circular that covers this (Circular 3, 2012) says you should always try and negotiate through planning conditions rather than legal agreements. Some legal agreements take 3 years to resolve, not because the parties were at odds with each other, but because there were so many parties involved. Particularly on multipurpose sites".

Another local authority planner talked about the balance between agreements and conditions:

"We have used planning conditions particularly on sites where the reporter has been involved …….. For affordable housing we tend to use Section 75 as there is a financial contribution involved as well as legal questions about land. It does take longer (than planning conditions) and we are trying to look at how we can streamline this process".

A lawyer identified the basis of this choice between agreements and conditions:

"Planning conditions are regularly used by planning authorities, more so used for transport. Local authorities have a wide latitude to use conditions. Where PAs become uncomfortable is using conditions for delivery of contributions is money, as you are not supposed to use planning conditions to procure money".

A transport infrastructure participant explained when it wanted conditions used:

"we regularly request that planning conditions are applied which will deliver trunk road infrastructure i.e. junction improvements".

In a later interview the providers explained that they did not like the use of S48 Highways Act agreements to provide transport infrastructure as it did not 'run with the land' and therefore could not bind someone who subsequently bought the land and was completing the development They also had concerns about S75 as they had to rely on local authorities collecting the funding and ensuring the infrastructure was funded and/or provided – which providers we spoke to said became a problem if the funds were not used within five years as they believed developers could require the refunding of their contributions..

A local authority housing officer explained how the tax system also affected whether conditions are used:

"One issue regarding this choice is that where a council acquires a property using (planning conditions) , they will be required to pay LBTT additional dwelling supplement. If the council acquires a property using Section 75, they will not be required to pay this supplement".

12.1.3 Growth in the types of infrastructure required

Participants regularly referred to 'creep' where requirements were added to published lists (and formulae) for the infrastructure required for developments. These were needed to support new developments but had not been identified in plans although they were related to supporting the development of, for example, new health facilities. These extra demands compromised agreements developers had reached with landowners about what to pay for land. They explained how this added complexity and delay to discussions and negotiations.

A participant from a housing representative body spoke about the growth of these extra requirements:

"Health is an area that has started to come into policy now as well as practice. At first, we would ask on behalf of our members if this was an appropriate use of Section 75, since lots of healthcare is funded through tax and lots of practices are private businesses. But it has found its way into plans and will continue to be there now."

A participant from another representative body made the point that:

"What seems to happen more now is that whenever anything comes along which presents a cost burden to a local authority, there is pressure to look at whether development contributions are the answer to that cost burden. ….but it shows that there is possibility for movement in agreed sums which perhaps tests developers' faith in the system and can make the process slower".

A house-builders' representative made the point that:

"There are more and more items for which contributions are being sought. You lose in transaction costs through working out what all of those individual things cost what could have been gained through a more focussed approach. There is a creeping complexity in the system".

A volume housebuilder added that:

"'Creeping' is a good point, there is a mission creep in relation to some Section 75s, where local authorities are trying to make Section 75s do what they aren't supposed to. ... The planning system is often used as a 'catch all' for solving everything, which it cannot do".

Another housebuilder thought some of these extra demands were inappropriate:

"Traditionally, high level healthcare is a Scottish Government reserved matter. Further, GP practices are private businesses – why should developers provide a free doctors' surgery to a private practice?"

A lawyer advising private and public clients made a similar point:

"It would be interesting to ask what the material limits of the term 'infrastructure'. I have heard of some attempts to obtain revenue sums from developers as well as infrastructure itself i.e., if you are making a school, why not have the developer pay for the teachers as well as the infrastructure because they are necessary to the functioning of that infrastructure. Is it just built infrastructure that counts?"

A local authority officer explained the context for these extra requirements

"Looking at the broader context of why this 'creep' is happening, I think it often comes down to lack of finance on the side of local authorities. In [authority] we have just produced an open space strategy. The budgets for producing open space have been reduced over the years. At the same time, we have a robust arrangement for taking developer contributions for open space. The problem is that these contributions go towards a fund which is used to manage how we deliver".

A planning consultant stressed the needed for clarification of what could legitimately be funded by S75:

"I fear we will be editing Circular 3, 2012 every two years to add in surgeries, swimming pools etc. As a planning consultant, I feel we need to check back to 1) what are public goods that receive an income from council tax and 2) public funds raised once a house is on a plot and occupied by humans in the house. …. It's uncertain whether we are in a legitimate asset class which answers those paragraph 14 tests in the circular; "Fairly, reasonably, related in scale and kind to the development we're proposing"".

A consultant who was later interviewed thought that securing developer contributions for primary health care capital funding could be justified as large scale new development on greenfield and brownfield suburban locations brought additional patients into an area (just as they bought in additional school children). This therefore justified requiring developers to contribute to the costs of building new (or extended) GP surgeries (for example on a tariff basis per new dwelling as for education). However, the growing trend to integrate all health care provision makes this problematic in terms of the different funding mechanisms and the sub regional approach to provision.

Those involved in NHS estate planning described in later interviews how they increasingly looked towards developer contributions to secure land and also contributions to the funding of new primary care facilities. This was seen as an equally logical justification for developer contributions as was seeking those for new education and transport facilities because it was part of mitigating all the costs of providing the infrastructure needed for new developments. It was apparent that not all PAs recognized this and we heard that some prioritised seeking contributions towards the services that were provided by the PPAs themselves, such as education. It was also the case that policy in PA local plans was not as well developed as was the case for affordable housing and some other infrastructure and this caused challenges when negotiating contributions for new developments. There were also challenges in dealing with the long term additional primary care requirements of the cumulative impact of many small developments. There were different challenges for larger developments where the need had been agreed but there were problems in terms of the timing of payments in relation to the pace of the build out of new housing occasioning the new for some front funding. It was evident that policy and practice was evolving but that currently there was a mixed picture and an overall system lack of consistency both between PAs and between different Health Boards. Nonetheless, there was evidence that central government and the NHS wanted more co-ordination so that policy was clear in adopted plans.

12.1.4 Site mitigation of wider sub regional requirements?

Another challenge highlighted by all participants was the desire by local authorities to get contributions towards 'sub regional' infrastructure which went beyond supporting the specific development in question. A related challenge was demands to make contributions to the cumulative impact of several developments but where the development in question made only a limited impact itself.

A lawyer advising public and private clients made the point that:

"Local vs regional infrastructure: it is easy to work out the impacts of an education system and healthcare – but the link between the impact of a regional project like a travel network become harder to define. CIL has advantages over this".

A planning consultant agreed:

"Section 75 has its limitations and strengths; it does not cover regional projects, but …… it has been successful in providing funding. What needs to be discussed is how other laws/ policies are layered around Section 75".

A local authority planning officer explained these challenges for an authority

"The challenges from local members are quite significant, who want to know why the open spaces aren't being created in their area……. Developer contributions simply turn into a more general funding for the overall infrastructure plan. What I need to work out is how to make sure how we are responding to a precise development in the relevant and responsible way".

A participant representing infrastructure providers argued that:

"…what needs to be watched is that the developer contribution tail doesn't wag the wider planning needs dog. Because Section 75 is mainly housing driven, it might be called into question whether it is the right sort of legislation to use for 'places' as a whole and does it put the right sort of emphasis on what should be done in 'places'".

A planning consultant agreed that:

"For strategic infrastructure delivery, Section 75 is not the right piece of legislation. This can be seen in local authorities attempting to use Section 75 in incorrect contexts, which can lead to legal problems".

And a participant from a professional institute argued that:

"Section 75s are an important part of the planning system but don't meet all the needs. I think it is beneficial to look at the broader picture here; how can we provide infrastructure in a much more proactive way and what is the role of government in infrastructure".

A participant from a housing representative body explained how providing the wider subregional needs could undermine the local provision and:

"that authorities are having to pick and choose between a finite number of things to take from a development. …… The development might contribute in part to something that is needed more widely in the area, but the gap (in funding) might be in the funding for the existing community proportion".

12.1.5 Need for clarity in local plans and in contributions required

A number of participants also thought that some infrastructure needs were not always well justified in plans and guidance and this results in delays and renegotiations. Developers made it clear they had no objection to contributing to justifiable mitigations but needed clarity and certainty.

A participant from a house-building representative body explained that whilst there is certainty about the affordable housing element:

"…. with other contributions there is a lack of certainty up front; in local development plans there are no detailed costings of what infrastructure is required for individual allocations…... with Education and Transport contributions there is a lack of clarity about what is expected. The lack of clarity adds to the complexity around the use of Section 75s".

Another from a developer representative body pointed out that:

"At the moment it is hard to get the clarity up front at the plan stage because so much of that policy has not been finalised or comes in later at statutory guidance (which will be removed soon). The potential benefit of this is bringing the policy forward into the plan, which could help developers to provide more evidence of viability".

A volume house builder also emphasised that:

"councils are not prepared beforehand …. Affordable housing doesn't cause much of an issue. It is more complex projects like education which have more specific bottlenecks".

Another house builder explained that:

"No developers object to the principle of offsetting the impact of what we build. The issue comes with the level of money required and more recently I have heard …. of councils looking to increase what they set down in their statutory guidance because they think there will be a Brexit impact"

And another volume house builder also pointed out the need for clarity on what is expected:

"To operate the developer contributions system a bit better; we need a clear vision of what we think the impact of the development is and what we think the solution is to mitigate that impact. This is often not done in time to deal with planning applications; the planning application is delayed while the impact of the development is worked out between the developers and the council".

And as one local authority planner pointed out there is much complexity on large sites where several developers and landowners are involved

"I have experience of a master plan site where there were 3 or 4 landowners and 6000 homes involved. …… A lot of the work was in the hands of accountants and lawyers,,,,,,,.. Some cases involved the landowners wanting to delay the Section 75 because they would have been taxed if it had gone ahead".

A planning consultant made the point that this lack of clarity can lead to much renegotiation

"Developer contribution is a key part of a toolbox. The configuration of infrastructure might change, so some of the demands around that might change in turn this may affect developer contributions and their relevance. …. Re-negotiation has been a part of that over the last few years".

Another planning consultant also commented on the need for certainty:

"The flexibility of financial agreements is also a problem; either local authorities accepting less than they had originally agreed or asking for all the money up front from the developer in order to actually build the project".

A local authority housing officer also stressed the same point:

"As an approach, the system is uncertain for planning authorities, housing authorities and developers. It encourages 'gaming'; which is an entirely legitimate response as outcomes can be influenced by certain behaviours. On balance, it is a process that is unnecessarily bureaucratic, it has been developed in an ad hoc manner, and it would help all parties if there was a clearer process for extracting value from developments".

12.2 Relationships between local plans and infrastructure requirements/plans

12.2.1 Coordinating development and infrastructure planning

A transport infrastructure provider stressed the importance of coordinating local authorities' and providers' plans:

"Where development is located is a key driver for travel demands. …In the future, particularly in transport contexts, we will be looking for the national transport strategy, sustainable hierarchy and also investment hierarchies to be much more embedded in the spatial strategy decision making process……I hope that with the national planning framework and the national transport strategy there will be a change in the type of developer investment as well as choosing development sites which have existing capacity".

A volume house-builder stressed how important this integration was for the business:

"The issue is that who takes the initiative to drive this. The last thing we want is to waste public money on a white elephant, so we need certainty. …… The bit that is missing from the infrastructure first approach is the development agency that is prepared to take that gamble, as if it is left to infrastructure providers it will not get done".

A planning consultant reinforced the problems of this lack of integration:

"My experience is that is usually lacking and quite acutely so. The way local planning usually works is developers or landowners promote sites which is often a speculative exercise and infrastructure requirements are not assessed at that preliminary point. A solution to this might be…. [to] force developers and local authorities to be more engaged at early stage. PA's evidence base is often poor. …., PAs are often trying to use Section 75 for something it isn't meant for which means that it does unravel".

Another planning consultant also commented on how important better integration was for large scale development:

"We need to look closer at the developments we're proposing when it is big scale green field release and how that might impact on the nearby city and its brown field quest to still deliver. ….. I think we need a third part of planning activity....We need to bring in more of the experts in funding, financing, quantity surveying, cost assessment, civil engineering and development appraisal in order to action this".

Infrastructure providers agreed with these views. From a water provider's perspective:

"We are well involved and engaged in that process, but it does not inform our investment process. From an infrastructure perspective we need certainty, and the development plan does not give us this. There are around 13,000 sites in local development plans, some of which will roll on indefinitely. The certainty we need to invest is not there. This can mean long waits for infrastructure to actually be built".

And from a transport provider's perspective:

"Infrastructure first is an important ambition but actually how to deliver it still needs to worked out. …….. with regard to the alignment between PA plans and their business plans. In [the participant's organisation] there has never been any meaningful alignment between our investment programmes just because the cycles of plan making do not align with government funding".

In a later interview the transport provider stressed the need for local plans to both underpin a sustainable approach to transport (for example in terms of the locations of new development) and to provide clarity about what was required of developer contributions. Whilst this had been improving over the years, it still provided challenges for them when commenting on planning applications for new developments where there needed to be site mitigations with respect to transport including ensuring improvements to road safety. In addition, the provider had major problems when addressing the transport implications of cumulative developments and therefore the mitigations that could be secured from developers. This provided a 'first mover' advantage to the developers of initial small phases of what might later become a larger development in total. This was also a problem with the 'infrastructure first' approach as it was unclear how the required works could be funded before development started. Overall, the provider did not secure much from developer contributions to match its own capital funding

A participant from a professional institute noted that:

"[name of the professional institute] is supportive of the infrastructure first approach, but we recognise the challenge of bringing something like that in. The relationship between local plans and infrastructure plans is where we see some of the biggest challenges. … This ought to be about place-making......with the goal of achieving the sorts sustainable communities we are looking for in our development plans".

A participant from another professional institute reminded the roundtable that:

"Each local development plan has to have an action programme along with it. This is one of the weaknesses of the system because there is such a large variation in the rigour that is applied to each of these action plans. …. The development planning system is changing and will continue to change. The move to 10-year plans might make the prediction element much more difficult and what is the role of action plans/ programmes with this move?"

This point about planning reforms was reinforced by a local authority planner:

"Going forward with the planning reform agenda we will have local plans and not supplementary plans. So, the focus of what is coming through in the Section 75 will be rooted in a slimmed down adopted local development plan which will make it harder for PAs. These reforms are supposed to last 10 years, which might mean tweaks are needed down the line".

A local authority participant emphasised the need for a more corporate view:

"I think it is important that we view the delivery programme as more of a corporate plan, one which will shape the entire city or area it affects. Using the action programme in this way pushes us to take the plan more seriously….. [as] the autonomy of each council part can cause disruption to the overall delivery plan".

A house-builder suggested a national plan as a better way:

"On land value capture, it is often a very thin margin for developers as the average price of each plot can be very high if we take into account the cost of ground conditions and the lower revenue point. Given this, it might make more sense to have a national plan on infrastructure, rather than leaving it to the nuances of local authorities and communities, who end up vying for new community centre or doctor's surgery".

A developer noted the need for all involved to think of how most efficiently to fund the infrastructure required

"There are institutional investors willing to invest in infrastructure at a far more reasonable rate than even Public Works Loan Board money, for a longer duration as well. That sense of team, where developers, contractors, providers, investors, local authorities and planners can get around a table and working out what is required and then finding the most cost-effective way of doing it".

A participant representing local authority planners also suggested a different approach

"Planners should become deliverers. Has any work been done on the City Growth Deals and their finance? At [name of organisation] we have been working closely with Scottish Government about what are the asks for NPF4. One of the clear asks that has come up is for it to be properly funded across all the sectors, including Government departments, where most of the infrastructure funding is. … So, we are expecting NPF4 to come with a full capital plan, particularly for national projects".

Another local authority participant also suggested new ways of doing things but was frustrated by the difficulty of working with infrastructure providers

"In [name of local authority] we have been having conversations with infrastructure providers. I took this opportunity to present our land supply and our spatial strategy on using vacant and derelict land in hope of getting some useful information from them as well as collaborate with them. Their reaction was simply to say that 'it is fine'. I was hoping for something a bit more nuanced from them, developing an understanding of phasing".

A local authority planner also talked about the challenges of getting all providers collaborating:

"It is one thing for a council to try and develop an infrastructure plan, all the parts of the infrastructure need to be linked up. The systems which should be in place to create these links are very unsophisticated, and it is hard to share plans between different projects which may well affect each other. We made some attempts to get the utility providers more involved and trying to look at longer term plans. I was surprised at how unsophisticated some of their forward planning processes are as well as the information and how it is held".

12.2.2 Sub-regional infrastructure

A planner from another local authority spoke of the difficulty of using the system to deal with sub-regional infrastructure

"[name of local authority] has had experience of trying to do infrastructure planning and it has been incredibly testing…... Everything we have at the moment in terms of our approach to infrastructure planning is focussed on a site level basis. We are asking the question of what the specific site should do and not asking what the city needs".

A developer talked about the role that house-builders and others could play in sub regional infrastructure and help 'unlock' sites:

"From a developer's point of view, a sense of understanding the long-term plan is important. Knowing what the infrastructure plan is longer term (city, region) and then understanding what the contributions could be to unlock the value of these sites. Infrastructure first approach, then developments contribute back to the cost of the infrastructure".

A participant from a house-building representative body noted the key role local authorities were already playing and said that:

"Some local authorities are making significant up-front investments and are unlocking new development. There is good practice out there".

A local authority participant reported that local authorities were co-operating on this:

"Hopefully regional spatial strategies will help in terms of that coordination. The fact that they are not statutory gives them a little bit more leeway for creative thinking on these things…. creating some traction outside of planning circles with transport providers and other departments like this".

A local authority planner talked about how growth deals were helping with this:

"The growth deals in some cases are providing a catalyst towards unlocking land and enabling housing development. In our case this is getting done across the three authorities that make up [area] so that there isn't a barrier as you move across boundaries. We ought to invest in infrastructure up front. But this comes down to the risk appetite – how do you put that money up front when you don't have a developer set up and willing to action the plan?"

A housebuilder observed, however, that general taxation was key to funding as land value could not fund everything:

"The principle of development mitigating any impact should be the key for Section 75 contributions. But we need to realistic about where the funding for this infrastructure spending is going to come from…. so long-term infrastructure requirements need for a modern economy over many years can't be funded solely off the land value. At the city region level, it makes more sense for infrastructure to be funded by general taxation while the site-specific stuff is dealt with by the planning system".

12.3 Affordable housing through developer contributions

Participants thought developer contributions were a very important mechanism for delivering new affordable housing, but not everywhere especially on brownfield sites and in low land-value areas. Agreement on securing affordable housing is relatively straightforward because of policy clarity, plus availability of grants. Although the affordable housing percentage is much the same everywhere, local authorities may drop the requirement or reduce the percentage if they are keen to get some development.

12.3.1 Meeting targets

Participants stressed that, although local authority targets varied, they were generally consistently applied and mainly achieved and provided 'on site'.

A housing association participant explained how they worked with developers to achieve targets

"Generally, we buy serviced land at nil transfer and build out ourselves, perhaps with back to back deals with developers; less often we buy completed units, mainly when it is a small site; the price we pay depends on level of grant from government and what debt we can service from rents".

Another housing association representative interviewed later in the research explained that most local authorities do have clear statements of what affordable housing will be required (normally as social housing) so it is possible for developers to estimate the cost of the contribution and bid for land on that basis. This also covers the details of the housing mix as most authorities want the affordable housing on site and comparable to the market housing. Land is normally transferred at near nil value although in some cases there is a negotiated price with the developer. Where the housing associations buys completed homes from developers the subsidy framework is also clear – as is the rent to be charged – so it is fairly straightforward in the majority of cases to decide what to pay developers for the units.

A housing association representative at the roundtables explained how it dealt with design and layout:

"Most developers have partnership house types so matters like design/type/density are usually addressed at that level not each site… in most areas house types will depend on need studies, often different in suburbs compared with inner city or city centre sites… From all view points, including management efficiency, pepper potting affordable housing does not work. Most local authorities want affordable housing on site and comparable to the market housing. This layout also gets the housing association units built out first so helping developers' cash flow".

This point about how housing associations buying completed units early in the build out of new developments helped developer' cash flow and reduced their borrowing was made by other housing association and housing organisations' staff interviewed after the roundtables

A representative of a housing development body, present at the roundtables also explained that:

"The figure of 25% of affordable housing across Scotland is well understood and there is a degree of certainty around this. In this sense it probably helps to avoid some of the parallel problems found in England, where there are multiple thresholds".

Another housing association participant stressed how important developer contributions were:

"...without this land contribution, I do not know how RSLs and housing associations would provide social housing in the amounts that we are told we need to provide. There are local authorities talking about 30-35% affordable housing provision".

A volume house-builder was prepared to go beyond the normal 25 percent and discussed the wider market issues:

"As a developer I would not mind providing 30-35% so long as it is factored in. If the private sector is allowed to play its part in providing affordable entry level housing without subsidy that will help to get the numbers up as well".

A local authority participant confirmed that:

"In relation to the affordable housing policy, the planning system is working well. …. there is clarity around this policy for developers. Developers want to know what the contribution is likely to be and that will feed into their discussions in terms of …..what they will pay landowners".

An interviewee from a housing association involved in rural developments made the point that whilst need was located in a large number of villages relying on developer contributions from large developers building on one site in the area often meant the provision was concentrated only on one such site with the new affordable homes and related infrastructure often some way from where the need had arisen.

12.3.2 Targets and viability

As a volume house-builder explained:

"Most council areas in the East it is at least 25%, sometimes 15%. We are providing most of this on site, I can only think of one of our projects where we made a commuted sum in lieu. If the land is worth nothing, nobody is getting anything from it; it all comes down to viability".

A planning consultant confirmed this variability in targets:

"Amongst clients of mine on development of greenfield, I agree with [a volume housebuilder], developers are happy to put upwards of 25% affordable housing down. We just need to make sure that at the first stage we know what the kit list is. …on brownfield sites, I have some concerns that clients are squeezing down the development appraisal as far as possible. There needs to be an existing use value plinth for brownfield sites. … This will also prevent over-taxation of difficult to develop brownfield sites and encourage developers rather than deter them".

A local authority participant stressed how viability was not a problem on greenfield sites:

"Viability is an issue. But with regard to affordable housing, it is less of an issue because the sites tend to be greenfield spaces. What is more of an issue with affordable housing is the landowners pushing back because the developer comes back with a different price".

Another planning consultant commented on how targets also needed to fit spatial planning objectives with respect to brownfield development:

"Should we look more and more that affordable housing ought to be commuted back to the City? This … might be more of the tighter cluster, higher density and more mixed use. Various developers are saying the urban brownfield is where they want to be. …. This approach might help us deliver both green and brownfield".

A participant from a housing industry representative body explained how affordable housing definitions provide flexibility:

"… The Scottish planning policy definition is quite wide, which is helpful because it gives you more flexibility to find more possible sites. But this is not universally supported by all local authorities who want the full 25% going directly to their council houses".

A house-builder explained how more flexibility could enable more to be housed:

"The big push is often for the provision of social rent housing, particularly on high value sites. I would like to know how many people currently living in council housing at the moment have the means to move into private housing or buy their own. This would then free up those social rent units".

A housing association participant explained how this had been attempted in one local authority:

"The housing options team [name of local authority] Council did a project (2006) which identified tenants of council houses and some housing associations who had aspirations to move. Some people had the aspiration but did not know how to go about it. The team were able to identify and enable them to move. This freed up council housing".

12.3.3 Understanding needs

Most thought that policy and guidance of affordable housing needs was generally clear.

A participant from a local authority housing organisation pointed out that:

"Over the 15 years S75 had become more embedded, consistent and transparent. Most PAs do have clear statements of what affordable housing will be required (normally as social housing) so it is possible for developers to estimate the cost of the contribution and bid for land on that basis".

But a few participants considered that housing needs were not well understood. One from an infrastructure organisation pointed out that:

"Accepting a pragmatic difference in geography is essential. Some projects will work in some places and won't work in other places… Do we have a really clear understanding of what the housing need is? The evidence we got from our research is that we don't understand the housing needs in Scotland, nor is our understanding of those needs joined up with economic development and how you drive that in the future".

A participant from a professional body pointed out that:

"On [the] localised nature of housing needs and the demand assessment, the 2019 Act has a provision that the NPF will now have to set geographical housing targets, but this could go either way in terms of whether it has a top-down or bottom-up approach".

A representative of a housing association interviewed after the roundtables pointed out how important it was for all participants to work together to secure the provision needed but that this did not always happen. In general, the key relationship in reaching agreements on contributions (including affordable housing) was between the developer and the planning team of a local authority with the details of how the affordable element was to be provided (including tenures) involving subsequent discussions with others including local authority housing departments and housing associations. The interviewee stressed that it worked better if all were involved early in the process as it enabled the developer to secure land at prices that helped it deliver all the contributions.

12.3.4 The importance of grants

Several participants commented on the importance of grants in making the affordable contributions possible.

As one local authority participant explained:

"As you know there is the strategic housing investment plan through which we plan in developments which are going through an affordable housing policy, whether it is the council or an RSL taking the units. This plan is incorporated into the SHIPS which are updated annually. It works reasonably well".

But as a volume housebuilder stressed, grants did not cover all costs of a housing provider buying land or units from them:

"The grant funding usually only meets half the cost of the unit; the rest the housing associations raise themselves. My only concern… is that by over focussing affordable housing into urban brownfield sites, the developments are likely to gravitate to the cheaper areas and this might end up marginalizing people while missing the chance to have mixed communities".

Another house-builder stressed the long-term value of the grant programme to the business:

"The Scottish Government's support of the affordable housing programme through the local authority SHIP gives us certainty that we can partner with our RSLs or local authorities and provide the housing required. It allows us to develop really longstanding and useful relationships with RSLs or local authorities".

A participant from a west central Scotland authority explained that it had a large grant allocation and a large network of housing associations and did not need to use developer contributions but that:

if budgets reduce then we may need to think about using Section 75s.

Although most S75s were delivered on site, a house-builder explained how higher targets could be delivered by providing the affordable elements on another site:

"…With some developments, for example [a development site], where rather than provide 25% affordable housing on site, an off-site area was found which provided over and above the 25%. Often it is just not realistic to put affordable housing in developments, particularly with the higher value ones".

A local authority participant explained some of the challenges such commuted sums provided:

"We have had pushback more recently around some of the commuted sum payments due to land values increasing in this [specific location], which has the consequence of the commuted sum going up. … More up-front clarity can be provided around how these payments are calculated".

An interview after the roundtables with a government official about the role of grants confirmed the importance of grants and how they helped both keep rents low for tenants and helped housing associations acquire land and/or completed dwellings. The flat rates grants (with small variations in relation to locations and size of dwellings) are a benchmark to provide value for money in government funding. It was explained that, where a developer may have provided serviced land as part of an affordable housing contribution (or was selling completed dwellings), then grants assist in reducing the costs of the project, potentially reducing private finance and / or bringing it in within the benchmark grant. Contributions are designed to allow housing to come forward on sites and in areas that either land would otherwise not be available and/ or would be too expensive to build. The level of grants is not fixed however to take explicit account of the value of land being transferred (or of prices of completed units being acquired) and is not something taken into account when reviewing bids for grants.

12.3.5 Grants and land values

Several participants commented on the extent to which grants affected land values.

One volume housebuilder argued that:

"The land values aren't particularly affected. Affordable units are analysed in a different way to private units. One relevant point is that subsidy applies in relation to social rent or mid-market rent housing. The planning policy does allow other tenures of affordable housing to be provided. For example, low-cost homeownership costs no subsidy at all; so the Gov. and PAs could have more delivery (of affordable housing) if the tenure were wider".

A local authority participant pointed out that:

"In our authority there is high demand for houses (especially for elderly people – which is more expensive) and high land values. The burden of cost can be too great for the grant to really make a dent in our costs incurred".

A participant from a housing representative body explained that:

"In terms of the actual cost of any individual house, 38% is the figure cited by the more homes division as the percentage covered by grant/ subsidy. …….. I don't think there's any strong evidence that the grant pushes up land prices, it may push up the cost of building a house for the council. For the most part is does work well, but it works best in higher value/ higher demand areas leaving questions about an equitable spread and delivery across varied areas".

A housing association representative interviewed later stressed that, when buying completed units, they pay in line with affordable rents and relevant subsidy. They worked hard to ensure that the grant subsidy they get does not 'disappear' into land values. It was also noted that affordable housing also pays infrastructure tariffs though the association may be able to negotiate where this is not relevant – for example one bed units may not pay the tariff for education.

A house builder also explained the role grants played:

"The grant funding usually only meets half the cost of the unit; the rest the housing associations raise themselves. My only concern that by over focussing affordable housing into urban brownfield sites, the developments are likely to gravitate to the cheaper areas and this might end up marginalizing people while missing the chance to have mixed communities".

Not everyone who took part or who was subsequently interviewed thought grants had no effect on land values. One from a housing association made the point that without grants housing associations would pay less for completed units so that developers would have to pay less for land to maintain the viability of their schemes.

12.3.6 SME Developers

A participant from a housing industry representative body explained that

"The experience of the smaller scale homebuilder is different. These smaller projects have very different viabilities, the costs these builders incur is higher, they will have less cash and they won't be able to spread risk over several sites".

A participant from a housing developers' representative body explained that:

"…the number of them active in Scotland has decreased by 40% since 2008/9. Finance is clearly an important issue. However, the planning system itself does set up a certain barrier to entry. Most small builders can't obtain an option on small site, and so must buy it up front. The planning applications also cost money to submit. …. You can't pool across several sites and wait to see which one comes through because that is up front cash which small builders don't have. By doing this, you are taking out a valuable section of builders who could be putting up affordable housing in rural areas (5-10 units), or small-scale urban developments".

12.3.7 Trading off infrastructure and affordable housing

A local authority participant was adamant that this did not happen:

"We can't (and wouldn't) trade one off against the other because if the affordable housing policy applies in one area that is not negotiable. What is discussed is the mix; is it on site or commuted sum? If the impact of a development requires a junction improvement or contributions towards schools, then that is discussed but not traded off".

A participant who had advised on infrastructure provision was of a similar view:

"Overall it does help deliver on local requirements. Looking to the future, 'housing 2040' emphasises affordable homes where people want them, at the price they want to pay and with the right infrastructure around them".

12.4 Implementation: challenges of policy and practice

Participants raised a number of issues, including government policy and guidance as well as the impact of recent court cases and reporter decisions on planning appeals including those related to the extent to which contributions could deal with sub regional infrastructure and also the cumulative impact of several developments.

A planning consultant participant noted that:

"The legal cases help because they enforced a certainty on what Section 75 is meant to do and what it is not meant to do. The challenge we are facing is people trying to stretch Section 75 to do things it wasn't designed to do. That is, using Section 75 for very large plans is not a good use of it… If the aspirations to help fund infrastructure are going to be met, there has to be change either to Section 75 itself or through another mechanism".

A volume house-builder expressed similar thoughts and wanted greater policy clarification:

"The sense of what is happening at a macro level is not well understood. Understanding how Section 75 works will help us to decide what comes after. What potential is there to tweak Section 75, or is it worth moving on to something like CIL?"

An infrastructure consultant agreed on the opportunities for changing matters:

"… Massive potential opportunity at the moment. New Planning Act, NPF4 going through its design, infrastructure commissions have made some pretty clear recommendations… How these factors will come together along with the Government's plans will determine whether the Government is helping".

A local authority participant explained how the council has been addressing reporter decisions:

"The reporter asked for supplementary guidance to be prepared … which set out infrastructure required to support the plan and mechanisms to deliver that approach. The cumulative plan approach was accepted in the plan…. This has been a three-year process including formal rejection of it last year by the Scottish Government".

Another local authority participant explained how the council is exploring ways of dealing with these challenges:

"Our plan models the requirements for borrowing for front-funding of the infrastructure plan which supports the local development plan. It is mostly in relation to two significant pieces of work which are education and growth in [place name]. The model calculates the potential borrowing required, over what period and how much money would be received from developer contributions……We delivered [named primary school] through this model. We did receive significant developer contributions based on this approach".

One developer noted that the challenges of dealing with cumulative development could be addressed:

"You only need a connection that is more than trivial between the development and what it is seeking contributions for. I don't think this is unreasonable in the context of what Section 75 is meant to be. I don't see any local authorities making major changes to their supplementary guidance".

A house-builder took a different view especially where large development with several developers involved:

"If you are part of a wider land holding that has been allocated under a big masterplan, there are upfront payments depending on who goes first, and developers don't want to be hit first unless they have a proper equalization agreement amongst all parties. This is where these sites might be stalling if they haven't been brought under a proper equalization agreement".

Another developer agreed that:

"Cumulative development is a big issue. Unless there is a roundtable agreement about the size of the investment for the infrastructure on a larger scale site – how does anybody know that it is being divvied out fairly? And how do you know that infrastructure will be delivered if you don't know that every single piece is in place?"

A planning consultant commented on upfront funding in relation to cumulative impacts:

"I do think there can be a lot more agility in this process if we can increase the delivering hand of upfront funding. We have seen this applied in [several named developments] as well as many more. Upfront funding is a useful tool because it can help us start to decide, regionally (maybe nationally), where the big funding pot will deliver".

Several participants discussed where upfront funding could come from: first a house builder

"Where is the security for upfront funding for developers? Developers would be happy to put necessary infrastructure down in lower value areas if it didn't take so long to get cash back through slower sales and lower revenue points".

A planning consultant thought the public sector had a role:

"Maybe this is a sign that the public sector and its agencies need to think about carefully honed masterplan contributions upfront".

And a participant from a house building representative body explained how this needed to be linked to the planning review

"Need to link this work across with what is happening in the planning review. Change the culture of planning. If you want to front-fund infrastructure and then recoup it, it requires the local authority to have much more faith in its spatial strategy and site allocations. At the moment there is a tendency to look at Section 75s separately from the future processes for producing LDPs".

Finally, a participant representing planning authorities agreed:

"I agree that the aspirations for the NPF4 must be much be higher. We don't just see it as framework, but a national development plan for Scotland with a proper funded status, which will set out national and strategic infrastructure projects as well as costing them".

12.5 Is the system worthwhile and what would make it work better?

Generally, participants thought the system worked well but that changes were needed, especially to secure upfront funding on large scale developments.

12.5.1 The system generally works well

Many thought the system worked well, although they also thought more collaborative working and clarifications on requirements would improve things, and that the public sector might need to take on more risk.

As a housing association participant remarked:

"All in all, it is important and works well; there is a settled harmonious existence between housing associations and developers".

And as a house builder representative body participant put it:

"Yes. Our members made it clear that the current options on the table are the best. Section 75 is a well-established system, it has stayed in place for a long time and people are getting better at using it… There is only so much contribution you can extract from a development before its unviable. Section 75 has the flexibility to let local authorities be in charge of what they choose to seek contributions to and/or whether they can get enough contributions to support it. Other systems have less flexibility".

A participant from a housing association stressed the need for more collaboration

"Definitely needs review. There is not a one size fits all. But with the new Covid challenges it needs to be looked at. More collaborative work would help; if RSLs understood costing projects and could share their side with developers".

A participant from a housing representative body stressed the importance of local plans:

"Dealing with infrastructure and its costs and its viability first, at the plan making stage. With education, future predictions and realistic planning with the nature of educational infrastructure in mind. Focus in Section 75s, don't try and make them cover all the costs; deal with the key infrastructure and streamlining of the process".

A local authority participant agreed that authorities also needed to change:

"Clear and consistent guidance would help. It has been heartening to see consensus today. We as councils need to get better at the infrastructure plans and what education contributions are likely to be. Room for improvement but working reasonably well".

Another local authority participant reflected on the importance of collaboration:

"From a strategic point of view, collaboration is really important. Less arguing over small facts and figures in the Section 75s".

A participant representing local authority planners agreed:

"Worthwhile. But it needs to overhauled and enhanced. The different typologies in sites make it important to distinguish what the rules are for each one. Introducing filters would be beneficial to everybody".

Developers and landowners agreed on collaborative working - a developer:

"Collaboration – look at the infrastructure requirements for a certain area, and what creating that infrastructure unlocks. Then decide what developments ought to go where".

Another participant from an organisation working on land policy also agreed on the need for more certainty:

"There is still an issue around certainty. Where will the development take place and how will the infrastructure be funded. Infrastructure first might make more sense. This has to come from local authorities wanting to actually take risk".

And a landowner representative body member also stressed the need for clarity:

"From the perspective of smaller and more rural developments, establishing viability for them and making sure they can come forward. Ensuring there is clarity on the way the methodology is applied in calculating what the contributions to be will help landowners".

Another participant from an organisation involved with land policy also pointed to community engagement:

"The [named body] published research earlier this year on the benefits of early in-depth community engagement to developers and they found it led to better developments but also reduced risk".

12.5.2 New approaches to infrastructure funding

Despite feeling that contributions worked well, many participants also wanted a more strategic approach to infrastructure funding, especially for large and complex sites and for sub regional infrastructure.

A lawyer participant pointed to areas where change was needed, despite recent legal clarifications:

"The court cases have clarified the limits but have introduced a nervousness on the part of local authorities to seek contributions. In particular, where those contributions are becoming more tenuous and remote to the actual development… Section 75s are being put to a purpose which they were not expected to be, however, the system is working okay for local development. Not for regional project like roads. CIL would suit this better".

A volume house-builder was clear on what was needed:

"Yes [in answer to 'is it working well?'], but I think a national infrastructure company collecting national levy would be better".

A planning consultant was of a similar view:

"Let's push for NPF to be a national development plan. Let's align the Infrastructure Commission for Scotland and the infrastructure funding bodies, agencies and experts. More punch, less shrug from government. Say first where marketable land will be allocated and then assist delivery through market forces or interventions".

And a participant from a local authority pointed to the need to address upfront funding:

"Looking at the upfront funding is really important. There are clear shortcomings with not being upfront when delivering houses which are going to be within a liveable development".

A participant from a professional institute agreed:

"The Scottish Government had an opportunity to make some real changes through the planning act, but the changes are marginal. The new infrastructure levy is half- hearted. Do the Government. know what they want? How bold do Scottish government want to be with this?"

A participant from a housing authority noted that:

"The system works because of the hard work of people in it. It is frustrating that public policy objectives have to be gamed and negotiated with private and commercial interests. A degree of certainty around that would be helpful. A lot of it comes down to land taxation; if a development is a result of public policy decision then the value of that uplift should revert to the public realm. I think that is part of the answer to these difficulties".

12.5.3 The need for wider conversations and boldness in change

Participants expressed some frustration with the slow pace of the changes needed.

As a participant from a house building representative body put it:

"There has been a huge amount of focus on different ways to extract contributions from the same small group of people. There might be margins where you can increase that, perhaps through introducing infrastructure levy, but that doesn't look like a game changer. Frustrating that there is no conversation about this".

A participant from another representative body put it like this:

"If local authorities and their infrastructure and service delivery partners had more support from the government on planning for and delivering infrastructure, we might find that lots of the issues around Section 75 might resolve themselves".

An infrastructure consultant also had strong views on change and the need to be 'bold':

"You have to think about the foundation of what you want this to do. Go from there, that will lead you back to the boldness of the plan. Scottish government don't tend to work in partnership, this may make things move more smoothly".