How Cambridgeshire's land value capture mechanism will work

A new land value capture mechanism has been announced by a combined authority, but experts say its implementation faces challenges.

Land capture: it will ‘recapture any investment of taxpayers’ money to plough back into delivering housing’
Land capture: it will ‘recapture any investment of taxpayers’ money to plough back into delivering housing’

The publication last week of the housing strategy by the recently formed Cambridgeshire and Peterborough Combined Authority is the latest document to put the question of land value capture at the centre stage of planning debate. Announcing the plans, the combined authority’s Conservative mayor, James Palmer, said it is looking to use land value capture mechanisms "to recapture any investment of taxpayers’ money to then plough back into delivering even more housing". So what is the body proposing?

To enable the delivery of 100,000 new homes by 2037, the combined authority’s strategy outlines a suite of public sector financing "tools", including a land value capture mechanism. Sitting behind all of these tools is a proposed revolving strategic investment fund (SIF), designed to invest in unblocking schemes, take a return, and then reuse the money elsewhere. At its September board meeting, the combined authority decided to work up the plans in more detail and allotted £40 million for the SIF.

The value capture tool would be applied to housing sites that are dependent on a piece of infrastructure, such as a road, to make them developable. The idea is the SIF funds the necessary infrastructure through a loan to the site landowners which is secured against a charge on the land itself. When the land is sold to a developer, the charge is triggered, meaning the SIF receives a share of the sale proceeds, repaying the loan.

However, Adrian Cannard, the combined authority’s strategy and planning assistant director said details of the tool, such as how much is paid back through the charge and when, "will depend on the context of each site and the terms negotiated on individual deals". Stephen Ashworth, a partner at law firm Dentons, said the idea was not wholly new, with housing quango Homes England and the Greater London Authority’s Land Fund already pursuing similar approaches.

Andrew Whitaker, planning director at the Home Builders Federation, welcomed the authority’s strategic approach, but cautioned that such details would be crucial in determining its effectiveness. "They’ve called it land value capture but it looks very much like a scheme to pump-prime infrastructure, which is a very reasonable thing to do and quite positive. The problem may come if they’re going to require the land to pay for lots of other things as well, until ultimately landowner say they can’t be bothered to bring the site forward for housing."

Ashworth said the deals could leave the public sector taking a big risk over when money would be paid back. He also noted that the scheme is dependent upon the availability of experienced public sector staff able to strike deals with landowners. "Only a few people have done these sorts of deals and most of them are working for Homes England," he said.

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