Tenancy Trends

Tenant Farming Commissioner, Bob McIntosh reflects on the trends of agricultural tenancies in Scotland. Bob - portrait NEW 

The ability to rent agricultural land is important to the development of the agriculture sector. It brings together those with land but no desire to farm and those who desire to farm but have no land and it provides opportunities for new entrants who don’t have the capital to buy a farm.

While the principle is widely supported, the mechanisms for achieving a healthy renting sector have evolved and changed in response to the constant search for the ideal balance between the landlord’s desire for flexibility and the tenant’s desire for security. Prior to 2003 the secure (Agricultural Holdings (Scotland) Act 1991) tenancy was the main method of letting land but successive changes to agricultural holdings legislation have made this vehicle less attractive to landlords. The introduction of Limited Partnership agreements and the rise of contract farming arrangements was a common response by landlords and in recognition of the need for new letting arrangements the 2003 Agricultural Holdings (Scotland) Act saw the introduction of limited duration tenancies (LDTs). With 15 years experience now of limited duration tenancies it is interesting to review the current tenancy statistics and trends.

The total area of agricultural land rented out has been in long term decline for decades and by 2018 only 22% of Scotland’s agricultural land was in some form of rental agreement. Interestingly though, the last two years data suggest a small rise, for the first time in many years, in the area in some form of rental agreement. The most recent Annual Agricultural Land Occupation report produced by the CAAV has suggested that, for the first time, there was a rough balance between land leaving and entering the rented sector in Scotland. Whether this is a flash in the pan or represents a reversal in the decline of tenanted land remains to be seen but it is an encouraging sign. Of course land coming out of the rental sector is not always bad news. Scottish Government figures indicate that around half of the land coming out of tenancies between 2005 and 2015 was due to tenants buying their farms. While this may diminish, at least in the short term, the number of farms available for rent, it contributes to the Scottish Government’s desire for a greater diversity of land ownership and is clearly something that has been welcomed by the tenants given the opportunity to purchase their holding.

Since 2003 the number of Short Limited Duration Tenancies (SLDTs) and LDTs has steadily increased. By the end of 2017 there were estimated to be 1192 SLDTs and 710 LDTs in existence, some 4370 secure (91 Act) tenancies and some 459 Limited Partnership agreements. Over the last 12 years, therefore, the percentage of total tenancies represented by the limited duration tenancies has increased from 5% to 28% while secure tenancies have declined from 85% to 64% and Limited Partnerships from 11% to 7%.

While it seems clear that the introduction of limited duration tenancies has had a beneficial effect on the number of tenancies available, it is also clear that the duration of LDTs, which can be on any length, is tending to be relatively short (10 to 15 years). It seems that landlords are being cautious about committing to long term leases, probably because of a desire to retain future flexibility and fear of further legislative changes that might increase security for the tenant and/or extend the pre-emptive right to buy to limited duration tenancies.

This creates uncertainty for the tenant about the possibility of an extension and may reduce the incentive for the tenant to invest in improving the holding. It will also undoubtedly lead to some difficult discussions when a tenant who has invested emotionally and financially in a 15 year tenancy is told that it is not being renewed and that the tenant has 2 to 3 years in which to quit the holding and find an alternative home and possibly an alternative occupation. Even though there are legal grounds not to renew a tenancy there is the risk that political and public opinion may see this as an unfair ‘eviction’ and the sector has to approach this situation with care and sensitivity.

Ultimately, a fixed term tenancy must be able to be treated as such and landlords have the right not to renew a tenancy if it is not in their best interests. However, such a decision will be more readily supportable if it is preceded by a constructive dialogue with the tenant that attempts to find a mutually acceptable way forward. Such a discussion might include consideration of the tenant’s age and retirement plans, any opportunities for relocation or continued occupation of the house even if the land is not being re-let and any other special circumstances that might lead to consideration of an extension to the existing lease, granting of a new lease or formation of a joint venture or partnership as an alternative way forward. It may not be possible to arrive at a conclusion that suits both parties but that can only be determined if the discussion takes place.

Looking to the future, we have yet to see any impact of the recently introduced Modern Limited Duration Tenancy (MLDT) though its similarity to the LDT suggests that it will not radically change the direction of travel. We can perhaps expect to see more examples of partnerships, joint ventures and share farming arrangements between landlords and tenants as an alternative way forward. Such arrangements have the potential to increase the opportunities available to new entrants to ensure the ongoing        vitality, resilience and competitiveness of the agricultural sector and rural regions in Scotland.

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The future of community ownership

Scottish Land Commissioner, Lorne Macleod, looks at the future of community ownership following the publication today of the Commission’s recommendations to Scottish Ministers.

The ability of communities to own the land on which they live and work has long been central to the land reform agenda in Scotland. Land Commission board portraitsWith more than 562,000 acres of land in community ownership, many parts of Scotland already have control of their local land asset.

We have published a report today which looks at how this can continue to grow and for community ownership to become a normal and realistic option for communities across Scotland.  The sector is developing rapidly, and to become a normal option for both urban and rural communities there needs to be a clear vision for the way in which community ownership matures over the coming decades.

The report was informed by research from a team at Scotland’s Rural College which considered the experience of community ownership in Scotland over the last 25 year .

We make a number of recommendations for the future of community ownership; in particular, that it should become a routine option for communities, so it is planned and proactive rather than reactive.

We recommend that there needs to be a:

  • clear vision for how community ownership can become a mainstream way to deliver development and regeneration in urban and rural communities
  • recognition that community ownership is not an end in itself but a means to delivering wider outcomes
  • a shift from community acquisition being driven either by specific problems or a reaction to land coming onto the market, to being planned and proactive.

We will now work with Scottish Government to bring interested stakeholders together in a Community Ownership Delivery Group (CODG) to shape the policy tools and specific interventions needed to deliver the recommendations in the report that include:

  • embedding community land and asset ownership into local place planning
  • ensuring that targets for community ownership reflect the outcomes sought in both rural and urban communities
  • ensuring support for community ownership transfers is provided across the whole geography of Scotland
  • considering longer-term sources of financial support for both capital costs and post-acquisition development
  • supporting negotiated transfer of land as the norm, whilst streamlining right to buy processes.

Community ownership and right to buy has developed significantly over the last 20 years and community ownership is now seen as integral to regeneration and sustainable development in both rural and urban contexts in Scotland.

Community ownership should be seen as normal and routine, as it is internationally, for a community to acquire and own land that could provide local housing, business development, community facilities, recreation facilities, greenspace, as a fundamental way to create more vibrant communities and regional economies.

Community, communal, and municipal land ownership has a long history and is perfectly normal across much of Europe and elsewhere so the next stage of the Commission’s work will be to explore what makes such ownership successful, to draw lessons that can help normalise and support further community ownership, and inform that sustainable long term vision for the sector in Scotland.

We see community ownership as one part of a much more diverse  land ownership pattern in Scotland. It can unlock productivity, spread the benefits of land more widely and give people a greater stake and influence in land use decisions. We are delighted the Cabinet Secretary has accepted in principle our recommendations and we look forward to playing our part in enabling communities to take on ownership of the land and assets they need to meet their needs and ambitions.

TFC blog: Housing in Agricultural Tenancies that are occupied by the tenant

Houses which are rented out in the non-agricultural sector are subject to regulations which ensure that the landlord provides a property that meets certain minimum standards. Unless exempt, private landlords are required to register with the Local Authority and Local Authorities have powers to intervene if a rented property is not meeting the required standard. Bob - portrait NEW

 The Tolerable Standard (TS) is a very basic standard that all houses should meet, including those in agricultural tenancies. It is a condemnatory standard: accommodation which is below the TS is not acceptable as living accommodation and Local Authorities have a duty to ensure that they are closed, demolished or brought up to standard. The Repairing Standard (RS) is the minimum standard that should apply to any property let out on a residential tenancy.

 The requirement to meet the RS does not currently apply to most privately rented agricultural housing.  Housing on agricultural holdings, including ‘tied housing’, rented crofts and small landholdings that is rented to an individual under an agricultural tenancy is currently not required to meet the same standards as other private rented accommodation.  In such cases the farmhouse is treated as an item of fixed equipment like a shed or any other item of fixed equipment. The result is that in most tenancies the landlord has the responsibility for replacing and renewing parts of the farmhouse which are worn out through fair wear and tear and the tenant is responsible for repairing and maintaining the farmhouse. In cases, however, where a post lease agreement may have transferred responsibility for replacement and renewal of fixed equipment in a secure tenancy to the tenant, this will include the farmhouse. The end result of this is that some farmhouses have been improved by the landlord, some by the tenant, some by both and some have hardly been improved at all.

 All of this is set to change. The current position arguably puts the agricultural tenant in a less favourable position than someone in a rented house in the non-agricultural sector.  Scottish Ministers have indicated that they do not see it as equitable or acceptable that this situation should continue, and intend to make legislation in 2019 to introduce a requirement for rented agricultural housing to meet the RS by 2027. This should give ample time for discussions about what work may be required and where responsibilities lie, and for the necessary work to be carried out.

 This change will undoubtedly lead to some difficult discussions between landlords and tenants. The legislation puts the onus for any work required on the landlord but it is not clear whether this will take precedence over existing post lease agreements which transfer responsibilities to the tenant. No doubt too, this will be an opportunity to engage in the age-old pastime of disagreeing over whether some of the work that may  be necessary  is due to the landlord’s failure to renew or replace or the tenant’s failure to maintain. Whatever the complexities of agricultural holdings legislation, Ministers have made it clear that they expect these complexities to be addressed, so entrenched positions will not deliver a solution. A summit on this issue has already taken place last month, and all involved in the agricultural holdings sector need to give this issue some serious thought and must come together to agree a sensible way forward that respects the legislation and which is fair to both landlord and tenant. We have the time to do this, and hope that landlords and tenants will work together on this in the same cooperative way they have on other shared challenges.

TFC blog: The importance of recording agreements in writing

A good business relationship between a landlord and a tenant is often founded on a good personal relationship. The ability to talk openly about issues and to reach amicable agreement on any issue related to the lease and to the tenancy is a positive attribute which most tenants and landlords would want to share.Bob - portrait NEW

Unfortunately, however, the existence of a good relationship can lead to a false sense of security when it comes to reliance on verbal agreements. The landlord and tenant know each other well, they trust each other, and they are confident that each will remember and honour the agreement reached. All of that is fine while the relationship is good and while the landlord and tenant who made the agreement are still involved but time moves on, memories fade and tenants and landlords pass on responsibilities to their successors. At some point the issue on which agreement was reached comes up and the new party, be it landlord or tenant, has no knowledge or record of what was agreed and is reluctant to accept the other party’s version of events. The result is acrimony and a souring of the relationship.

I have come across a couple of such cases recently and I’m sure that there are many others out there. In one case the landlord and tenant had agreed verbally that one of the farm cottages in the tenancy would go back to the landlord to let out. When the landlord ceased to let the cottage it stood empty for a time, eventually attracting a large backdated council tax bill and some vandalism for which there was no insurance cover. The result is an argument between landlord and tenant over responsibility for council tax and repairs and all because no written records were made of the agreements reached and the consequences for the respective responsibilities of landlord and tenant.

Any agreement made between landlord and tenant which impacts on the terms of the lease or the responsibilities of either party should always be confirmed in writing. In some cases this may require a formal legal agreement but in others a simple letter setting out what had been agreed should be provided by one of the parties and agreed by the other, with both parties retaining a copy for their records. Without the ability to provide evidence of any agreement reached, there is a high risk of future disagreement and dispute which can only damage the landlord/tenant relationship and which may have adverse financial consequences for either or both parties.

Bob McIntosh
Tenant Farming Commissioner

Compulsory Sale Orders – adding to the regeneration toolbox

Earlier this year, I blogged about how the Scottish Land Commission was developing proposals for the potential introduction of a Compulsory Sale Order. Here I also discussed why we need such a power. We have now published a detailed proposal informed by comprehensive discussions with a wide range of experts and organisations that have experience ranging from regeneration, housing, valuation and human rights.

The problem

Vacant and derelict land and buildings present real challenges for communities across Scotland. The quality of life for existing residents can be damaged. There are 11,600 hectares of vacant and derelict land in Scotland (an area almost twice the size of the City of Dundee) and with more than 37,000 long-term empty homes in the country.

Often smaller areas of vacant and derelict land or buildings in built up areas in particular, can make it more difficult to meet community needs especially where affordable housing, urban green space or cultural facilities needs are great. They can act as a deterrent for investment which can hold back regeneration.

In the current regeneration toolbox, Scotland has mechanisms that allow planning authorities and communities to buy such sites. However what happens when neither have a specific end use in mind for problematic sites? What if the authority or community body hasn’t got the capacity or resources to take on the site themselves? Seeing such sites being put into some kind of productive use that will benefit the local community is often desirable but the current tools available might not always be appropriate.

Transfer and transform

The Compulsory Sales Order (CSO) would offer an additional way for planning authorities to deal with such eyesore sites. By enabling a transfer of ownership, these sites could be transformed. This is backed up by research evidence which suggests that a change in ownership that transfers a property from a passive to an active owner is often a necessary pre-condition for bringing vacant and derelict sites back into productive use.
A CSO power would offer a planning authority (on a case-by-case basis) the chance to:

  • firstly, investigate a site. This would be very important step because it provides an opportunity to bring about a mutually acceptable resolution between the authority and the owner. This step must be taken before a formal order could be issued, demanding the sale of the property via an auction. A CSOs is not intended to be a punitive instrument it can help facilitate a constructive dialogue with owners of problematic sites, arguably one of its strengths.
  • provide a more reliable measure for valuing vacant and derelict urban sites. An auction is an efficient way for revealing the true market price of a site at any given point in time, especially when they are difficult to value or estimate as there may be no accurate comparisons.
  • commit a new owner to bringing the property into a productive use. Conditions attached to the sale would mean that new owners are required to complete the development and bring the site into a productive use within a fixed period of time.

Let me illustrate this with some examples, which may be all too familiar..

The abandoned gap site

Take, for example, an abandoned and neglected gap site which has been in this state for several years. Even though planning permission was granted a few years ago, nothing has been done with it.  There’s litter and overgrown trees which are blocking out the light for nearby residents. This is having a negative impact on the wellbeing of the community and compromising the quality of life of nearby residents. No one within the community has any particular desire to take ownership of the site but people are keen for action to be taken to improve its physical appearance.
What are the reasons preventing the site being brought into productive use? A preliminary investigation for a CSO could help identify these and potentially even help bring about a mutually acceptable resolution, or ultimately issuing a CSO could result in ownership being transferred to a more active and responsible owner. A CSO could therefore be an effective tool for improving the site and bringing it back into productive use in the interest of the public.

 

The derelict hotel

There’s also the example of an unloved and derelict hotel which may not be an uncommon sight in town centres of smaller rural towns. It’s been neglected for a long period of time and is an eyesore. It’s also a danger to the public and building standards notices have been issued to the owner- a company that is difficult to contact and isn’t doing anything to improve the situation.
Yes, the right to buy legislation could potentially be a route for bringing this site back into productive use, however taking on such a site by a community body may be complex and technically challenging. Equally, compulsory purchase could be an option for the local authority yet resource constraints mean that, unless the physical condition of the building becomes a serious danger to public health, it’s unlikely that the authority would compulsorily buy the site. There is therefore currently no realistic prospect of the site being brought back into productive use.

 

Empty homes

There is a strong appetite to use CSOs to help address the problem of empty homes and the harm that these may cause not only to housing supply but also physically, to the community.
A useful example comes from the south west of Scotland where in the early 2000s a resident of a small market town purchased a flat in the centre of the village to live in.  The owner continued to buy the neighbouring flat and the commercial premises on the ground floor, eventually owning the entire property.  The owner moved away and the property has been empty for the last 15 years and the physical condition of the property has deteriorated significantly. It’s now in an extremely poor state of repair.  A recent valuation estimated the current market value at far less than the original price that the owner originally invested.
The local authority is very keen to bring it back into productive use to help address a chronic shortage of affordable housing in the area. They’ve offered to purchase the property for a price significantly above the current market value but the owner is unwilling to sell because the price offered is still considerably below what he originally invested in the property. There is currently no prospect of the property being brought voluntarily to market. Compulsory purchase is also currently not an option as the authority doesn’t have the budget or a development partner.  This means that there is currently no mechanism that the authority can use to bring the property back into productive use. Here a CSO could offer a way forward in developing the site and making it productive again.

Our proposal includes several more real life examples to help create a picture where a CSO may or actually MAY NOT be the best tool to use for dealing with a particular site. It is important to view the CSO not as a silver bullet but potentially a powerful additional instrument for urban renewal in Scotland.

Read the full proposal here.

Community Land Week: community land ownership becoming the norm

As Community groups across Scotland are opening up their doors showcasing what Land Commission board portraitshappens on community owned land in the first Community Land Week, Scottish Land Commissioner, Megan MacInnes looks at the importance of community land ownership and its success story in Scotland’s land reform journey to date:

Land across much of the world is traditionally owned and managed by communities but the community right to buy land that we have in Scotland is unique. According to the 2015 SPICe Briefing ‘International Perspectives on Land Reform’ the “shift in policy towards community ownership in Scotland since the Land Reform (Scotland) Act 2003 is in contrast to the apparent European trend towards increasing land consolidation” and the Scottish Community Right to Buy exists no-where else.

From pioneering beginnings in places like Assynt, Knoydart and Eigg, community ownership has become an established model; relevant to rural and urban communities alike. As it has grown, so has the level of ambition and recognition of its potential. Efforts to find ways to ensure communities legally own the land they live on in Scotland are being reflected by efforts globally, in particular increasing the tenure security of the land belonging to indigenous peoples and local communities.

Land ownership brings within community control an ability to realise opportunities and create social and economic benefits, an ability to develop income streams and confidence to shape local assets, services and places.  Community land ownership is an effective means to deliver community-led development and regeneration, underpinning resilient local economies, delivering outcomes that go well beyond a change in ownership. But more than this, communities owning lands transforms the relationship between local people and the land on which they live and how decisions about the land are made.

In addition to the benefits for the community itself, other types of land owners could learn from the ways in which community land ownership models integrate transparency, community engagement and local accountability into the heart of decision-making around land, its use and management.

Of course, community land ownership is not ‘the answer’ for all communities, or indeed to all calls for land reform. It is not the only way to realise opportunities for development, nor should its challenges be underestimated. But we do think that it should be a much more common part of the mix of land ownership in all parts of Scotland both urban and rural.

The public interest outcomes of community land ownership across rural and urban communities are the same but the increasing interest in community ownership in urban centres demands a fresh look.

In urban centres it may be ownership of a single building that will make the difference, but the same may be true for a rural community. While for some communities ownership of a large ‘estate’ land holding may be appropriate, for many more it is ownership of sufficient land to meet local housing needs, community facilities, recreation space or assets to generate long-term revenue that will make the difference.

Community ownership needs to be recognised and integrated into established and emerging approaches to economic development and regeneration.  Community ownership connects place-making, social and economic resilience and regeneration.

To continue with the success of community ownership it is important that the number and range of communities benefitting from having land and assets under community control is monitored and what this enables them to achieve is appraised.  The success of community land ownership is being evidenced by the active and resilient communities in which ownership of land and buildings is seen as an integral part of shaping their long-term provision of facilities, services, revenue and opportunities.

With the introduction of the urban community right to buy, there is a move for community land ownership to become ‘normal’ and seen as an option for communities across the country.  To continue the success story of community land ownership it is important to support that shift and for it to be normal process for communities to consider what land or buildings around them should be owned by the community and taking a proactive, planned approach to acquiring them.  Negotiations between a willing seller/willing buyer need to be encouraged with existing and forthcoming rights to buy effective in enabling communities to purchase land.

The Scottish Land Commission is currently carrying out a detailed study on opportunities to improve existing rights to buy, and what wider steps are needed to make community ownership a more viable across Scotland. We will be publishing our findings and recommendations to Scottish Government in the next couple of months.

Community Land Week is an excellent opportunity to learn from those communities who have gone through the process, the lessons they have learned and how they have made it a success.  Have a look at Community Land Scotland’s website to find out more:  www.communitylandscotland.org.uk

 

 

 

 

 

 

 

Barriers to entering agriculture

Scottish Land Commission Policy Officer, James Mackessack-Leitch looks at ‘Barriers to entering agriculture’:

As with any industry, sustaining a cohort of new entrants is crucial to the ongoing vitality, resilience and competitiveness of the agricultural sector and rural regions.1

One of the perhaps lesser known workstreams the Scottish Land Commission is James FINALadvancing is around reviewing the barriers to entry to agriculture, and how to overcome them. Although there’s a lot of uncertainty in the sector at the moment, there is one thing we do need to address regardless of what the future holds: getting more new talent into agriculture by ensuring that existing farmers have the tools and confidence to involve newcomers in their business, and ensuring that the energy, enthusiasm, and innovation new entrants bring to the industry isn’t lost.

At the Farm Advisory Service’s New Entrants Gathering in Perth earlier this year, I saw first-hand a room full of enthusiastic young people who – via a perhaps unscientific straw poll – indicated that the biggest barrier to their entering agriculture was a lack of access to land. Given the previous research in the area over at least the past decade has shown similar results that shouldn’t be a surprise – but it is a growing concern.2

While there’s a lot of good work going on in agricultural education, and the creation of starter farms on public land – where the FONE group have done a power of work – there is more we can and should be doing. Which is why earlier this year the Land Commission engaged the James Hutton Institute to dig into this issue, and crucially, suggest some practical solutions to increase the availability of farmland for new entrants.

The report by McKee et al. which has just been published explores:

  • Current experience and understanding of joint venture options such as contract farming, partnerships, share farming, agricultural tenancies, and leasing/licensing
  • The potential for tax interventions, with a particular focus on income tax relief in relation to tenancy creation/length
  • English, Welsh, and Irish experience of land matching services
  • The development internationally of farm incubators for new businesses

So far the joint ventures and tax interventions have attracted the most attention, and will likely be the focus for the short term, but I think there’s definitely something in the development of a Scottish land matching service, and incubators too.

Following the setup of land matching services in the Republic of Ireland, Wales, England, and Northern Ireland over the past few years, Scotland is now alone in not having a similar service available to landowners, farmers, and potential new entrants.

In essence a land matching service is like any other matchmaking (or dating!) service. A farmer or landowner registers their details, along with an indication of what they are offering in which sector (land, joint venture opportunity, etc.). Likewise, the potential new entrant registers their details including qualifications and experience, whether they bring any assets, and what their aspirations are.

The matching service then matches suitable candidates, and offers to facilitate the initial meetings. If things go well, both parties are then free to enter into a business relationship. Additionally the service may be able to support both parties in drafting agreements, and provide advice.

Incubators have a different focus, and generally provide training and mentorship as well as the opportunity to take risks. They may also provide some funding, and access to a network of supporters and previous users for advice – and even subsequent progression.

Crucially, incubators provide an environment for new entrants to experiment where the focus is on innovation, research, and development – not absolute profitability.

Given the high risk associated with incubators, international experience shows these are almost exclusively limited to public and third sector landowners. However, for some larger private landowners developing a small incubator unit could well lead to significant rewards with the right people and support in place.

In the current climate of uncertainty it may seem strange to be encouraging more people into agriculture, but the reality is that in many cases working with a new entrant can bring extra benefits and security. For starters, a new entrant with energy and enthusiasm can reinvigorate a farm business – taking on a share of the physical labour as well as the technical and computer based side of things.

In many joint venture situations a new entrant taking on some of the business risk can help stabilise a farm, and having two (or more) determined people supporting and encouraging each other can provide a stronger platform to weather future challenges – and exploit new opportunities.

The next step for the Land Commission is to take this message out to farmers, landowners and potential new entrants – and with our partners in the NFUS and Farm Advisory Service that’s exactly what we’ll be doing in a series of workshops later this year – keep an eye out for details coming soon!

1 https://landcommission.gov.scot/publications-consultations-research/research/

2 http://www.gov.scot/Resource/0051/00510416.pdf

Land Value Capture – what’s the big idea?

Policy Officer, Kathie Pollard looks at land value capture and how communities can benefit.Kathie final

Land value capture is no unfamiliar concept. It has been in the limelight recently due to the current UK Parliament inquiry into methods for capturing the uplift in land value, and internationally the Lincoln Institute of Land Policy just launched a global campaign to promote it.

In Scotland, we are discussing land value capture in conversations around how land can more widely benefit society. Working out a way to extract the increase in value of land after development is a challenge that local authorities, landowners, developers and policy-makers grapple with, and one that affects the public too. If uplifts in value of land are captured effectively using the right mechanisms, this would have the potential to widely benefit communities, by providing a way of funding the supporting infrastructure, such as roads and schools, required to bring sites forward for development.

Defining Land Value Capture

When land is sold its value is largely determined by how it is used based on its planning permission. For instance, if a plot of land previously allocated for agricultural uses was granted planning permission for residential development this is likely to significantly increase the value of the land and enable the landowner to sell this land at a higher price. To some extent this increase, or uplift, in value is created by a public authority granting planning permission, rather than any actions of the landowner.

 

For this reason, many feel that it’s important to intervene and somehow hold onto this rise in value so that it can benefit the public. Land value capture is an overarching term that refers to exactly this idea: ways to hold onto this increase (or uplift) of land- may it be through some kind of tax, agreement, or other mechanism.

One of the Scottish Land Commission’s strategic priorities focuses on land for housing and development. This involves looking at ways in which we can  we can improve land supply for housing and encourage a more active approach to developing land in the interest of the public. If addressed effectively, land value capture could help tackle a variety of issues ranging from increasing affordable housing and infrastructure.

Ways to capture land value

 

Working out the best methods, or arguably the most viable, for harnessing any uplift in the value of land inevitably stimulates debates: who should benefit from this uplift in land value? How and who is best to negotiate the collection of any cash receipts? Even though the reallocation of value may present some trade-offs, there is a real opportunity to identify mechanisms that allow Scotland to benefit from such an increase in land value. As Tony Crook, John Henneberry & Christine Whitehead (2016) state:  “[Even so,] the evidence suggests that land is different and the generation of large-scale increase in land values when change of use occurs presents the opportunity for taxation or other approaches to enable gains to be captured for the common good.”[i]

Various fiscal and regulatory instruments have been thrown into the mix of options to capture some of that uplift in land value. Successive governments have attempted to use these with varying degrees of success. These range from taxations such as Development Gains Tax and Development Land Tax of the 1970s to levies like the Betterment Levy or Community Infrastructure Levy. Additionally, others have suggested that adjusting the compensation rules for compulsory purchase could make it cheaper for authorities to acquire land. Of course, planning also has a significant role to play and planning obligations can capture some of gains from developed land as income to benefit the local community.

In conversations about the extent to which developers contribute towards infrastructure or affordable housing, through different ways such as planning obligations or taxes, it’s worth bearing in mind the extent to which the ‘public’ and ‘private’ interact in this setting. How much intervention is needed? How is land value capture best regulated? Agreeing which mechanisms are ‘best’ (or most efficient) for capturing the uplift in land value is difficult but not impossible if consensus is achieved. If we are to avoid repeating past mistakes it is vital that we learn from history about the relative successes and shortcomings of previous UK government policies or initiatives that have been attempted.

What are SLC doing about it?

 

Our task in assessing the options to improve land supply for housing and development will be rooted in robust evidence. This is core to our objectives and forms the basis of our work on land value capture. That is why our starting point for investigating options for land value capture is to look at historic attempts to capture land value uplift in the UK in order to learn from experience and recognise the lessons learnt that can help inform policy makers today. SLC is currently working with a team from Heriot-Watt University to do this and will be reporting on the initial findings from this work in the late spring.

In Scotland, if we want the ownership, management and use of land and buildings to work in benefit of the common good, options about how to best harness the gains made from the development of land must be explored and capture the attention of those making the decisions about our land, for the long term.

Keep up to date on our website and via our newsletter to find out about current or recent research opportunities via Public Contracts Scotland.

[i] Crook, A., Henneberry, JM & Whitehead C (Eds.) (2016) Planning Gain: Providing Infrastructure and Affordable Housing, Wiley-Blackwell, Chichester., p.35

Welcome to the Scottish Land Commission’s Blog!

We will be blogging about key issues affecting both urban and rural land in Scotland today and topical debates surrounding land reform.

There will be regular features by the Scottish Land Commissioners, the Tenant Farming Commissioner, staff and guest bloggers from partner organisations and those with an interest in land reform.