The economic value of planning

Economic Value of Planning
Matthew Spry, Senior Director, NLP
10th
March 2015
n @mspry74
It’s all about the money, money,
money….
The economic value of planning

Economic Value of Planning2
Structure
• Economic and policy context
• Economic outlook
• Policy reform
• The Value of Planning – Key Instruments
• Market Shaping
• Market Regulation
• Market Stimulus
• Capacity Building
• Conclusions

Economic and Policy
Context

After a turbulent few years, the economy has been
gathering momentum
Indicators
•Falling inflation and
unemployment
•Business investment is
recovering
•Housing market
indicators have picked
up sharply
•Consumer spending
has been the biggest
driver of recent growth

But still subject to uncertainty and geographical disparity
• Productivity and wage growth
remain disappointing..
• ..while exports are still
lagging behind pre-recession
levels
• International uncertainty
• Localities with the strongest
growth potential are those
with a strong private sector
base and particular
concentration of high growth
sectors...
• ..with big cities, London and
SE leading the way

With a key reliance upon certain sectors for growth,
including construction and professional services
Average annual growth rate for employment by sector for each cycle
(%)
Decade of growth (1997-2007) Recession & Stagnation (2008-
2013)
5 year growth forecast (2014-
2019)
Source: Experian, NLP analysis
Retail
Finance &
Insurance
Transport &
Distribution
Hotels, Restaurants &
Leisure
Public Services
Construction
Professional Services
IT & Media
Manufacturing
Agriculture, Forestry &
Fishing
Extraction &
Mining
Utilities
Average Average Average

Construction output remains 12.2% below its peak. Private
commercial/industrial construction still has the longest way
to recover to reach its pre-crisis output levels.
7
Infrastructure
Housing
(Public)
Public**
(non- infrastructure)
Total
Construction
Housing
(Private) Private
Commercial
Private
Industrial
* Pre-crisis peak for total construction was 2007
**Public sector construction of buildings such as schools and colleges, hospitals, universities, fire stations, prisons
and museums. NB excludes housing and infrastructure.
Change in sector output (£bn) from pre-crisis peak for construction*%
Source: ONS/NLP analysis

Planning reform has placed economic growth firmly at the
heart of the planning agenda, with a renewed emphasis on
the important interactions between planning and growth
“Significant weight should be placed
on the need to support economic
growth through the planning system”
“To help achieve economic growth, local
planning authorities should plan proactively
to meet the development needs of
business and support an economy fit for
the 21st century”
More opportunity to
think locally about how
positive and proactive
planning can support
growth
Greater incentive for
local authorities to
achieve economic
growth aspirations
Practical guidance
on assessing
economic
development and
housing needs to
support the
preparation of Local
Plan evidence base
NPPF

The Value of Planning
• RTPI research to examine the value of
planning, focusing on economic and financial
value
• Recognises that planning helps to create the
kinds of places where people want to live,
work, relax and invest..
• ..and is much broader than a purely
regulatory role
• Identifies ‘planning’ as the deployment of
policy instruments intended to shape,
regulate and stimulate the behaviour of
‘market actors’ and to build their capacity
to do so

1. Market Shaping

Market Shaping: The Theory
• Planning = important context for decision making by landowners,
developers, investors and others, by
• increasing certainty
• reducing risk
• encouraging market actors to see benefit for themselves in
meeting wider policy objectives
• It ensures that individual developments are planned as part of a
broader picture rather than in isolation
• encouraging the provision of ‘collective goods’, such as better
connectivity and improved public realms
• Planning as a framework that encourages and rewards
integration within the process of development, and deters
disintegrated behaviour

Market Shaping: Practical Examples and Strategies
• #1 – Plans, Strategies and Visions
• Used, particularly at the local level, to articulate how places should
change over time
• Reliance upon other parties to share and help implement the vision
• Cross-boundary issues / functional market areas
• Relies upon a high quality evidence base and navigating a process
that can make it difficult to see wood for the trees
Key Success Factors
 Taking advantage of market
information (e.g. rents, prices,
yields, vacancy etc)
 Engagement with key market
actors (such as landowners and
developers)
 Deliberately seek to change
market behaviour by specifying
key criteria for development
 Providing an effective balance
between flexibility and certainty
 Specific consideration of
implications of allocations for land
value
 Connect with other policy
instruments for example that
stimulate demand

Critical factors What can planning do?
People
Proximity to skilled
workers
Labour productivity &
flexibility
Provide adequate scale of housing for work force
Secure development commitment to drive skills and training
Ensure right type of land / business space is available for different
industries to function in areas with access to labour
Place
Quality of life/amenities
Accessibility/transport
Infrastructure
Opportunity for
development/expansion
Planning policy/development that preserves and promotes quality
of place and access to labour
Plan pro-actively to meet development and space needs of
business
Explore approaches to unlock or bring forward employment space
by providing upfront infrastructure to secure investment
Business
Supply chains
Customers
Clusters and competitive
advantage
Ensure sufficient employment space is available to accommodate
expansion/relocation
Boil down regulations that may hinder or constrain competitive
advantage / development of sector clusters
Consider implementing Enterprise Zone style scheme, providing
incentives for firms to co-locate and interact
Confidenceinalocationasaplace
todobusiness
Making a place ‘open for business’: What drives investment decisions?

The dynamics of work are changing – Local Plans need to keep up with new ways of doing business
World leading in Tech
employment
London, East and
South East region*
744,000
tech/info workers
692,000
tech/info workers
California
*including Oxford and Cambridge
Source: South Mountain Economics
Implications for Planning and
Property Sector:
Telecommunications, media and
technology (TMT) industry driving
job growth
Office demand and housing
A third industrial
revolution?
Location derived from
clusters and agglomeration
Factory is now one of the most
productive in Europe
Impact of new technology,
knowledge and high value added
1999
271,157 cars
4,594 workers
2013
480,485 cars
5,462 workers
Nissan’s factory in Sunderland
3D printing originally conceived
as a tool to make one-off
prototypes. Potential to be
scaled up and completely
transform manufacturing
sector
An additive approach to
manufacturing
Open, innovative economy
craves proximity and
integration
Cambridge Life Sciences & Healthcare cluster
Media City Salford
14

Changing model of retail
supply chain / logistics
Shift to convenience combined
with leisure/transport hubs
Retail and spending behaviour
is constantly evolving
2007 was the first year since
the 1950s that no new US
shopping mall opened
Up to 50% of US shopping
malls could be closed or
repurposed by 2030
Source: ICSC
% of total household expenditure
Source: ONS Family Expenditure Survey
Leisure includes restaurants & hotels, recreation & culture
Shift to convenience – integrated click and
collect at major transport hubs/high
footfall leisure centres
Fulfilment centres/dark stores to
cater for rise in online spend
In the past five years (2009-13)
Tesco has opened six dotcom
centres in and around London
Other retailers include Sainsburys,
JLP (Waitrose, John Lewis) are
opening ‘dark stores’ targeting
city/urban edge locations to cater
for online shopping demand
Amazon to open pick-up lockers at
London tube stations starting with
Finchley Central and Newbury
Park
Amazon has also tied up with
Network Rail’s Doddle to create
up to 300 click and collect centres
at rail stations
Source: Retail GazetteSource: Telegraph/BBC
Planning for a changing retail and leisure economy - spending less in shops but spending more on leisure and experiences.
15

• In a recent NLP survey of Local Authorities, around half of
respondents felt that the strategies they had in place are likely to
respond effectively to future economic conditions.
The extent to which Economic Development officers
and Planning officers view their Local Authorities’
suite of strategies (i.e. planning, economic,
regeneration etc.) as responding to the likely future
economic conditions for their area

• #2 – Property Rights Reform
• Political, social, economic and legal institutions paying more explicit
attention to how markets are constructed, rather than entrusting this
to informal change.
• Decisive and deliberate institutional reform of property rights can
have a significant effect on developer behaviour and development
opportunities.
• e.g. land supply competition, land value tax, “use or it lose it”, CPO

• #3 – Strategic Market Transformation
• Deliberate ‘place production’ adding value from comprehensive,
well-planned and integrated approaches to development
• Creating entirely new places or rescuing places that have fallen into
decline
• e.g. urban expansions and major regeneration projects
• Area-based plans / development frameworks
• A significant feature of pre-recession planning
• Most recent examples focused on urban extensions
• Challenge is to get the right balance of prescription, quality and
flexibility to change

2. Market Regulation

Market Regulation: The Theory
• Regulatory instruments seek to compel, manage or eradicate
certain activities, thereby limiting actors’ scope for autonomous
action
• In the UK, development management (formerly ‘devt control’) is
the best known regulatory instrument affecting the use and
development of land
• To ensure their intentions are achieved, regulatory instruments
need to be supported by effective enforcement procedures

Market Regulation: Practical Examples and Strategies
• #1 – Discretionary vs pre-defined regulation
• Discretionary approaches consider each case on its merits but
may publish in advance what will be expected in individual cases,
while ‘material considerations’ may be brought into play when
planning applications are submitted
• Pragmatic and enable flexibility, as circumstances change
• Pre-defined approaches publish comprehensive standards,
norms and regulations setting out in advance what is permissible
• Create greater certainty and less open to political manipulation
• Examples include Design Codes and Local Development Orders
(LDOs)
• Difficult to get right balance of control/flexibility

Economic Benefits
• Setting or applying rules means understanding and articulating the
economic contribution of development and giving adequate weight
to the full range of economic benefits

• Understanding the
counterfactual position
(i.e. what would happen
without the development)
• The cost of doing nothing
• Recognising future
growth potential
• Recognising changing
world of work
Net additional benefit:
Year 2 = 5 jobs / £250K of GVA
Year 10 = 30 jobs / £1.5m of GVA
Years 2 – 10 = 140 years of employment /
£10m of GVA
EconomicValue(Jobs/GVA/Taxes)
Time
Yr 2
Yr 10
Net additional benefit

• Consider the economic benefits beyond just quantity of local jobs
• Thinking about wider contributions of business growth, e.g.
• ‘Gateway’ entry to labour market
• Retaining productive capacity in UK economy
• Growth in productivity
• Maintain competitiveness
• Deliver profitability
• Taxes
• Returns to shareholders
• Pension returns
• Investment
• National policy imperative and a sustainable economic future
• How well are these factors reported/captured in the planning
balance so they can be taken into account?

• #2- Planning Obligations
• These can:
• Prescribe the nature of a development (e.g. affordable housing)
• secure compensation for any consequent loss or damage (such as
open space)
• mitigate a development's impact (e.g. by enhancing public transport
provision)
• Market regulation ensures private sector takes more responsibility for
the social and infrastructure costs of development, rather than leaving
these to be picked up entirely by the public purse
• E.g. Section 106 agreements and Community Infrastructure Levy (CIL)
• Challenges around viability and effective delivery chain for
infrastructure (esp. balance between s.106 and CIL)

3. Market Stimulus

Market Stimulus: The Theory
• Helping to make development happen by nurturing, encouraging
and stimulating development activity, especially in thin or fragile
markets
• Facilitates the individual decisions of market actors (such as
developers) by expanding their room for manoeuvre
• Directly impacts on financial appraisals by making some actions
more (and some less) rewarding for particular actors
• Usually specified as a discretionary rather than mandatory activity
for planning authorities
• Patience and taking a long term view – success often measured
over a whole economic cycle

Market Stimulus - Examples
• Releasing public sector land
• Investing in land/remediation/infrastructure
• Subsidising development and access to finance (loans/grants)
• New vehicles for delivery
28

4. Capacity Building

Capacity Building
• Often an ethereal concept
• Capacity building enables actors to operate more effectively on an
individual and collective basis:
• ‘Culture eats strategy for breakfast’
• Looking afresh at longstanding planning problems / challenging
preconceptions
• Producing and sharing information and evidence, for example about
real estate markets, trends and opportunities
• Public sector drivers significant investment decisions simply by
providing the data upon which decisions are made
- Information vacuum = uncertainty and risks
• Engaging through the plan-making process
• Encourage networking and cross-discipline working

Conclusions

Conclusions
• Positive signs that economic recovery has momentum
• But significant disparities remain between different localities and
their ability to capture future growth
• Policy reform has placed economic growth towards the top of the
agenda
• Planning has a vital role to play if it thinks laterally and takes a
positive and holistic approach…
…recognising the value it can have in shaping, regulating and
stimulating local markets

This publication has been written in general terms and cannot be relied on to cover specific situations. We recommend that you obtain professional advice before acting or refraining
from acting on any of the contents of this publication. NLP accepts no duty of care or liability for any loss occasioned to any person acting or refraining from acting as a result of any
material in this publication.
Nathaniel Lichfield and Partners is the trading name of Nathaniel Lichfield & Partners Limited. Registered in England, no.2778116.
Registered office: 14 Regent's Wharf, All Saints Street, London N1 9RL
© Nathaniel Lichfield & Partners Ltd 2011. All rights reserved.

The economic value of planning

Recommended

Recommended

More Related Content

What's hot

What's hot (12)

Similar to The economic value of planning

Similar to The economic value of planning (20)

More from PAS_Team

More from PAS_Team (20)

Recently uploaded

Recently uploaded (20)

The economic value of planning