Scottish Government

CHAPTER THREE - METHODOLOGY

3.1 The study has been conducted in two main stages:

Stage 1 - Collection and analysis of information from all 34 planning authorities obtained through questionnaire returns and from the Scottish Government.

Stage 2 - In-depth analysis based on case studies of agreements, practice and policy in a representative sample of 11 planning authority areas together with a limited literature review and forecasting of potential values to 2010.

Stage 1 - Information Gathering

Information sought

3.2 The scope of the first stage of the study was to gather and analyse the following information for all Scottish planning authorities :

(a) The numbers of planning agreements for each year of the study period;

(b) For each agreement;

• Details of the financial or in-kind contributions secured.
• The total number of separate kinds of contribution secured.
• The purpose of each contribution (e.g. whether for transport, affordable housing etc).
• The location, type, size and value of the development to which each agreement is linked.
• The dates when Planning Committee was minded to grant planning permission and then when permission was granted (to enable allocation to a particular financial year).
• Whether the contribution had been paid at the time of the survey.
• The legal mechanism used (e.g. whether under s75, s69 or s48).

(c) Details of the authority's practice in relation to the negotiation and conclusion of planning agreements;

(d) Details of the authority's policies in relation to the seeking of contributions and the extent to which these relate to audited local deficiencies; and

(e) The total number planning applications determined by authorities during each year of the study.

Methodology for Stage 1

3.3 The information specified in (a)-(d) above was sought directly from each local authority. With regard to the information on individual agreements (defined at (a)-(b) above) each authority was asked to complete a standard table. Information on policy and practice was requested in a separate questionnaire format. Finally, copies of each legal contract and of the relevant policy documents were also requested.

3.4 The study team wrote to the Heads of Planning of all 34 planning authorities on 17 April 2007. The letter explained the purpose of the study and requested the above information. Copies of the standard table and questionnaire were also provided together with a guidance note on how to complete these. Heads of Planning were asked to identify a member of staff for the study team to liaise with. Once identified, the liaison officers were provided with electronic copies of the table and questionnaire for ease of completion. Copies of the letter, table, questionnaire and guidance note can be found in Appendix 1.

3.5 Information on the total number of planning applications determined each year ((e) above) has been gathered and published by the Scottish Government and this data has also been used for this study. This data includes information on the numbers of planning decisions linked with a s75 agreement but not with agreements under s69 or s48.

Response Rate

3.6 In total 28 authorities returned the table (a response rate of 82%) while the questionnaire was returned by 32 authorities (a response rate of 94%).

Gaps in the information provided and how these have been addressed

3.7 The most significant gaps and how these have been addressed are as follows:

3.8 ( a) The 6 authorities who did not return the table.

In spite of repeated efforts by the Study Team and support from the Scottish Government, it has not been possible to obtain this information from all authorities. As a result, it has not been possible to obtain a completely accurate Scotland-wide picture of the number of agreements entered into over the study period nor of the overall values secured. An estimate of the total number of agreements has been produced using planning application statistics gathered and published by the Scottish Government (Planning Performance Statistics: 2004-2007). However, as those returns are also incomplete and only provide information on agreements entered into under s75 of the 1997 Planning Act, we believe these are still likely to underestimate the total. An estimate has also been made of the total value of contributions but, for the same reason, this is also likely to be conservative. Further details of these estimates are given in Chapter 4. With regard to other findings and conclusions, these have had to be based on an analysis only of the information provided that can be used and again need to be viewed in that context.

3.9 (b) Information missing from the tables which have been provided

Some of the information provided by authorities is incomplete. The study team has worked with the authorities to improve the information and also, where possible, used information gathered in the case studies at Stage 2 to improve what was provided at Stage 1. However, there remain gaps including:

• agreements not allocated to a particular financial year;
• no indication of which legal mechanism was used;
• insufficient details of what the contribution involves; and
• insufficient information on the development to which the agreement was linked.

Where possible the numbers or types of agreements/contributions/values involved have been identified in the findings and included in the total for the study period as a whole. In some cases authorities have provided information on a global sum secured to cover several separate types of contribution but have not indicated how this is broken down between those elements. In such cases the total sum has been allocated proportionately between the elements and as a result this may produce figures which over-represent the amount secured for some types of contribution and under-represent it for others.

3.10 In relation to valuation of in-kind contributions there are cases where insufficient information has been provided to make a meaningful valuation. Where that is the case, the number of agreements involved has been identified but those agreements are excluded from the valuation findings.

3.11 Planning authorities were asked to give information on whether the contributions agreed have actually been delivered/paid but the information provided by them is insufficient to enable any meaningful conclusions to be drawn. As a result no such information is included in the study findings. The fact that the authorities have generally not provided this information suggests a possible lack of post agreement monitoring. A similar study of practice in Wales found post agreement monitoring to be generally poor ("The Use and Value of Planning Obligations in Wales" Report to Welsh Assembly Government August 2007; see especially paras 1.12 and 5.9).

3.12 Finally, planning authorities were asked to provide information on development value but gave few responses to this question and as a result this information is not included in any of the findings.

3.13 (c) The Planning Authority returns to the Scottish Government on planning applications are incomplete

A few authorities have not made returns to the Scottish Government for some of the years in the study period. This affects our assessment of the proportion of all planning applications linked to an agreement. As a result, we have focussed just on a Scotland-wide assessment because at that level the missing returns should not have a significant effect.

3.14 (d) Contributions arising in connection with consents under the Electricity Act 1989

It is known that major wind farm developments tend to be linked with planning agreements. However, no authority provided information about these. As a result, the study team carried out an initial investigation using information available on the Scottish Government Energy Consents Unit website. This showed that only a handful of consents under s36 and s37 of the 1989 Act were granted during the study period and the information available on related planning agreements was insufficient to assess further. There are, however, a great many wind farm applications currently in the pipeline and this may become an important source of developer contributions in future.

Stage 2 - Case Studies

3.15 The main elements of Stage 2 involved sample case studies of 11 authorities, a valuation of the in-kind contributions identified in Stage 1, a literature review and forecasting of potential values to 2010.

Case Study Methodology

3.16 Eleven authorities were selected on which to base the sample. The relevant authorities were chosen following an analysis of the questionnaire and spreadsheet returns which were provided at Stage 1.

3.17 In order to ensure that a useful and truly representative picture could be gained, the following five factors guided sample selection:

(i) Geographical spread

A range of authorities were selected to ensure representation from north, south, east and west of the Country, urban and rural areas, large and small authorities.

(ii) Council approach to securing agreements

The sample was designed to ensure representation from authorities with a well developed approach including detailed or formula based Policy and Supplementary Planning Guidance ( SPG) and dedicated officers, as well as those who have no dedicated staff, no policy and appear to negotiate on an ad-hoc basis.

(iii) Authorities securing contributions from small developments

The Stage 1 returns indicated that some authorities are securing planning gain from small developments. They were included in the sample to provide a contrast to those authorities who only secure contributions from large developments.

(iv) Authorities securing in-kind contributions

The spreadsheet returns have shown that the majority of contributions secured involve a direct financial contribution. However, most authorities are also securing "in-kind" contributions. It is important that the sample should look in detail at the trends relating to "in-kind" contributions as well as financial ones, particularly with a view to forecasting the value of planning agreements in the period to 2010. The detailed analysis of the sample agreements will enable a value to put to "in-kind" contributions, and will produce data that can be used to enable forecasting for future agreements in Scotland as a whole.

(v) Type of legal mechanism used

The Stage 1 findings found inconsistencies in which legal mechanisms authorities use. To address this, the sample selection was designed to cover the different approaches being used, whether that be s75 (T& CP (S) Act 1997) only, s69 ( LG (S) Act 1973) preferred or a mixed approach. The data obtained from authorities at Stage 1 indicates a large increase in the use of s69 of the Local Government (Scotland) Act 1973 for the purpose of securing developer contributions. The sample is designed to inform discussion on this trend and explain the reasons for this growth.

Selection of Authorities

3.18 The authorities selected are identified below. A brief justification of why each was selected is given in Appendix 3.

• Aberdeenshire
• City of Aberdeen
• City of Edinburgh
• City of Dundee
• City of Glasgow
• East Dunbartonshire
• Midlothian
• North Lanarkshire
• Scottish Borders
• Stirling
• West Lothian

Methodology for valuing In-kind Contributions

3.19 The main aim of this study is to look at the economic and financial benefit accruing to the public sector, through planning agreements over the last three financial years. The majority of contributions are made through direct financial contributions. However, a number of contributions are provided in-kind. It is therefore necessary to put a value against the value of land or works involved in the contribution in order to fully assess the value of the contribution.

This section summarises the methodology used to ascribe financial values to the contributions received. A fuller description is given in Appendix 2.

3.20 In order to fully analyse the agreements, it was necessary to understand:

• what the proposed development is for;
• where the need for the agreement has arisen from;
• how it is justified in terms of statutory or non-statutory policy; and
• what contributions are being secured.

3.21 The planning officer's delegated or committee report on the application was obtained where possible to establish where the need for the agreement has arisen from and what effect it would have. This was supplemented by reviewing the relevant policy documents for each sample authority.

3.22 Key information was obtained where possible, including details of the planning application especially site location and description of proposal. This was important to enable the valuation of developments and developer contributions delivered in-kind.

3.23 Where the contribution involves a direct financial contribution authorities were asked to provide the study team with the details of that contribution. Where the contribution is delivered in-kind, valuation methods have been discussed with the Scottish Government.

In-kind Valuation Issues

3.24 It has only been possible to ascribe values to in-kind contributions where the information supplied by the planning authorities has been sufficient to do so. This applied to 129 of the 205 in-kind contributions that authorities advised.

3.25 By far the most valuable in-kind contribution is the provision of low cost houses and flats at a variable discount to market value followed by the provision of low cost, serviced housing plots. The balance of the in-kind contributions is made up by traffic measures, provision and upgrade of open space and numerous other minor items including provision of public art. Some of the terms of the planning agreements were deemed to be conditions that would apply to any normal planning consent and therefore valued at nil. These included occupancy restrictions on houses or commercial property, some landscaping, reinstatement of mining operations, provision of street lighting etc.

Valuation Methods

3.26 The valuation of the non-housing contributions in-kind was conducted mainly by direct analysis of the agreements completed by Scottish planning authorities which produced an average cost/value per residential unit or an average cost per item. Some items remained very difficult or impossible to assess such as travel plans or have been described by authorities simply as "unspecified works" with no other information given as to what that might constitute. In terms of travel plans, similar recent research in England and Wales has found that no values can be ascribed to such plans. The other rates are derived using the consultants' experience of valuing similar developments and are set out and explained in Appendix 2, Table A2.1.

Valuation of In-kind Affordable Housing Contributions

3.27 For the valuation of housing contributions the country was divided into the main cities, Glasgow, Edinburgh, Dundee and Aberdeen and all other areas are described as "rural". Consideration was given to the use of the Scottish Household Survey urban/rural classification but it was felt that these would make little substantive change to the data to justify a more complex analysis. For the valuation of houses it is assumed that the floor area of a two bedroom house is 75 sq m and a three bedroom house 100 sq m. It is assumed that a one bedroom flat extends to 50 sq m, two bedrooms to 65 sq m and three bedrooms to 85 sq m. From the consultants' experience, sale prices of £1,900/sq m were applied for rural houses with £1,750/sq m for a rural flat. Units in the four cities were assumed to sell for approximately £10,000 to £30,000 more. Serviced plots for flats and houses were valued between £35,000 and £52,500 each and represent approximately 30% of the market value of the average house or flat - see Appendix 2, Table A2.2.

Market Value

3.28 When assessing market values for residential properties we have arrived at our opinion of the market value taking no account of the ultimate owner or any restricted or discounted value to a registered social landlord. Values assume normal builder/developer profit. Market value is defined as what sale price would be achievable on the unrestricted housing market with no occupancy or planning restrictions.

3.29 It is assumed in all cases that low cost housing is being provided to a typical specification required by a Registered Social Landlord.

3.30 The values for in-kind affordable housing contributions were arrived at from the consultants' general knowledge of the Scottish residential property market and also from detailed studies carried out in a variety of Scottish communities. It is considered that this is up to date market information that reflects average Scottish house prices.

Valuing the different types of affordable housing in-kind contributions

3.31 Following extensive discussion with the Scottish Government regarding the method to be used for the valuation of the provision of housing to Registered Social Landlords ( RSLs), it was agreed that housing provided for RSLs is to be calculated at market value, regardless of the mechanism described in the planning agreements, some of which reflected a model closer to that used in the 2006 study for England and Wales ( DCLG, 2006).

3.32 The alternative valuation method is also described in section 3 of Appendix 2 - Valuation and Forecasting Methodology. This Appendix also describes in more detail the overall valuation methods used for the study.

Forecasting Methodology

3.33 In addition to valuing in-kind contributions, the study team was also required to forecast the possible total value of all types of contribution that may be secured to 2010. In order to produce those forecasts the study took into account variations in policy and practice between local authorities. Some authorities have mature practices in place with dedicated officers and a full range of policies and it is therefore assumed that their ability to evolve further and obtain increased levels of developer contributions is limited. However, some authorities are beginning to develop more refined systems and it is therefore assumed that the number and value of contributions they receive will increase. The forecasts are based on an assumption that all contributions had been paid and that applies to in-kind contributions as well. The forecasting of the anticipated value of contributions to 2010 also takes into account issues such as:

• the identified trends in agreements, policy and practice over the period to 2007 and our assessment of how these trends are likely to evolve;
• what is anticipated to happen in terms of development activity within the various local authorities in the period to 2010; and
• significant current and expected infrastructure projects that are likely to be linked with developer contributions.

3.34 Three tables have been produced giving projections of the values that may be achieved in the period 2007-2010 based on different assumptions. These are Tables 7.1, 7.2 and 7.3 in Chapter 7 of this report. Further details are also set out in Appendix 2.