The government's new housing target of three million new homes by 2020 has highlighted major challenges for developers, in terms of having the right infrastructure in place to meet the needs of the UK's expanding population, says Simon Marks, partner at EC Harris in Birmingham.
It should be remembered that regeneration is about more than just building homes. It is about creating communities, access to jobs, recreation, health, education and other public facilities. Currently the contributions for some of these facilities are collected by local authorities through a Section 106 Agreement. In the industry this is often referred to as a 'tax' on developments and has become an area for intense and time consuming negotiations.
However, the government's introduction of a new planning charge could pave the way for planning reforms and should be welcomed by developers.
The so called 'roof tax' which was announced in the Pre-Budget Report by Chancellor Alastair Darling in October, has the potential to bring commercial benefits to the developer in terms of budgeting and implementing schemes. It has already been adopted by a number of local authorities including Milton Keynes and early indications suggest the model is working.
Marks said: "The new planning charge should be welcomed by developers, because it relates to a fixed fee per dwelling, rather than having an open-ended arrangement to provide 'community facilities' with inevitable escalating costs.
"The ability to budget more accurately from the outset and at the early planning stages means that developers and investors are in a far better position to ascertain the commercial viability of any scheme.
"This will overcome current difficulties during the negotiation stages between local authorities and developers, who have their own agendas and approach the end goal from a different perspective."
Local authorities need to be working in partnership with developers in order to fulfil their obligations of building communities and facilities that are deliverable from all parties involved.
The opportunity to have total transparency on the real costs of a major regeneration scheme enables the partnership with the local authority to be far more effective and harmonious - knowledge is a powerful tool in the construction industry.
Marks continued: "More attention must be paid to understanding the value that investment in delivering quality infrastructure brings to a major regeneration scheme. Developers and local authorities need to adopt a more visionary approach by looking at the bigger picture, rather than focusing purely on the actual costs.
"Once the parties begin to understand the value associated with these elements then costs do not become so obstructive.
"Future developments need to focus on creating communities that deliver sustainability - where people want to live, work, shop and relax. Improving the overall value of a scheme must be a key objective, bringing significant benefits to all parties and achieving a premium return on investment," he concluded.
Source: EC Harris