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How The Localism Act Can Affect Land Values

By Expert Author: Kelly Leary

Land Investment in the UK Can Be Affected By the Localism Act 2011

The decentralisation of decision-making relative to land use, as provided in the Localism Act 2011, might help or hinder land investors’ return on investment.

The Localism Act 2011 is, like any piece of sweeping legislation, both prized and pilloried, depending on whom you discuss it with. It is welcomed by many in its intent, which includes providing residents the power to initiate local referendums. This can apply to any local issue, and it includes the power to veto council tax increases (expected to be very popular over time).

With regard to land and housing, there are some key points of the Act that can affect owners, investors, developers and the eventual occupants of land and property. Essentially it decentralises decision-making for land use and infrastructure development, taking it away from the now-defunct Infrastructure Planning Commission. It also allows community residents, not a centralised commission, the following:

• Levies. Local councils can impose a Community Infrastructure Levy on developers to pay for infrastructure improvements that will accommodate development.

• Community voting. Allow neighbourhood plans that are approved by 50 percent or more of votes cast in a referendum.

• Local decisions. Such neighbourhood-approved developments can be implemented without the requirement of planning consent.

For the land investor a natural question may simply be, “Is this a good thing?” The answer may lie in the skills of the investor (or the investor group and its professional land acquisition and development advisors) in working with communities. Are investors able to make a convincing case for development, for example, in a situation where land use zoning needs to be changed? While the intent of the Act is to expedite the development process, will that in fact happen in all cases?

To the matter of the Community Infrastructure Levy, this of course impacts the expense side of land investors’ balance sheets. It may well be affordable to pay for the development of roads, sewers, water supply and the like within a complex land site assembly plan. Or will a community activist, intent on blocking development, push for unnecessary and exorbitant community features that effectively stop development plans?

For the local communities, the questions also arise as to their capacity to effectively use the powers of the Localism Act. Do they have the capacity within community and voluntary organisations to produce smart neighbourhood plans? Will some factions wield asymmetrical power over others such that non-democratic outcomes result?

These and other questions may well find answers on a project-by-project, community-by-community basis. In some scenarios it might increase the overall return on investment for the land investor. Elsewhere, it may decrease it. The difference might lie in the skills of the investors themselves, able to anticipate both opportunities and problems created by the Act.

For the individual who contemplates becoming a strategic land investor, understanding the significant opportunity to invest in land that draws from the economics and housing needs of a growing population, these are important questions. Such individuals are advised to work with their qualified financial advisor to sort through the risks and rewards present in the current economic environment.

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