What your land might be worth with planning permission

If you break down the cost of any new house, you will see that there are four sections: construction cost; cost of obtaining planning permission; costs and profit of all players; and finally – land value. It is perfectly possible to calculate all of those except land value, so we refer to that as a “residual”. That is the factor which is most difficult to value.

The value of land now with residential planning permission depends largely on the following factors:

Local house prices

At any moment in time house prices can be assessed. The problem is in volatility. National and international events can strongly affect prices so that a builder can only guess at the market price of houses he proposes to build, for sale in two years time.

Local Planning Authority (“LPA”) constraints

These are mostly stated as formal policies in the Local Development Plan (“LDP”). However, as time passes, and LDP becomes increasingly out of date. To make sure the LPA gets what they want, the LDP increasingly relies on supplementary planning documents. These can be up to 100,000 words. It is sometimes difficult to interpret what they regard as policy statements and what are mere dreams. Dealing with LPAs.

A further difficulty arises from LPA constraints in that general policy statements cannot always apply to every site. The question as to whether a particular policy applies to a site you have in mind may therefore be a subjective judgement. Even at the pre-application stage, the “advice” given is likely to be a strict interpretation of the policy, to prevent a later claim that bad advice was given.

For example, the Government insists that an LPA should be looking to develop at a density of 30 to 40 units per hectare. Let us assume that the LPA adopts that same proposition in its development plan. Now we can see immediately that to build at that density on small sites in village locations would be a disaster. But what we don’t know is what a particular planning case officer thinks appropriate.

Whatever the constraints, the valuer has to take them into account, as far as they are known. The problem to a land promoter or a builder is that the range of values is enormous.

The natural environment

We just wish there was enough available land in England to be able to build 3 million houses and also expand both the raw natural habitat and at the same time to allocate additional land to create large areas of semi-wild parkland where we and our children can relax and enjoy the natural world without being restricted. Unfortunately that is a dream. We grow oilseed rape and sugar beet instead of frogs and chaffinches. Where land is preserved for nature, it is accessible only to academics and special interests. Children brought up in an urban environment have no access to real countryside.

However, as far as land promotion is concerned we have to be realistic. The bottom line is that we cannot have it both ways. Every time the law requires more land to be given over to the natural environment, the density of houses per hectare is reduced.

The historic environment - buildings

The issue relating to the historic environment is similar to that relating to the natural environment. We will not repeat the same points. However, the historic environment throws up a number of additional problems:

We can refer to every building as having its own “setting”. When we admire the historic building we are said to be viewing it “within its setting”. Of course it is more interesting if its setting reflects its history and adds value to our “experience” in viewing it. However, each of us views that building in a slightly different way. Consequently the extent and value of its setting is extremely subjective. In one instance it may be the immediate grounds of a grand house in an urban location. In another instance it may be a view of the village church half a mile away. Experts disagree too. The developer must take into account the effect on proposed development of different levels of importance which could be attributed to the setting of every listed building in the neighbourhood and the consequent “harm” which could be attributed to the proposal.

Because a historic building is, by its nature, irreplaceable, even a small change to its setting can be reason enough for the subjective judgement of a case officer to decide that the prospective harm to that setting attributable to your proposal is sufficient to justify a refusal of your application. It is particularly difficult for the developer to assess prospective harm simply because it is a subjective judgement. If members of a district council are determined to prevent development, this can be an easy win for them. The best way to overcome the subjective expert opinion is to provide our own experts report, offering an alternative opinion.

The historic environment - archaeology

The historic environment encompasses what is below ground as well as what is visible above ground. Certain areas of England have been occupied by humanity since time immemorial and the steady increase in understanding our past also provides pointers as to where we should be looking next, in order to increase that understanding. Consequently, all areas of England which would have been attractive to live in over past millennia, now provide problems for a prospective developer.

Generally, a developer is dealing with experts who produce real evidence and can assess the likelihood of archaeological interest, so the scope for reliance on the opinion of a layman is very limited. Processes have been established. The latest technology can now identify many objects underground and this technology is advancing every year.

There are also advances in the science of how to construct foundations in ways that least disturb those areas of least importance.

The downside is that archaeological investigation can be extremely expensive. When we encounter an archaeological problem, we have to consider the possibility of abandoning the project rather than putting out a large sum of money for what could be several years.

Affordable housing

South Cambridgeshire District Council want 40% by house numbers or land area. Most other LPAs will accept rather fewer. Negotiation of an appropriate number, shape, size and cost of what makes up your affordable contribution is a matter that can be finalised only when you have a grant of outline permission. By pressing for prior agreement, a developer is compelled to commit or risk a refusal of a grant.

The rules regarding a Section 106 agreement are complicated and interpreted according to LPA data which is rarely transparent. The bottom line is that your 2 ha of land with planning permission will be valued by reference to the net market value of the number of houses which can be constructed and sold on the market.

Open space

Whilst we all know that somehow we have to “intensify” housing construction, we also prefer to live with space around us for recreation and, if possible, some contact with the natural environment. Both of these require space – a lot of space. On the face of it that should not be a problem. We strongly approve on both counts. The difficulty is that the more space we provide for amenity value of one sort or another, the less remains the construction of houses.

On a site of 3 ha, it is possible to create really great community facilities. However, you will almost certainly want to maximise your selling price. It is also probable that you will have read that developers and LPAs should be looking at a target figure of 30 to 40 units per hectare. In practice however, the developer has to work on 20 units per hectare to allow for the amenity element to be provided in accordance with the LDP.

Because the site will be sold to the highest bidder, there will always be a conflict between density and the common good, expressed in the amenity value. That conflict is strongest in the negotiations between a developer and an LPA. The developer has to make a profit to survive. The LPA is subject to criticism, and even legal action, by local residents who take the view that they have given the developer an easy ride.

Our policy

In summary, all of the features we have described above are matters we are looking out for when we first set eyes upon your land. The decision as to how far to support additional features and a high level of amenity will vary from one site to another and from one land owner to another. We shall periodically discuss with you some of the issues we have described above. Whatever we agree, we shall never know whether we would have lost more or gained more from some alternative policy. Concessions to the LPA may make for an easier and more certain ride through the planning process. There is never a perfect solution. The bottom line is that a land owner should be aware that media headlines of “£1 million a hectare” are unlikely to apply in rural England.

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