Sector welcomes plan to allow sale of public land sites for less than best value

Government plans to overhaul the rules governing the sale of public land would speed up land sales and encourage regeneration, experts say.

In last week’s housing white paper, the government launched a consultation on whether the rules should be relaxed requiring local authorities to sell land to the highest bidder, so that they could sell provided the sale price was not below a certain threshold of market value.

The exact level at which this threshold would be set is also being consulted on. Currently, if a local authority wants to sell land to a developer that is not offering the best price, they can do so only with the specific approval of the secretary of state.

This is a “time-consuming process”, according to Sara Bailey, head of real estate at law firm Trowers & Hamlins, and therefore authorities prioritise upfront capital over potential long-term gains.

‘Unlock a lot of land’

So if the government goes ahead with the plans, what impact will they have?

Stewart Murray, head of the development group at GL Hearn, and former assistant director of planning at the Greater London Authority (GLA), says that many authorities currently apply to the secretary of state to sell land below the highest bid, leading to a “blockage in the system”.

The proposed measures would therefore “speed up [sales] and unlock a lot of land”, he argues.

Promoting innovation

Bailey adds that the move would free up local authorities to promote “more innovative development” and give developers that focus on regeneration more of a look-in.

“If you look at an Argent [or similar], they’re all about creating place, which means the bottom line for a bid is not as high as one for a housebuilder,” she says.

Local authorities would be able to think more long term about development and consider the social value of a proposed scheme, such as the number of jobs it creates, she adds.

“It will help on the very large-scale regeneration schemes that need a more holistic approach,” she reasons, singling out large regeneration sites in London owned by the GLA and land outside the capital owned by the Homes and Communities Agency (HCA) as specific beneficiaries.

The proposals would also allow SME developers, which often cannot compete with their bigger, better-financed counterparts in the market, to purchase more public land sites, Bailey suggests.

London First’s head of housing Jonathan Seager agrees that freeing up local authorities to consider lower bids could lead to better-quality schemes.

“Nobody wants councils to do a poor deal, but there are obvious cases where there needs to be some flexibility [so that a deal] still provides good financial return while also producing a potentially better housing offer than if there was a higher receipt,” he says.

The plans could also encourage more affordable housing, Seager suggests. Developers that want to provide a “broader mix of homes” may not be willing to pay as much up front, and the government’s proposals could mean those developers start to win bids.

Warning sign

However, the detail of any reform is crucial, warns Murray. The new rules must be accompanied by clear frameworks for local authorities to self-regulate and decide the basis on which they accept “under-value” bids for land, he says.

“What you don’t want is to end up with a situation where local authorities are selling to the first guy who comes along and [then] realise they gave their crown jewels away,” he says.

With that proviso, the proposals could unlock the true development potential of surplus public land.

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