Legal Report - Reforms point way ahead amid financial meltdown

Scotland is currently implementing radical changes in its planning system. These include an overhaul of plan-making functions and substantial alteration to the development management process.

Against a background of turmoil in the international financial markets, the current crisis and its aftermath raise questions for the planning system as a whole. Banks are lending on less favourable terms to companies and individuals, culminating in what can only be described as a meltdown in new house building.

The Scottish Government has a target to build 35,000 homes a year across the country. At best, this looks very ambitious after what has happened to the industry. We have also witnessed an erosion of the other development sectors, although areas such as convenience retailing and renewable energy continue to be active.

Renewables offer opportunity

Scotland will have to play to its strengths in continuing to seek opportunities for investment. This is particularly relevant to the renewables sector, where Scotland has a significant proportion of European resources. To date, there has been a degree of public resistance to projects but it will be vitally important to maintain the momentum to sustain economic activity.

One of the benefits of the streamlined system introduced by the Planning (Scotland) Act 2006 is that it should be able to respond to the new market conditions. The greatest challenge will be in trying to attract investment. There is no doubt that the risk profile associated with the development of property-based assets has now changed considerably and we are all now aware of the international nature of capital.

Over the past decade, numerous development plans have been prepared that rely on the private sector to fund significant infrastructure. Reducing land values and the risk profile associated with development make it extremely unlikely that such investment will occur. The whole approach of local planning authorities to the negotiation of appropriate contributions will have to change. The fact is that the land values are no longer there to support investment on the scale that was previously envisaged.

The Scottish Government is currently in the process of reviewing planning agreements. The stated aim is "to produce a system that will balance provision of contributions to support related infrastructure and amenity while enabling the development necessary to increase sustainable economic growth in Scotland at a local and national level". This exercise presents an opportunity for the Scottish Government to provide forthright leadership on the issue.

Home partnerships predicted

Another area of significant change is likely to be the importance attached to public investment. Historically, affordable housing was seen as a burden by most private sector housing developers. It is now a comparatively safe source of funding, which can help in meeting the cost of additional infrastructure.

This brings developers almost full circle. We are back to the position that existed after the Second World War, when the planning system provided an effective vehicle in helping to identify locations for public investment. Given the current lack of appetite for full public funding, new forms of partnership and relationship are likely to emerge with the private sector.

We have moved from development control to development management and it now seems that the planning system may well have to look at approaches to enable and ease development. It is now even more important to proceed with the remaining structural changes to the planning system. It will be a key instrument in seeking to secure recovery.

However, changes in national policy will have to emerge to support that process. For the short term at least, it is also clear that there are many parts of Scotland that will struggle to attract private investment. In some areas, development viability was marginal even in a strong investment climate. This is set to pose a major challenge to local authority planners.

Planners will have to adopt a proactive approach to reform and actively seek and support private investment. The current downturn provides an ideal opportunity to get on and implement many of the changes that are required in the planning system at a time when the investment pressure of recent years has receded.

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