One of the main issues which embitters many a planning dispute is who pockets the large windfall gains from the conversion of cheap land to dear land with building permission?
There are three models on offer or regularly debated. The first is that the developer or land owner should claim the gain , because it is their land or their activity which is leading to improved value and the new homes.
The second is that the community should seek a substantial portion of the gain. This currently happens on larger developments through Section 106 agreements. A developer negotiates with a planning authority, offering to give the Council money for public facilities, or offering to build public facilities as part of the plans. The developer may offer roads, flood schemes, leisure facilities or whatever the Council thinks the community wants.
The third is that the wider nation should pocket the gain, through moving to a system of land nationalisation, where everyone just rents their property from the state and the state collects all the rents and therefore benefits from new construction. Effectively land values are abolished as no-one is allowed to be a freeholder apart from the state. Various Labour figures are pressing for a variant or starting point for this, proposing for example that the state should levy a tax on all properties adjacent to new infrastructure improvements in cities, on the grounds they are benefitting from this state investment and their property values have gone up as a result.
I am not keen on any of these three versions. The first leaves many people feeling it is unfair that large landowners can make huge sums out of the artificial scarcity created by planning permissions. A true free market system would leave the land owner free to profit, but it would also allow any landowner the right to build as they wished, creating much more competition and lower prices for buildings than a planned system does. Our current system allows enterprising people to make money out of rationing.
The second leaves many feeling the relationship between Council and big developers is too cosy, as the Council will make a profit out of the development if it allows it to go ahead more or less as the developer wishes. Quite often the 106 money or infrastructure contribution is spent in ways that do not help the home owners who feel they are disadvantaged by the new development. It is, for example, a final insult to the houseowner objecting to new homes on the greenfields next to his house, if the development goes ahead and the Council places a noisy play area adjacent to his house, paid for out of the Section 106 money.
The third if done in full is so radical that no-one has satisfactorily explained how you could get to it from where we are today, even if you wanted to. Partial implementation is just another kind of tax on those unlucky enough to live near “improvements”.
It seesm to me the large profits thrown up by scarce planning permissions should be shared with those most immediately affected by the development. The way to make people feel a new development near them is fair would be to give them a share of the winnings by way of compensation. They would then be able to decide for themselves whether to accept it gracefully or to spend the money on the costs of moving if they really cannot stand the change in their local environment.