How Environmental Issues, Zoning and Planning Affect Land Value

Environmental, zoning and planning considerations affect Land investments.

The Localism Act 2011 reset the rules for land investing. Concerns for local control in planning, zoning and environmental matters can be an opportunity.

Among the many implications of the Localism Act 2011 are those that affect UK investors in land. Formerly, a land investor needed to heed regional decisions regarding land use if the goal was to convert undeveloped property to residential or commercial uses. But a new set of rules shifts those decisions to local councils. The effects of the act are only beginning to be felt, but no one should characterize it as all good or all bad for the investor.

The Act altered the landscape, so to speak. That is not necessarily a bad or good thing – as illustrated by the following points:

• Sustainable communities/Environment – The imperatives to develop in ways that are favourable to the environment are necessary and satisfy the consensus of thought about such matters. While this may negate some plans to use certain properties for certain uses, we now have a clearer idea on what can and cannot be done. It is that certainty that the investor needs.

• Sustainable communities/Local economy – The land investor is now required to make a case for the long-term impact a land use designation change might have on the local economy. So be it! The land investor wants only to increase the value of property, and that cannot happen if the end-use fails to meet a market need.

• Planning – With planning functions now distributed to local councils, there will be theoretically smarter decisions made and plans drawn. We say “theoretically” because it assumes expertise and rational thought in all municipalities, which may not always be the case. Investor groups are tasked with providing a convincing case for how a development will ultimately benefit the community at large.

• Zoning/Land use designation changes – As local decisions are made about zoning changes, they can also be subject to a voter referendum where the majority vote wins. Is it a good thing when citizens overrule elected officials on land use? There are probably as many answers to that question as there are sheep in Australia.

What should be clear is that entering into UK land investment is not a casual affair. One needs to go about it strategically with a convincing land site assembly plan. As more UK investors are drawn away from the stock market to alternative investments, many elect to work with UK land fund managers who are schooled in all of the factors cited above and who can best predict how to achieve asset growth from strategic land development investments.

As should be the case with all investments, individuals should work with a personal financial consultant to identify which investment strategies fit their individual needs and risk tolerances.

Might the Answer to the UK Housing Shortage Be Found on Disused Farms?

Relaxed rules on the conversion of farm buildings and other structures to alternative uses illustrate a trend: the UK is open to adaptation and change.

The increased productivity of farms in the United Kingdom has worked its way into national planning policies in a surprising way. Beginning in May 2013, existing agricultural buildings that measure less than 500 square metres can now be utilised for other purposes with a “light touch” neighbour consultation.

This means that farm outbuildings and homes might adapt quickly to serve as retail, financial services, office, leisure, assembly, restaurant, pub and hot food takeaway businesses. According to Communities Secretary Eric Pickles, this can have a positive impact on rural economies. “There is huge untapped potential in many disused existing buildings,” he told a website serving academics and professionals engaged in urban development. “We’re determined that every one of them is put to good use. By simplifying the process and relaxing some stringent rules we can provide a helping hand to those eager to boost their high streets or rural communities by cutting the time and costs needed to start up new businesses.”

In some of those communities, conversions to free schools might be accomplished as well. The programme also includes disused office buildings, which can also be converted to residences.

Why is this happening – and how might it address the country’s serious housing shortage?

It is largely due to the increased efficiencies in farming over the past several decades. Wheat yield as measured in tonnes per hectare rose from about six to eight from 1980 to 1995, for example. Yields have come about through more intensive use of fertilizer, increased use of pesticides, greater knowledge and expertise in farming, removal of hedges that enable more efficient farming, and European Union guaranteed pricing. Over this same period of time, the proportion of UK workers engaged in farming declined from 175 per 1,000 workers to about 100, a 42 percent reduction. With fewer people needed to work the land, it’s understandable that there has been so much consolidation of farms and the abandonment of farm buildings that go with that.

The conversion of farm buildings to pubs and office buildings to residences speaks to a generalised effort overall to open up building and land to alternative uses that fit a changing world. The UK population grew by 7 per cent between 2001 and 2011, an astonishing rate of growth in comparison to most countries in the Eurozone. This is due to a combination of immigration, higher birth rates and senior longevity. This last factor, seniors living longer, includes them remaining in their own homes longer, which contributes to the housing shortage. The National Planning Policy Framework (NPPF) has advised that more local authority be allowed to drive decisions on how land is used, in part to speed up the process of conversions of property and buildings from a former use to something more appropriate for contemporary needs.

Strategic land investing is also an attractive investment opportunity when those conversions can be made. Specialists in conversion schemes – property fund partners who purchase disused farms, for example, that can contribute more to the local economy by conversion to residential use – will work with investors to identify appropriate sites, achieve a zoning change, and build the infrastructure necessary to enable homebuilders to build and sell residences. In some areas, those may be rental homes and in others homes for purchase.

Investors interested in any such land or building conversions need to go about it carefully, of course. Real estate is a means by which many have achieved significant asset growth, but it should be done in balance with other financial assets and growth strategies. An independent financial advisor should be enlisted to make an assessment of this type of capital growth fund.