South Anywhere County Development Corporation / Equity for land rights funding

Rather than purchase land for some monetary amount, compulsorily or otherwise, and load local authorities / development corporations with debt, a South Anywhere County Development Corporation (SACDC) would issue equity to landowners whose land was affected by the JSP, in exchange for rights SACDC acquired over the land. 

South Anywhere County is an imagined real world example, mentioned in this recent blog by Andrew Lainton

How to Capture Land Values under the Current Rules

of somewhere which is currently preparing a Joint Strategic Plan:

Let’s look at a real world example, South Anywhere County is preparing a Joint Strategic Plan. 

I very much like the blog, which starts from the observation that “It is very likely at some point in the next couple of years that clauses of the Land Compensation Act 1961 will be reformed”, and goes on to cite the ‘Pointe Gourde’ principle and the following legal opinion

It is well settled that compensation for compulsory acquisition of land cannot include an increase in value which is entirely due to the scheme underlying that acquisition.

Like most discussion about the problem of the public sector not getting enough of the increase in land value on development, the blog generally used the term ‘capture’ for this, although at one point it refers to sharing:

I’m sure that there would be little opposition to a ‘profit sharing’ partnership arrangement (say 80:20 in favour of the public sector) available to landowners who sign up rather than fight all the way to CPO

Influenced here by the recent report of Nick Falk for the GLA:

CAPITAL GAINS: A BETTER LAND ASSEMBLY MODEL FOR LONDON

where the language of ‘sharing’ is preferred to capture, I think this idea could usefully be developed.  Rather than purchase land for some monetary amount, compulsorily or otherwise, and load local authorities / development corporations with debt, a South Anywhere County Development Corporation (SACDC) would issue equity to landowners whose land was affected by the JSP, in exchange for rights SACDC acquired over the land.  As well as making SACDC more financially viable, it should also achieve an alignment of the interests of landowners with the wider public interest.  Instead of a one off act of ‘sharing’ – which if done compulsorily might seem more like alienation – it would change the game into one where there were repeated acts of sharing – i.e in sharing future dividends from the SACDC.  I use the term “game” deliberately to refer to game theory, and the well known difference between the bleak Prisoner’s dilemma, and the rather more hopeful repeated version

Some background here is my interest in the development of Oxford, which is dominated by the existence not only of the University, but also several very wealthy colleges. Their power is intensely resented, but they are far from being get-rich-quick developers. Rather, they are would-be legacy landlords, with investment horizons extending well beyond our lifetimes. They are also spending time and effort working up urban expansion proposals such as this planning application for the development of land within the Oxford Northern Gateway Area Action Plan, which I broadly welcome, while regretting the absence of elements which would have been included if the return on this investment was going to shareholders in a “Central Oxfordshire DC” (CODC) rather than just St John’s College.

Some more background is this classic by Elinor Ostrom which I am currently reading:

Governing the Commons: The Evolution of Institutions for Collective Action

and would suggest we have here a fine example of needing to change the rules of the game so that the wealth generated in common by good urban development can be appropriately shared.  Andrew Lainton argues we can already get better outcomes under existing rules, but in Elinor Ostrom’s sense, it may be possible to change  rules as well, by those with an interest in solving a problem negotiating new relationships between themselves.  Rules are not just what is legislated in Westminster, as interpreted in the courts, or deals with terms emerging from Whitehall, but can include commitments devised and entered into by local stakeholders.

For the large Oxford land owners, who as well as being immensely powerful, are deeply committed to their land ownership and charitable purposes, the decision is whether working with a CODC can achieve their long term aims as legacy landlords, better than paying for and fighting planning battles individually.  For local civic leaders, the challenge is to find an offer to landowners which will align their interests with those of a Joint Spatial Plan, although for the sake of winning popular support, the planning terminology should be dropped for more direct explanations  of how well planned, well located affordable housing will be built.

There will be far more details over which local stakeholders might want to negotiate that I am able to go into here.  Much of it will parallel the negotiations which happen with land assembly for development projects, but there is no reason not to look at more possibilities, because the more there is to negotiate on, the more options there will be to reach a deal.  Overall estimates will be made of how land value gain is shared in percentage terms, and Andrew Lainton may be right in thinking that land owners would sign up to getting just 20 percent, but a fixed percentage, to apply in every case, would not help getting a general deal.

Popular support for any arrangement to ensure that local government gets enough of the land value gain to fund the requirements of the JSP will also require acceptance by people who own their own freehold, and smaller landowners.  I had this in mind when writing my previous blog 

Elder Stubbs and Existing Use Value

which is about how a standoff between a small local charity and Oxford City Council about how land value should be shared (it ended 70:30 in the landowner’s favour) has left a legacy of resentment. I suspect freeholders’ rights are so embedded in English attitudes that the systematic use of CPOs which work 80:20 in favour of the public sector will provoke far greater opposition than suspected by Andrew Lainton.

Specific percentages should not be the issue here.  Rather, as far as I know, the idea of issuing shares in a local development corporation rather than using CPOs, is original, although, in the way of original idea, they have a way of being found suggested by someone else years ago.  If so, I’d be interested to know what became of them, but in any case, I think it is worth exploring how this idea could work out in a real world example.

 

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