Infrastructure and Incentives

The planning, design, provision and financing of urban infrastructure have always been a key function and rationale for urban planning, as emphasised in Chap. 2. If you look at contemporary slums internationally, the informal settlements of third world cities, you find that the most immediate need of these areas is for roads, water supply, sewers and other utilities, and the space to put them (just as in the nineteenth century British slums). The infrastructural function of planning became rather taken-for-granted in twentieth century British planning practice and is not much discussed in most textbooks. This neglect was not critical in the era of traditional local government and public utility structures up to the 1970s, although there was still considerable grounds for criticism that major new housing developments often lacked a wider social infrastructure (recreation and community centres, nursery and play facilities, health clinics) or a good range of ‘services of general interest’ (SGIs, to use the Euro-term) including convenience retail and allied services (cafes, pubs, hairdressers, etc.).

Changes from the mid-1970s, as part of the general shift towards more neoliberal market-oriented economies, including local public spending cuts (especially in capital investment) and the privatisation of utilities and public transport, broke the link between local authorities as the planning agency and the provision of most infrastructure. It became necessary to re-establish mechanisms, through formal consultation, by which local authority led land use plans could ensure that infrastructure would be provided, through the corporate investment strategies and procurement mechanisms of the utility providers, often overseen by a consumer-oriented regulator. In the process, the cost of infrastructure provision has tended to shift from the general taxpayer towards a combination of the developer making a contribution and the utility consumer paying higher bills.

The need to find new solutions to the problem of paying for infrastructure, as well as to meet the rising aspirations of new communities for better community facilities, encouraged local authorities to make use of their planning powers to strike agreements with developers under section 52 of the T and CP Act (s.106 of the 1990 Act). This was an increasingly common use of such agreements in the 1970s and 1980s, before their use for affordable housing became significant. Throughout the 1990s and 2000s, this became more and more common, indeed approaching a norm for larger developments, as documented in, for example, Crook et al. (2010) who showed that in the peak year of 2007 ?5.2bn of contributions to infrastructure and affordable housing were claimed in England.

Government and advisory commissions (e.g. Barker 2004) questioned whether this ad hoc negotiated approach was the right way forward and sought a more rationalised system where developers would face a more predictable set of requirements, with an accountable connection between contributions and infrastructure delivered, and consideration for the viability of the development. After nearly a decade of debate, proposal and modification, this finally emerged in England as the CIL. Local authorities compile a schedule of infrastructure requirements associated with their local plans and determine a scale of payments as contributions towards these. This has created a newly formalised and overt role for planners as ‘infrastructure planners’. Affordable housing remains outside the remit of CIL and may still be the subject of planning agreements, as discussed below, but the general use of planning agreements for infrastructural purposes has been significantly scaled back in England as a result of the CIL (which does not apply in Scotland).

First through planning agreements, and more recently through CIL, England has come to achieve similar goals to local authorities in many US states and elsewhere who impose ‘impact fees’ on development. However,

CIL is expected to be variable between localities and sensitive to the economic viability of development in different areas. Rather than a blunt flat-rate imposition, CIL is intended to operate as a kind of a progressive tax on land values (and explicitly not as a discouragement to development in economically marginal communities).

The use of financial incentives to encourage (critics would say ‘bribe’) reluctant communities and local authorities to plan for more housing, and to approve and support development applications through the planning system, is a more recent innovation, prompted mainly by the considerations of the Barker Review (2004). Barker examined the current local finance system in Britain and concluded that it did not give a strong and clear financial incentive to local authorities to support development; although local taxation is quite significant. Local authorities perceive that additional housing will increase their costs for services (schools, nurseries, social care, recreation, etc.) without commensurate extra money. In this respect, the situation in Britain is unlike that in quite a lot of other countries. Reviewing the situation just across the different countries considered in this volume, it is quickly apparent that the fiscal links between new housing development and local authorities’ financial position are crucial in explaining some of the wide differences in behaviour between, say, mainland China or Spain, on the one hand, and Britain and the USA on the other.

The CIL, and more legitimised planning agreements, can create a financial incentive to support development. The post-2010 Coalition government also introduced an explicit incentive, known as the New Homes Bonus (NHB). This was calculated as a payment equivalent to seven years of the annual local tax (Council Tax) payment per dwelling in addition to the local authority’s grant. This system has now been in operation for a number of years. It is not clear that it has radically transformed attitudes or behaviour, or indeed led to an upward step change in housing supply (DCLG 2014). Critiques have argued that the incentives are not large enough to meet the extra infrastructural costs of new housing, with s.106 planning agreements and CIL securing greater benefits for authorities and of more importance in practice. The grant was paid for by reductions in the general grant to local authorities, so what was given with one hand was taken away with another—and this was happening in the context of authorities taking an enormous cut in general service budgets (Hastings et al. 2015). To use the economic jargon, the incentive ‘price effect’ of

NHB might be swamped by a negative ‘income effect’ as local authorities got visibly poorer. In addition, there was an interesting contradiction revealed, whereby it was perceived as ‘illegitimate’ for planning authorities to be swayed on individual decisions by financial incentives, given their quasi-judicial and public interest role, and similarly inappropriate for authorities to channel the financial benefits to particular neighbourhood communities affected (Dunning et al. 2014).

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