What development obstacles do large landowners face and what advantages do they have? Strategic Land Consultants

To meet the multitude of housing needs in the UK, local planning authorities are almost forced to increase the housing stock in their jurisdictions. About half of towns and cities are slow to set plans to indicate how they will do it, indicating both how much remains to be devoted to development and the fact that many planners may still be influenced by where construction should take place.

The opportunity for landowners to earn money is strong. But in most cases, they should not assume they can do it alone, nor can they profit from development in a clean and simple deal. The Town and Country Planning Association, pointing out that since the Town and Country Planning Act 1947 landowners cannot develop land without planning permission, says that while farm-use property could sell for £3,000 to £ 10,000 per hectare, the value can rise to as much as £2 million per hectare in “higher demand areas”.

Sounds like winning the lottery, right? Well, not in the short term. A planning gain supplement, known as a Section 106 Settlement, is essentially a tax on those who experience a significant gain in value from the sale of land. The obligation this imposes, negotiated between the developer and the local planning council, is intended to cover the costs of increased infrastructure (schools, roads, hospitals, sewage, etc.) driven by new residents or commercial development. Another form of this is the community infrastructure levy, which is used in some jurisdictions. In any case, the great profit to be obtained will be significantly reduced by this obligation.

And negotiating these fees is simply one aspect of the development process, requiring an expert sense of local economics and politics. But the reason that investor-developers, such as property fund partners, not original owners, more typically organize the conversion of raw land into homes is because of the wide range of skills and experiences required to complete the process. . Those include:

• Feasibility evaluations, to determine the suitability of the land for development, as well as profitability evaluations (called threshold value).
• Site setup (plans on how it will be developed, to appease planning authorities)
• Access works (costs in road construction, for example)
• Remediation (more typical of brownfield development, where toxins must be removed)
• Abnormal preliminary work (management of geological problems, such as bedrock outcrops or floodplain remediation)
• Relocation and purchase costs of existing residents (if applicable)

Some developers may work with their own construction company to build roads and utilities, as well as the houses themselves. But many now contract or sell parcels directly to homebuilders and are solely engaged in building roads and utilities. This may lower your profits, but also turn the land over to parties who can focus their efforts on their skill set, designing and building suitable homes for the prospective buyer.

Individual investors who do not have real estate experience very often make up a part of the investment group. They can work with as little as £10,000 to participate in a fund; Such investors are strongly advised to work with an independent financial advisor to select investments that are appropriate for their personal wealth risk profile.