Planning gain

Planning gain refers primarily to the increase in the value of land which results from planning permission being granted for that land. This increase in land value mainly accrues to the owner of the land, but a levy or tax may be applied to divert some of the planning gain to the public sector. In England and Wales, such arrangements are currently negotiated between the developer and the council, and take place under the terms of Section 106 of the Town and Country Planning Act 1990. In Scotland the equivalent is a Section 75 planning obligation (Section 75 of the Town and Country Planning (Scotland) Act 1997).

The planning obligations agreed with developers through Section 106 agreements are sometimes criticised for:

Better Alternative: Experience shows that S106 negotiations delay the planning process and is costly to both the developer in legal/planning advice and costly to the planning authority in terms of professional officer time. An annual Land Value Tax is a much more effective alternative which does not incur these costs and delays.

Obligations may be created that are more than the developer would consider a bare minimum, with local authorities seeking contributions from developers that go beyond the definition originally given in Department for Communities and Local Government (DCLG) Circular 1/97. and later in Circular 5/05.

Section 106 agreements are often used by planning authorities to provide new public realm development or affordable housing in England and Wales.

In Wales, these agreements are used on whole sites or single self-build homes; this causes problems with finance, and almost all lenders are unwilling to consider a mortgage on these dwellings. Increasingly, the planning inspector is finding in favour of applicants who wish to modify or discharge the obligations.

Typically, a new housing development over a given threshold size (commonly 15 dwellings in many local authorities) would be required to provide a pre-determined proportion of affordable housing - see DCLG Circular 05/2005. This is a source of friction between developers and local planning authorities, because the developers attempt to maximise revenue while the councils attempt to maximise the amount of affordable housing. Many councils have a loosely worded Development or Local Plan to reflect s 54A of the Act, which requires any decision to be reached in accordance with the terms of the Plan unless material considerations indicate otherwise. Circular 6/98 states affordable housing itself is just one material planning consideration, therefore simply meeting a requirement for affordable housing provides no guarantee that other issues may need to be addressed.

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