Under the hammer- Compulsory Sale Orders explored

Kathie finalScottish Land Commission Policy Officer, Kathie Pollard, looks at Compulsory Sale Orders:

According to statistics published by the Scottish Government, Scotland has 12,435 hectares of vacant or derelict land (VDL) which has been issue that has been around for decades. These unloved sites are often seen as an eyesore, can be victim to vandalism, misuse, or are simply a longstanding area of neglect. This urban vacancy and dereliction is a problem. Neighbouring communities have been losing out on potential local development opportunities. By visualising these spaces as schools, workplaces, housing or community green spaces, such regeneration can significantly add social, economic and cultural value. With the right tools, Scotland can start to bring small blighted sites back into active use.

The Scottish Government’s Land Rights and Responsibilities statement (2017) says that landowners have public and private responsibilities. When an owner retains land and property indefinitely, without use or sale, it may fail to serve the public interest. A local authority that decides a vacant site could be put into an active use because it is in the best interest of the wider community, should be empowered to do so. A new owner could bring a small site into action, and if complying with a given timeframe it could see a rapid initial transformation.

If we want Scotland’s land to become more productive, efficient and equitable we must consider mechanisms such as Compulsory Sale Orders (CSOs). It is not a silver bullet but it could be a reserve power, like a Compulsory Purchase Order (CPO). CSOs could be a significant additional tool available to address vacant and derelict land. How so?

The introduction of powers for CSOs was one of the 62 recommendations of the Land Reform Review Group in 2014. It was one of nine recommendations directly relating to urban land assembly, housing and regeneration. The SNP committed to bringing forward legislation for compulsory sales orders during the course of the next parliament in its 2016 manifesto. It would be a new statutory power available to local authorities which could be used on a case-by-case basis. Once a site is identified as an appropriate CSO candidate and the CSO is triggered, the site would then be sold by public auction to the highest bidder. The auction process is key here. It allows the land to be sold at a price that the market is willing to pay.

Auctioning abandoned or unused land is not a novel idea. One can easily look at public auctions of brownfield land, both online or in person, to imagine how such mechanisms would work. A recent example of a brownfield site under the hammer include the 0.7 acre site, former road depot in Auchterarder which is near a residential expansion scheme and sold for £300,000. Internationally, compulsory sale auctions take place in Hong Kong under the Land (Compulsory Sale for Redevelopment) Ordinance. The context is different but the ambition to regenerate and bring vacant, derelict and empty land back into productive use, remains the same.

There are plenty of questions around how a CSO would work in practice and other complexities which are currently being teased out in robust discussion and research. It will be important to focus on the fair procedures of the auction and valuation. The Land Commission is in the process of gathering expertise and developing a proposal which will form the basis for a formal consultation on CSOs by the Scottish Government (find out more).

If we don’t have these conversations now, we are in danger of neglecting the potential of these small sites for many more years to come. Reinvigorating land through the compulsory sale of vacant and derelict sites could make a meaningful impact across Scotland.

Advertisements

Public interest led development

Land Commission board portraitsScottish Land Commissioner, Prof David Adams looks at public interest led development in Scotland:

If we want to provide more affordable housing, generate new employment, create better quality places for people in Scotland, we need to be braver, bolder and be prepared to accept more risk and uncertainty than now.

The state needs to act as the ‘prime mover’, to make development happen, where it would otherwise not do so, or ensure higher quality development, where mediocre development might otherwise occur.

Almost always, public interest-led development (PILD) as it is called – development designed to deliver specific public-policy objectives – involves partnership between the public sector and private sector.

It has a number of advantages over relying primarily on the market, as we mostly do now.

In most cases, it involves land acquisition and assembly by public authorities, often followed by putting in infrastructure – roads, utilities, and so on – so that the land can then be split up into different parcels to be sold on if appropriate.

The creative, visionary regeneration of the Dundee waterfront led by Dundee City Council is probably the best example of this approach in Scotland.

Direct control of land ownership puts the public sector in a much stronger position to ensure development is properly coordinated, well-integrated and well-designed – especially so for major projects and regeneration of large areas of vacant/derelict land – than where this is controlled simply through the planning system.

It also provides a mechanism for the public sector to capture any value uplift from urban development through buying land at a fair price that takes account of all the public investment needed for major new projects, and in due course, recouping at least that investment through land sales.

But it requires particular skills and expertise, such as development experience and market awareness, which are no longer always available within the public sector. By definition, it involves some form of risk sharing with the private sector, and robust risk management.

In the decades immediately after the Second World War, public interest-led development was the model used to build new towns and redevelop many obsolete or bomb-damaged town and city centres.

But it fell out of fashion and we now rely – almost entirely – on the market to deliver.

It has led to a situation where we are not revitalising or enlarging the physical fabric of Scotland’s towns and cities, well enough or fast enough.

As Scottish Government’s Council of Economic Advisers said 10 years ago, much of what has been built in Scotland over the last three or four decades, “is a missed opportunity and of mediocre or indifferent quality.”

By contrast, Sweden, Netherlands and Germany all provide recent, inspiring exemplars of what we could achieve in Scotland with a fresh approach.

PILD requires up-front public investment, which could be financed from the sale of bonds or from other potential investment sources. Scottish local authorities are – in principle – well placed to raise funds at competitive rates of interest.

Moreover, over time, profits from land sales could be used to finance new projects, making the process self-sustaining.

Rather than expecting the private sector to take on all the risk of major urban development, a shared approach in which the public sector plays an important leadership role – especially on major urban regeneration or development projects – is more likely to produce greater benefits for all.

As the two authors of the Land Lines discussion paper The Delivery of Public Interest Led Development in Scotland that’s published today by the Scottish Land Commission conclude, “…Successful public interest led development needs a commitment to doing things differently, a need to be radical and take some risks in order to achieve the goal of achieving places that people deserve.”

We are publishing this paper to open up debate and discussion to see how effective public interest led development can be achieved in Scotland and contribute to making more of Scotland’s land. We are continuing the discussion at our Public Interest Led Development conference to be held on 25 April 2018 in Glasgow.  Planners, developers and investors from both the private and public sector are encouraged to attend to explore how Scotland can effectively deliver PILD.

 

 

David Adams is a Land Commissioner with the Scottish Land Commission. David holds the Ian Mactaggart Chair of Property and Urban Studies at the University of Glasgow. He has researched and published widely on urban land problems and is particularly interested in resolving ownership constraints to urban development and tackling land vacancy and dereliction. He was previously an adviser to the Land Reform Review Group, working especially on the analysis of housing and urban land markets. He is professionally qualified as Fellow of both the Royal Town Planning Institute and the Royal Institution of Chartered Surveyors.

Land Lines: The housing land market in Scotland

Building small

The Scottish Land Commission has commissioned a series of independent discussion papers on key land reform issues.  The papers are intended to stimulate public debate and to inform the Commission’s longer term research priorities.  The opinions expressed are those of the author and do not necessarily reflect those of the Commission.

The first paper in the series, ‘The housing land market in Scotland: A discussion paper’ is looking at how the public sector could intervene to improve the operation of the land market and increase the supply of land for new housing.   A number of important questions have been posed to encourage the debate to continue.  We would welcome your views on the paper and you can get in touch by either contacting the Commission directly, through our blog or at one of our events.

Here is a guest blog from the author of the paper, Laurie Macfarlane:

Laurie

Between 1995 and 2015 the share of income spent on housing costs in Scotland increased by 50%, from 12% to 18%, the second sharpest increase of any UK region outside London. Levels of homeownership have been falling for a decade – particularly among young people. There are nearly 150,000 people on the waiting lists for social housing, while the government spends nearly £2 billion a year helping those who cannot afford to pay their rent.

It’s clear that Scotland is in the grip of a housing crisis. But how did we get here, and what can policymakers do to fix it?

Scotland’s housing crisis is complex, but at the heart of it lies a dysfunctional land market. House prices have increased dramatically across Scotland in recent decades, but it is not the bricks and mortar that have become more valuable – it is the land underneath.

Rapidly rising land prices are not an inherent feature of advanced economies. Instead, the way the land market operates depends largely on the laws, institutions and political history of particular nations. In Scotland, the housing land market is characterised by a number of distinct features, including:

  • a reliance on the private sector operating on a speculative model to deliver new house building, which makes it inherently difficult to deliver a step change in the number of homes being built;
  • a legal framework that allocates the uplift in the value of land resulting from planning permission to landowners, rather than public authorities;
  • a liberalised mortgage credit market which has seen a relatively elastic supply of credit interact with a fixed supply of land, pushing up house prices;
  • a taxation system that is highly favourable to land and property, which has helped to fuel demand for housing and land as a desirable financial asset; and
  • a paucity of publicly available information on land values and ownership, which has made it difficult for policymakers and market participants to make informed decisions.

As house prices have continued to increase, the gap between house prices and earnings has grown larger. For those who own property, this has generated an untaxed windfall which has increased net wealth. But for those who don’t own property, the cost of homeownership has become increasingly prohibitive. Many households have found themselves with little choice but to rent privately. For these households, escalating rents have constrained living standards, reducing the amount of money that people have to spend on other goods and services. The result is a growing gap between those who own property, and those who do not.

The availability of high returns from investing in existing land and property assets has diverted investment from more productive areas, harming productivity growth and output. At the same time, there are over 2,000 hectares of vacant urban land, and over 10,000 hectares of derelict land across Scotland – much of which has remained in the same state for decades.

Without bold action, the pressures of population growth and demographic changes will only add to Scotland’s housing problems. Policy options to improve the operation of the land market include public land value capture, compulsory sale orders, a new housing land development agency, tax reform, and greater market transparency.

As well has helping to meet Scotland’s housing needs, intervening to improve the functioning of Scotland’s land market can help generate a number of long-term benefits for Scotland’s economy, including a more productive and dynamic economy; a fairer and more inclusive society; improved living standards and healthier public finances.

Making more of Scotland’s land

Hamish Trench, Chief Executive, Scottish Land CommissionHamish - portrait 003

At our conference on 28 September we published our first Strategic Plan for the Scottish Land Commission: ‘Making More of Scotland’s Land’.

In this we set out a clear vision: a fair, inclusive and productive system of land ownership, management and use that delivers greater benefits for all the people of Scotland.

Our plan reflects the broad reach and relevance of land reform. We want to open up debate and change in the way we make the most of our land; and ask fundamental questions about the role land plays in delivering things that matter to people across Scotland.

We want to shape change on the ground that makes it easier to deliver housing, to create high quality places for people to live, for communities to shape the way the land and buildings around them are used and for people to be able to access the land needed to develop new enterprises, grow businesses and the economy.

Our work will be as much about Scotland’s urban centres as it is about rural communities and it will be about both land ownership and land use.

To start delivering against this in the coming three years, our work will be framed by three long term objectives: Productivity, Diversity and Accountability. We see improved productivity as being central to land reform. By this we mean we want land to be productive in economic, social and cultural ways. This is essentially about ensuring the way we structure land ownership and use helps grow our economy, our communities, our natural capital, our well-being.

Diversity of land ownership and the benefits of land use are also fundamental to our approach. We want to encourage a more diverse pattern of ownership, but also ensure the benefits from land are shared more widely and inclusively.

Accountability is critical to public confidence in any system where decisions of a few potentially impact the decisions of many, whether those decisions are made by private individuals, public agencies, community or charitable bodies.

We will be taking forward work in four priority areas:

  • Land for Housing and Development
  • Land Ownership
  • Land use Decision Making
  • Agricultural Tenure

In each of these we will be looking at potential changes to legislation and policy, but as important will be the cultural and practical changes we can help shape and prompt. Much progress can be made through changes in practice and approach.

While land reform has developed in Scotland in a rural context, it is as relevant to some of the major challenges we face in our towns and urban centres. For example, the way land markets function has a significant influence on the delivery of housing and infrastructure. Ownership and tenure constraints are key factors in looking at the re-use of vacant and derelict land and land supply for housing. We will be looking at what is needed to bring vacant and derelict land into more productive use, the impacts of land banking on housing land supply, land assembly for development and options for land value capture that would help unlock development.

We will also be addressing some of the fundamental questions about diversity and equity of land ownership. We want to understand the implications of scale and concentration of land ownership, to examine the role of charitable land ownership status and review the effectiveness of community right to buy mechanisms.

Land reform is of course not just about ownership, but the use of land and even more fundamentally, our connection to land. We will be exploring how the accountability of land use decision making can be improved, considering how and when communities and a broader range of interests can be engaged in decision making. The quality of decision making is also likely to be improved through policy alignment and clear articulations of the public interest in land use, all things Scotland’s Land Use Strategy seeks to help.

Agricultural tenure is our fourth priority, specifically in relation to the functions of the Tenant Farming Commissioner but it is also integral to our wider vision. The central theme here is seeking to improve relationships between agricultural landlords and tenants and looking at what is needed to stimulate the tenanted agricultural sector, improving investment and productivity. More widely we will be looking at what further action can be taken to improve access to land for new entrants, to help create a resilient and dynamic farming sector.

Taken together this is an ambitious programme of work for the coming three years and we will need to work with many organisations across sectors to make progress. We are determined that our work should deliver benefits on the ground in the short-term as well as leading to recommendations for changes to legislation and policy.

Engagement and communications is as important to us as research and evidence. We will be looking for opportunities to work with others in stimulating awareness of new approaches, promoting best practice and case studies, providing guidance where it is needed and influencing change on the ground.

We do not underestimate the diverse range of views and expectations across the scope of work we are setting out. But we have a straight-forward approach. We will work with all interests and listen to everyone, we will challenge and test assumptions, we will be thoroughly evidence-based and above all we will be open, transparent and outward looking, willing to learn from ideas and experience wherever we find it.

This is an exciting time for the Scottish Land Commission and we look forward to working with all interests to make more of Scotland’s land. Please don’t hesitate to get in touch with us to share ideas and experience.

This short animation summarises the work ahead for the Scottish Land Commission: ‘Making more of Scotland’s land’

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.