RTPI response to HM Treasury’s consultation on Land Remediation Relief
About the RTPI
The RTPI champions the power of planning in creating prosperous places and vibrant communities. As a learned society, we use our expertise and research to bring evidence and thought leadership to shape planning policies and thinking. As a professional body, we have over 27,000 members across all sectors, and are responsible for setting formal standards for planning practice and education.
Introduction
- What are the main factors that businesses consider when selecting a site for development?
- What role does tax (in particular LRR) play?
- If LRR is factored into decision making, how is it considered in the site selection and development process?
- How do businesses establish the amount of contamination or dereliction and, with that, the costs that would be eligible for LRR compared with overall costs on site? How does LRR help with any uncertainty around this?
When selecting a site, businesses will consider all the factors that feed into the financial viability of the site. This includes, but is not limited to:
- the physical geographical location
- transport connections
- the current state of the land and associated demolition or remediation costs
- construction and repair costs
- the most valuable potential use of the land (with regard to local planning policy)
- the cost of purchasing the land
- any outstanding planning permissions onsite
The introduction of a land remediation relief should hopefully incentivise the development of previously developed land (PDL) through subsidising remediation costs. Brownfield sites and PDL can be a blight, particularly to disadvantaged communities, and encouraging this type of development will allow derelict areas close to existing urban centres to more easily be brought back into use. Urban PDL can often facilitate higher density development, contributing significantly to housing targets, supporting economic development through commercial use, or both.
Taking a wider look at sustainable development more broadly, the Institute believes that incentivising the redevelopment of PDL needs to be considered in conjunction with the reuse and retrofit of existing buildings. PDL often has buildings already on site as well as contaminated ground. Relief or support to tackle both issues together would be the most effective way to bring PDL back into use.
Furthermore, if planning is to contribute towards tackling climate targets, then reuse of buildings where possible should be encouraged. Currently, works to repair existing buildings are charged VAT while new construction is zero rated. This means that there is a financial incentive which promotes demolition of existing buildings over retrofit and reuse.
The equalisation of VAT on works to existing buildings could reduce this financial incentive and would help towards climate targets by reducing the embodied carbon costs of new buildings, as well as protecting heritage and contributing to a heritage-led placemaking approach.
- What are the main barriers to development on i) Brownfield sites, and ii) In particular, contaminated and long-term derelict land? To what extent/how does LRR help with these versus other options, such as grants?
The barriers to development on brownfield sites in general can be interconnected and multifaceted. These can include issues related to land assemblage, off-site highway works, remediation costs, decision-making timescales, funding issues, constructions costs, and infrastructure delivery. All these potential costs taken together can result in broad viability issues.
Efforts to redevelop contaminated and long-term derelict land will have to consider a broad range of viability issues. The costs of land remediation can be prohibitively high, and the full extent of works required is not always clear until works begin. This increases the risk that developers take on when trying to develop sites like these.
Furthermore, long-term derelict sites can often contain open mosaic habitat (OMH). This unique habitat type is recognised as a ‘high distinctiveness’ habitat in the government’s statutory biodiversity metric. This means that removing and replacing OMH in accordance with biodiversity net gain (BNG) practice can be a particularly expensive endeavour, and some have argued that they are disproportionately high and therefore a blocker for development.
The RTPI would be in favour of a comprehensive study of viability on brownfield sites, that includes consideration of the above factors alongside developer obligations including BNG, affordable housing, and building safety levy contributions.
Design of the relief
- To what extent are the right projects able to access LRR, given the structure and design of the relief?
We agree that the relief should be targeted towards costs incurred by works relating to remediating contaminated or derelict land, and towards those sites where such costs have been a long-term barrier to bringing the land back into productive use.
We share concerns with stakeholders that the requirement for land to have been derelict since 1 April 1998 could be difficult to evidence, and we would appreciate guidance on a) why this date was chosen and b) how applicants can evidence this effectively.
Thought should be given to how the LRR scheme might be used to unlock sites of particular strategic importance, such as well-located city centre sites, or areas able to support a mixed range of uses. While the scheme will rely on landowners and developers coming forward, the Government should explore whether there is scope to try and align suitable sites with the relevant local or strategic level plans. This way, the LRR becomes a targeted intervention that maximises the potential of land, rather than approaching brownfield development in a more ad hoc and piecemeal fashion.
- We have heard representations that the following aspects of the design of LRR act as an impediment to incentivising development of contaminated or derelict land, which we are seeking views on in particular:
- activities/elements that aren’t covered by LRR
- the types of works that are included in the definition of ‘derelict land’
- the impact of the date from which land must be derelict to be considered eligible
- the number of additional sites that would become viable if the date were changed from 1998 to a fixed date (for instance, 10 years) prior to today, aligning with the original legislation
- the ’continuous use' requirement, which disqualifies land from LRR that has been in productive use for more than 7 days a year
- the exception from LRR where a company or connected party was responsible in any way for causing the contamination or dereliction or such a company holds an interest in the land (the ‘polluter pays principle’) – in particular where the owner retains a reversionary interest
As mentioned in our response to question 3, we would query how the date of 1 April 1998 was chosen as the requirement for land to be considered derelict. We are concerned that otherwise suitable and well-located sites would be excluded from the LRR because of this.
It would be useful if the consultation document set out why the ‘continuous use’ requirement is in place, and what sort of behaviour it is intending to dissuade.
- Are there other aspects of the design that act as an impediment to incentivising the development of contaminated or derelict land?
No comment.
- How complex is the relief to claim? To what extent does administrative complexity of claiming the relief hinder the relief from achieving its objectives?
No comment.
- To what extent does the legislative complexity of the relief hinder it from achieving its objectives?
No comment.
Impact of the relief
- What role does the credit element of LRR play in influencing decisions in site selection/proceeding remediation works?
No comment.
- In general, what proportion of overall costs tend to be eligible for LRR?
No comment.
- How much eligible land is there? How does this compare to when the relief was first introduced?
No comment.
- Are there examples of contaminated and derelict land that has been developed as a result of LRR? Do you have a sense of how much contaminated or derelict land has been developed overall as a result of LRR?
No comment.
- Are there examples of where LRR has contributed to projects that would not have proceeded absent the relief? Similarly, are there examples of where LRR has contributed to projects that would have proceeded absent the relief?
No comment.
- How does LRR compare with other forms of support for the development of Brownfield land, such as the Brownfield Infrastructure and Land Fund, and local government support? What benefits or drawbacks would, for example, a grant have compared with a tax relief to the same value?
As a tax relief, LRR requires involved parties to have the funds available to cover the full cost of works beforehand. A grant could allow the parties without the funds to cover full costs to enact remediation works. At the same time, depending on when the grant is paid, it could delay projects while stakeholders wait for the grant before beginning works. Beyond this, there might be a different range of grants and reliefs across the different devolved nations.
- What impacts do interactions between LRR and other forms of support, such as government grants, have?
The design of the relief, as outlined in chapter 2, states that eligible expenditure cannot be subsidised. It is unclear if this would relate to works carried out using grant funding or not, but there could be an unintended impact here.
Robustness against abuse and error
- What is your understanding of why customers and/or their agents may make errors when submitting claims for LLR or the LLR tax credit?
No comment.
- Are there any changes that could be made to the LRR guidance or rules to help prevent errors when making LRR claims, and/or make the process more straightforward?
No comment.
- Are there fraud risks associated with LRR, particularly with the payable tax credit part of the relief?
No comment.
- What additional processes could help to reduce error or fraud without introducing disproportionate administrative burdens?
No comment.