Scottish Government

What are Learning Points?

Learning Points share what people have learned from their experience in regeneration - from people working or talking together, or from research into issues and evaluation of what is happening. Learning Points can help people and organisations to improve their practice through identifying what works and what doesn't.

The views described in Learning Points do not mean that the Scottish Centre for Regeneration (SCR) or the Scottish Government necessarily support them. They simply reflect what has been debated and what those involved in the event considered useful learning and lessons from their perspectives.

What is this Learning Point about?

This Learning Point summarises the learning from the Future Infrastructure Requirements for Services (FIRS) event delivered by the Royal Institution of Chartered Surveyors in Scotland (RICS Scotland) and the Scottish Government. It looks at current perspectives from the public and private sectors on the coordinated development of infrastructure. It also considers the current context in which development is taking place and the challenges that private sector housebuilders (and public sector partners) are currently facing.

The event focused on the experiences and lessons learned from the FIRS approach being taken in Aberdeenshire - outlined by Stuart Robertson, Planning Gain Coordinator, Aberdeenshire Council. Allan Lundmark, Director of Planning and Communications, Homes for Scotland, discussed the issues facing the house building industry in the recession and the industry's role in supporting infrastructure. This Learning Point provides a summary of the main issues, lessons and learning identified.

What is already known?

• Putting in place appropriate infrastructure (including services, amenities and transport systems) is essential to the success of any development. How infrastructure is delivered and how it should be resourced are key issues in the development process.
• Under the planning gain system, private developers contribute to the infrastructure requirement at development sites (where land values allow). In recent years, the house building industry in Scotland has been the largest source of private investment in roads, water and drainage infrastructure and other community facilities.
• Scotland has a chronic undersupply of housing.
• The housing industry is currently facing a severe recession. The 'credit crunch' has resulted in: reduced mortgage availability making it more difficult for potential buyers to come into the market; and very limited access to debt capital (ie finance for development).
• The recession has resulted in a housing production 'crash' and is having a significant downward impact on land values.
• The Scottish Government has stated (in Firm Foundations) that it would like housing production to increase to 35,000 homes per year in order to meet demand. At the time of this policy statement (2007) production stood at around 25,000 but the rate has dropped significantly since then.

What are the key issues?

• What is the role of the development industry in planning and delivering infrastructure?
• How can the costs of infrastructure development be more efficiently and fairly attributed?
• How can the public sector (and partners) better support development?
• What approaches are being taken to promote development in the current economic situation?
• What is the lasting impact of the 'credit crunch' on the housing industry in Scotland?
• What action needs to be taken to help the housing industry recover?

A coordinated approach to infrastructure provision

Stuart Robertson considered infrastructure provision from the public sector perspective and described how Aberdeenshire Council's Planning Gain Service has been developing a new approach for planning infrastructure known as Future Infrastructure Requirements for Services (FIRS).

Positive partnership with the development industry must take account of the following issues:

• The development industry does not like 'shocks' (these should be minimised from the outset through dialogue and information)
• Developers provide employment and buy from local suppliers
• Developers take commercial risks and have to make a profit
• It is developers that deliver the 'Local Plan'
• The 'credit crunch' has had significant negative impacts for developers (reduced profit margins, fewer buyers, and falling land values - potentially restricting availability)

Councils need to embrace a number of key issues if they are to successfully enable development in the current climate:

• Willingness to review payment schedules to ease developer cash flows
• Keeping the industry 'in the loop' - ensuring they are aware of possible actions and emerging procedures
• Identifying opportunities for developers to deliver infrastructure to the Council's specification and under Council supervision
• The desire to use public land for affordable housing means that land can be used to 'kick start' development (maintaining the capacity of the industry during recession)

The approach means that:

• The industry is informed of outcomes from the assessment process.
• The industry is asked to consider infrastructure requirements and determine sites that can be delivered.
• Deliverable sites are put forward into the Draft Local Development Plan (LDP). Possible alternative sites are assessed by the FIRS Group as contingency.

The FIRS approach is also concerned with fairer attribution of infrastructure costs. In Aberdeenshire, the Council is looking at providing up-front funding for certain infrastructure which would then enable it to be in the position to apportion costs among all developers through the course of development on a pro rata basis. This would provide more certainty for developers and the Council.

Supporting house building

Allan Lundmark outlined the issues currently facing the house building industry and gave views on the way forward. In the context of the Scottish Government's target for increasing production to 35,000 homes per year, production has been declining in the recession - from just below 25,000 in 2007 to less than 10,000 this year. The impact of the recession on house building has taken £3 billion out of the Scottish economy and 50,000 people have lost their jobs in the industry (this will do significant damage in terms of the skills and capacity lost to the sector).

Currently developers are "competing for cash flow not for profit" and trying simply to keep up production. It will potentially take decades for the industry to recover. As such, the house building industry needs major structural intervention to improve the production rate.

Over the longer term, liquidity in mortgage markets and access to debt financing will improve. In the short term, there should be action on delivering infrastructure in order to support house building:

• Investment in infrastructure to stimulate recovery - but it was argued that the model of planning gain where the public sector plans and private sector pays was never sustainable.
• Remove burdens on house building relating to infrastructure and community facilities - if the house building industry is there to build homes this should be its focus. In the current economic climate these burdens should be removed to help production continue.

The presentation highlighted the key segment of the market (households with annual income between £20k and £40k) where people want to buy but aren't able. This is the segment where there is the greatest demand and where production is currently weak. While it should be possible to build houses for this segment (priced at around £100k to £130k) inhibitors are land values and the infrastructure burden. It was argued that in order to make this segment attractive to investors there has to be a major fiscal incentive.

The following issues were raised in relation to improving the development process:

• Land supply - How effective is the land supply? All planning authorities need to look at this and make more land available for release. There is potential for innovation and more small scale release of land. A key question is whether land values can currently support the development of family housing and fund infrastructure.
• Planning - We need to speed up the planning process (planning applications typically require 21 separate background studies - can this be reduced?).
• Sustainable energy strategies - Can sustainable approaches to developing housing and transport help cut costs and make procurement more efficient? We need to get smarter about linking housing to sustainable transport systems.

What did people learn from the event?

• If infrastructure is an 'after-thought' in development it can be in the wrong place or not appropriate (and therefore a waste of time and money). There are benefits from informing developers of requirements from the outset. Under FIRS, the Council is determining preferred sites and the timeline for delivering major infrastructure.
• Proportional contributions to infrastructure will open up access to development - developers of all sizes will be able to bid for sites.
• The development process is more effective when uncertainty is removed.
• Better medium to long term planning can reduce infrastructure duplication and costs.
• A strong partnership model means that the private sector and public sector (Council and external partners) have a greater understanding of each others' requirements.
• There has to be cross-boundary working to ensure consistency in planning of major infrastructure.
• Local authorities need to be "risk aware, not risk averse". They should be prepared to take risks with infrastructure to encourage development - but minimise that risk with good planning.

What next?

The Scottish Centre for Regeneration and RICS are working in partnership to deliver a number of practical outputs on land assembly and development delivery though the Mixed and Sustainable Communities Learning Network. If you want to keep in touch with these developments and have not already done so, you may like to sign up to the Network or contact Geraldine McAteer, the Learning Network Co-ordinator, on 0141 305 4091 for more information.

Find out more...

• Find out more about the approach being developed in Aberdeenshire in the case study.
• You may be interested in joining one or more of the SCR's Learning Networks. The Networks share best practice in relation to: Community Regeneration and Tackling Poverty, Town Centres and Local High Streets, and Mixed and Sustainable Communities.
• Firm Foundations is the Scottish Government's discussion document on the future of Scotland's housing.
• Find out more about the Planning System in Scotland.
• The Scottish Government's National Performance Framework sets out national outcomes that the government wishes to achieve - many of which link to housing and regeneration.

Scottish Centre for Regeneration

This Learning Point is published by the Scottish Centre for Regeneration in partnership with RICS. The Centre is part of the Housing and Regeneration Directorate of Scottish Government. We help to achieve Scottish Government's Purpose, Targets and National Outcomes through supporting our public, private and voluntary sector delivery partners to become more effective at:

• regenerating communities and tackling poverty
• developing more successful town centres and high streets
• creating and managing mixed and sustainable communities.

We do this through:

• coordinating learning networks which bring people together to identify the challenges they face in delivering regeneration and to support them to tackle these through organising events, networking and capacity building programmes

• identifying and sharing learning through undertaking research, developing capacity building tools and highlighting lessons learned and good practice

• developing partnerships with key players in the regeneration sector to ensure that our activities meet their needs and support their work.

Scottish Centre for Regeneration, Scottish Government, Highlander House, 58 Waterloo Street, Glasgow G2 7DA
Tel: 0141 271 3736
Email: contactscr@scotland.gsi.gov.uk
www.partnersinregeneration.com

RICS Scotland

RICS Scotland (Royal Institution of Chartered Surveyors in Scotland) is the leading organisation specialising in land, property and construction and related environmental matters in Scotland.

The organisation represents around 10,000 chartered surveyors, advises the Scottish Government, works closely with relevant organisations and under its Royal Charter puts the interest of the public at the forefront of its work.

It maintains standards within the profession through the accreditation of university courses in Scotland, challenging examination of potential members and life long learning for existing members.

• 15% of members cover land including: rural, minerals and waste management, geomatics, planning and development and environment

• 41% work in property including: residential, arts and antiques, commercial; plant and business asset, facilities management, management consultancy and valuation

• 44% are involved in construction including: quantity surveying, building surveying, project management and dispute resolution.

RICS Scotland is a national organisation and part of a global RICS network of offices around the world including New York, Sydney, Hong Kong and Dubai. RICS is the mark of property professionalism worldwide.

RICS Scotland, 9 Manor Place, Edinburgh, EH3 7DN
Tel: 0131 225 7078
www.rics.org/scotland