Planning payments for affordable housing rise faster than land prices, study finds

The amount of money and other contributions handed over to councils by developers under planning agreements has more than doubled in two years, a new study has found.

The paper, commissioned by the department for communities and local government, found the value of planning obligations in England had risen from £1.9bn in 2003/4 to around £4bn in 2005/6.

The proportion of large developments covered by planning agreements rose significantly but the proportion of small schemes covered by agreements fell suggesting councils are focussing their efforts on securing more obligations on the biggest developments. In the residential sector the proportion of major schemes covered by agreements rose from 40 per cent to 48 per cent over the two year period. The value of affordable housing planning obligations, including discounted land for homes, rose from around £1.2bn to £2bn between 2003/4 and 2005/6.

While there was high land price growth during the period – 32 per cent for residential land outside London – the number of units covered by planning agreements rose by 37 per cent showing that the value of developer contributions for affordable housing rose faster than the rate of residential land inflation.

Direct payments to councils rose as a proportion of all obligations by 10 per cent between 2003/4 and 2005/6 indicating increased use of standardised charging approaches by planning authorities.

The study estimated that £3bn of the £b4n of obligations negotiated in 2005/6 was likely to be delivered as some permissions will not be used and others will be renegotiated.

Planning authorities thought that introduction of new planning policies or supplementary guidance as well as changes in land a property prices had changed the number and value of agreements.