York’s local paper, The Press, has reported “1,400 new homes planned at former British Sugar site” (1).
In recent years the value of land for development in York has reached several millions of pounds per hectare (a). These reports were for city centre land, an estimate of the land value for suburban land is £1.9 million per hectare (b). Using suburban land values the British Sugar site can be valued at £100 million (c). Almost all of the value of this site derives from planning permission as residential development. For example, if planning permission restricted the use of the land to agricultural purposes its value may not even reach £1 million
Associated British Foods, parent company of British Sugar, still own the site(1). The grant of planning permission increases the value of their site by £100 million – possibly more. As developers of the site they may engage in a useful economic activity but as owners of the site they receive a bonus of £100 millions for doing very little. As owners, all they need to do is get planning permission for the site and then sell to another developer.
The question here is “Who owns planning permission?”. Government or local government institutions are giving enormous amounts of wealth away in the form of planning permission. Under current tax laws, the state may capture a few percent of this value. There should be better ways, which capture more of this value.
24th April 2010
(a) In 2001 The Press reported “York land prices hit £1m-acre”(2). This is £2.7 million per hectare adjusted for RPI inflation (3). A better measure of inflation for the value of land for residential development is the increase in house prices. Adjusted for house price inflation these values for York are £3.3 million per hectare(4).
(b) The Press also reported John Urwin, property consultant with City of York Council, as saying that residential brownfield land in the centre was fetching between £1 million and £2.5 million and that compared with £500,000 to £750,000 per acre for suburban greenfield sites as a two-tier market develops(1). The average of these values for suburban sites, adjusted for house price inflation is £2.1 million per hectare.
(c) The Press reports the former British Sugar site as 100 acres (47.6 hectares). £2.1 million per hectare gives a value of £100 million. For a development of 1400 homes this makes the average land value per dwelling to be £71,000. This is a low value for the value of a housing plot in York suggesting that the estimated value of the site is rather conservative.