TOWARDS A NATIONAL BROWNFIELD STRATEGY

Transcription

1 TOWARDS A NATIONAL BROWNFIELD STRATEGY Research Findings for The Deputy Prime Minister from special adviser to the Deputy Prime Minister on brownfield issues September 2003

2 CONTENTS PAGE 1. INTRODUCTION PREVIOUSLY DEVELOPED LAND AN OVERVIEW PDL AND THE PROPERTY MARKET POLICY OPPORTUNITIES KEY FINDINGS A series of Briefing Notes form a separate volume that accompanies this report: BN1 BN2 BN3 BN4 BN5 BN6 BN7 Public Service Agreement and Related Policy Targets The 'Stock' of Previously Developed Land The Use and Creation of Previously Developed Land The Availability of PDL for Development Land Requirements Implicit in Policy Targets Forecasting the Creation and Reuse (Take-up) of PDL Regional Brownfield Action Plans

3 1. INTRODUCTION 1.1 BACKGROUND The new remit afforded to English Partnerships following the fundamental review confirmed EP s role as special adviser to the Deputy Prime Minister on brownfield issues. It is in this context, that EP were asked to prepare, on behalf of the Deputy Prime Minister, advice on how a National Brownfield Strategy can contribute to the achievement of the Sustainable Communities Plan, and thereby the desired urban renaissance. The rationale for a strategic overview for the re-use of "previously developed land" (or PDL) is self-evident from the following: England is the most densely populated country in Europe, and the fourth most densely populated country in the world, our cities are inherently "suburban" in character, with typically some of the lowest average densities in Europe, large amounts of land within our urban areas, released as a consequence of structural changes in the economy, remain under-utilised, with adverse social and economic consequences, continuing social changes result in the need for an extra 2.4 million new homes in the next two decades. In these ways, the better re-use of PDL contributes to the achievement the desired urban renaissance and the pursuit of sustainable development of our towns and cities. To "do nothing" with PDL represents a lost opportunity, whether to make better use of finite resources, or address the adverse impact of vacant and derelict land on the surrounding areas and communities. However, it is readily acknowledged that not each parcel of previously developed land should or could be re-used for urban activities rather, the most appropriate use for such PDL should be pursued, including non-urban or amenity uses, that reflect the site-specific and locational characteristics of the land in question. The significance attached to a National Brownfield Strategy, as a component of the achievement of sustainable development, was confirmed in the recently published Sustainable Communities Plan, where in section 4, it was stated: English Partnerships are developing a comprehensive National Strategy for brownfield land. This will start from a detailed understanding of what brownfield land is available, making full use of the National Land Use Database (NLUD), which identifies 66,000ha of previously used land capable of redevelopment. A quarter of this land has lain dormant or derelict for 10 or more years. The Strategy will cover how best to bring sites back into use, especially in the growth areas. Towards a National Brownfield Strategy 1

4 1.2 OVERALL APPROACH In support of the development of a National Brownfield Strategy, an advisory Steering Committee was established by EP, comprising representatives of key stakeholders with a keen interest in such a strategy; namely the ODPM, DEFRA, the Environment Agency, the Housing Corporation, the Local Government Association, the Regional Development Agencies and the private sector (in the form of Igloo Regeneration). The Committee has provided an invaluable sounding board against which to consider the emerging issues, and with whom to discuss what might be the appropriate policy responses. Within the context of the Steering Committee, guiding principles that reflected the key challenges for a National Brownfield Strategy were agreed: to develop a coherent vision for the future of brownfield land, to provide advice on strategic objectives, and to provide an effective management tool to facilitate brownfield regeneration. In these ways, it was acknowledged that the evolution of a National Brownfield Strategy would make a material contribution to the delivery of established targets for the reuse of brownfield land within England. 1.3 SCOPE OF ADVICE Over the past nine months, various strands of research and analysis have been undertaken by EP, drawing upon both in-house and consultancy resources. Whilst further work will be required to fully develop our understanding of the issues and processes at work in the reuse of brownfield land, key messages are emerging. This document, therefore draws on the results of analysis to date in order to: describe the scale and nature of brownfield land in England, outline the processes at work in the use and creation of brownfield land, consider the range of policy opportunities, and present EP's key findings for consideration by the Deputy Prime Minister. Further background detail pertinent to a National Brownfield Strategy is contained in a series of Briefing Notes accompanying this document. Towards a National Brownfield Strategy 2

5 2. PREVIOUSLY DEVELOPED LAND AN OVERVIEW 2.1 INTRODUCTION A significant proportion of PDL is a product of a past structural change within the economy and the urban areas. Changes in industrial practice and the pattern of economic activity across England have resulted in a heritage of vacant and derelict sites for which there is currently no productive or beneficial use. Furthermore, certain of these sites have remained vacant and unused for considerable periods of time, and provide a considerable backlog of under utilised land. This backlog represents both a lost opportunity to accommodate new land uses (and so reduce the pressure on further incursions on greenfield land) and can also cause material blight on the surrounding localities and communities. For these reasons, any National Brownfield Strategy needs to address how such sites might be brought back into beneficial use and thereby contribute to the desired urban renaissance. However, PDL continues to be created, stimulated by economic and social factors, and thus a key challenge must be to ensure that the pace of reuse exceeds the pace of creation of PDL, in order that the backlog of under-utilised sites might be progressively reduced. 2.2 A DEFINITION OF BROWNFIELD LAND There is no formal definition of the term brownfield, and indeed common usage of this word can be a cause of misunderstanding. For some, brownfield is viewed as a synonym for contaminated, whereas others use it in a more generic sense meaning non-greenfield. However, there is also no formal definition of greenfield land and, in common usage, this term can be misinterpreted as referring to statutory Green Belt. Understandably, the scope for confusion increases in the international arena North American usage has a predominant focus on contamination, and the word brownfield does not readily translate into a certain European contexts. A better concept of previously developed land (or PDL) has been established in Planning Policy Guidance Note 3: Housing: Previously-developed land is that which is or was occupied by a permanent structure (excluding agricultural or forestry buildings), and associated fixed surface infrastructure. The definition covers the curtilage of the development. Previously-developed land may occur in both built-up and rural settings. The definition includes defence buildings and land used for mineral extraction and waste disposal where provision for restoration has not been made through development control procedures. The definition excludes land and buildings that are currently in use for agricultural or forestry purposes, and land in built-up areas which has not been developed previously (e.g. parks, recreation grounds, and allotments - even though these areas may contain certain urban features such as paths, pavilions and other buildings). Also excluded is land that was previously Towards a National Brownfield Strategy 3

6 developed but where the remains of any structure or activity have blended into the landscape in the process of time (to the extent that it can reasonably be considered as part of the natural surroundings), and where there is a clear reason that could outweigh the re-use of the site - such as its contribution to nature conservation or it has subsequently been put to an amenity use and cannot be regarded as requiring redevelopment. It is this definition of PDL that has been adopted for the purposes of our advice for a National Brownfield Strategy recognising that this definition is also reflected in the key datasets the Land Use Change Statistics (LUCS) and the National Land Use Database (NLUD) that have informed our considerations. In order to reduce the risk of confusion of meaning, usage of the term "brownfield" has been avoided throughout this document, rather previously developed land, or PDL, has been used predominantly. Furthermore, usage of the term brownfield in public policy statements, especially if published subsequently to PPG3, has been interpreted as referring to PDL. 2.3 CURRENT BROWNFIELD POLICIES AND OBJECTIVES The objective of achieving the desired urban renaissance and the pursuit of sustainable development have been reinforced by a number of specific public policy targets. Notably, these targets are set out in the ODPM s Public Service Agreement (PSA) targets and in other policy documents. The evolution of these targets in recent years is discussed in greater detail in Briefing Note 1 (PSA and Related Policy Targets) accompanying this document. However, the salient targets can be summarised as follows: nationally, a minimum of 60% of new homes should be developed on PDL by 2008, similar regional targets, reflecting local circumstances, should be developed by the Regional Planning Bodies and incorporated into the emerging Regional Planning Guidance (RPGs), that the Regional Development Agencies (RDAs) and EP should, collectively, reclaim PDL at an annual rate of 1400ha or more, that nationally, 10% of the estimated 2000 stock of PDL (i.e. some 5,770ha) should be reclaimed by 2008, and that nationally, 20% of the 2000 stock of PDL (i.e. some 11,540ha) should be reclaimed by INTER-RELATED PUBLIC POLICY TARGETS There are other associated, and relevant, public policy targets whose achievement will be influenced by (and conversely will influence) the pace and pattern and reuse of PDL across England. Notably, the PSA target regarding the provision of 60% or more of new homes on PDL is likely to be closely associated with the overall pace of achievement of new homes, and the aspiration to achieve sustainable development. Towards a National Brownfield Strategy 4

7 2.4.1 Total Housing Achievements This inter-dependence can be illustrated by reference to the recent achievements in total housing completions and the proportion achieved on previously developed land. Over recent years, the number of new homes built on non-pdl has declined - a desired outcome - as illustrated below: Dwellings Completed on non-pdl 70,000 50,000 20, * * provisional data Over the same period, however, there has not been a compensating increase in the increase in numbers of dwellings completed on previously developed land: Dwellings Completed on PDL 80,000 50,000 20, * * provisional data Towards a National Brownfield Strategy 5

8 When taken together, the aggregate housing completions across England have declined in recent years although the achievement of the target of 60% of new dwellings on PDL by 2008 was met in 2001, ahead of time. Demonstrably, the dynamics of the reuse of PDL are complex, and the overall policy response required to achieve the various targets is therefore unlikely to be one-dimensional Sustainable Development The concept of sustainable development is based around the balancing of three inter-related perspectives - namely the social, economic and environmental impacts of development. Therefore, public policy aspirations with regard to the environment and the community will also impinge upon the achievement of more explicitly PDLrelated targets. In each case of potential redevelopment of PDL, the balance between these three perspectives will be different. In some circumstances, environmental protection perspectives may be the stimulus for redevelopment (such as the remediation of a contaminated site), whereas in other cases concerns about protecting the biodiversity (say, where a site has lain unused for a number of years) may be a material consideration undermining the commercial viability of a scheme. In other circumstances (for example, where a community has faced radical structural change) the predominant concern may be to remove the adverse social consequences of a degraded local and visual environment. Consequently, the development of a National Brownfield Strategy cannot be undertaken in isolation of these other factors. 2.5 THE AMOUNT OF PREVIOUSLY DEVELOPED LAND The availability of PDL, as defined in PPG3, is measured by the National Land Use Database (NLUD), a database collated to a common national standard by individual local authorities. First compiled in 1998, two subsequent surveys have been undertaken in 2001 and in NLUD specifically records the following categories of PDL, namely: Category A previously developed land now vacant, Category B vacant buildings, Category C derelict land and buildings, Category D land and buildings currently in use and allocated in the local plan and/or having planning permission, and Category E land and buildings currently in use where it is known there is potential for redevelopment (but the sites do not have any plan allocation or planning permission). In the latter years, a further category has been included to record where former PDL has been known to have been developed for beneficial use. According to the 2001 NLUD returns, some 65,500ha of PDL has been estimated across England. This is a grossed up figure reflecting both the as recorded data prepared by a local authority and judgements as to its completeness of otherwise. The following diagram presents an analysis of the identified PDL by category: Towards a National Brownfield Strategy 6

9 NLUD 2001 by Category E 10,350 ha A 14,730 ha D C B 14,030 ha 4,900 ha 21,410 ha Changes of land use are also recorded on the Land Use Change Statistics (LUCS), and these statistics differentiate the changes taking place on PDL from those on non- PDL (or "greenfield" land). LUCS is based on the results of surveys undertaken in the course of regular up-dating of Ordnance Survey maps and therefore only records changes after the event rather than the stock of PDL. The availability of PDL is therefore a dynamic picture, with certain PDL being absorbed by the development process and with new PDL being created as previous uses cease and land and buildings fall out of use. Naturally, the comparative size of the stock of PDL varies by region, as does the pace at which it is taken up by the development process and the pace at which new PDL is created by economic change. The following diagram illustrates the variations stock of PDL, as recorded on NLUD, by region: Stock of PDL by Region - NLUD 2001 % of national figure 16% 15% 14% 12% 10% 9% 9% 8% 7% Ha 10,000 10,710 9,870 9,010 8,000 7,820 6,000 6,580 6,140 5,850 4,930 4,590 4,000 2,000 0 North West South East Yorkshire & the East of England South West East West North Midlands Midlands East Greater London Humber Towards a National Brownfield Strategy 7

10 Further details of these variations are discussed in Briefing Note 2 (The 'Stock' of Previously Developed Land) and Briefing Note 3 (The Use and Creation of Previously Developed Land) accompanying this document. 2.6 DURATION OF PDL STOCK Much re-use of PDL takes place in the course of commercial development especially in areas of buoyant demand for land and property but in other cases PDL can remain under-utilised, or indeed vacant and derelict, for considerable periods of time. A study undertaken of the PDL recorded on NLUD indicated a "hardcore" of persistently under-utilised sites that had been vacant or derelict for nine or more years. In aggregate, some 16,523ha of hardcore land were identified from this study. This represents one quarter of the total stock of PDL recorded on NLUD, and more pertinently represents 61% of the land investigated in the hardcore study - sites that individually or in clusters total more than 2ha. As with the total stock of PDL, the regional distribution of hardcore sites is uneven, as illustrated in the diagram below: % of national figure 26% 4,259 Ha 4,000 Hardcore Land by Region - NLUD % 11% 10% 9% 9% 8% 7% 2% 3,000 3,038 2,000 1,000 1,751 1,640 1,556 1,499 1,304 1, North West Yorkshire & the Humber South West North East West East South Midlands Midlands East East of Greater England London For hardcore sites, and also for many other PDL opportunities, a combination of site-specific factors (e.g. ground conditions, contamination, planning permission etc) and locational factors (e.g. local property market values, accessibility, planning allocations etc) are sufficient to discourage re-development, such that the land in question may well become under-used, vacant or derelict. 2.7 AVAILABILITY OF PDL FOR DEVELOPMENT Not all the land identified on NLUD can be considered as effectively available" for development, certainly for hard end uses in the foreseeable future. Various Towards a National Brownfield Strategy 8

11 regulatory and market-driven perspectives are likely to confound such development, or to add to actual or perceived costs of development. These perspectives are considered further in Briefing Note 4 (The Availability of PDL for Development) and in section 3.2 of this document. 2.8 RECENT TAKE-UP OF PDL Land Use Change Statistics (LUCS) offers a means to record, over the past fifteen years, the patterns of development across England and the proportion of this development that has taken place on PDL and greenfield land. Based, as it is, on the visible changes in development material to the revision of Ordnance Survey mapping, LUCS is not wholly comprehensive in its coverage. For example, it is acknowledged that it cannot accurately record the number of dwellings created by conversion of existing properties, and thus a notional 3% of total dwellings completed are assumed to have being achieved through conversion. Furthermore, errors can occur, in terms of timing, for land use changes outside the urban areas, due to the greater elapsed time between successive surveys. Nevertheless, despite the above limitations, LUCS provides a good indication of the pace at which PDL has been absorbed by the development process. In recent years, LUCS indicates the following levels of annual take-up across all regions of England as follows: Annual Average Take Up of PDL ( ) Residential Employment Other Hard End Uses 2871ha 1143ha 2301ha By comparison, LUCS is far less accurate at recording the creation of PDL, particularly latent PDL that continues in productive use prior to redevelopment. Whilst the actual change to the new use will be recorded on LUCS, the underutilisation prior to change, unless it involves changes to the physical fabric of buildings, is far less likely to be recorded. By contrast, in categories D and E, NLUD records local authorities opinions of the extent of such latent PDL within their areas. 2.9 CURRENT PDL LAND REQUIREMENTS The reuse of PDL has risen up the policy agenda over the last decade, such that public policy targets related to the use of PDL, as discussed in Briefing Note 1 (PSA and Related Policy Targets), are an important driver in the future demand for PDL. Consideration of the underlying land requirements allows the development of estimates of land requirements (both in aggregate terms and the PDL component). Such an analysis is possible at a regional scale and nationally, and can be compared with recent patterns of take-up of PDL shown in LUCS indicating the degree to which recent patterns might need to change if all policy aspirations are to be met: Towards a National Brownfield Strategy 9

12 Aggregate land requirement Aggregate PDL requirement All Regions 12,404ha 7,711ha In aggregate terms, the c7,700ha of PDL annually "required" to achieve all policy aspirations compares with recent annual average take-up rates of c6,600ha of PDL for all hard end uses a requirement for an additional c1,000ha of developable PDL each year, or an acceleration of c17% above recent trends. Again these perspectives vary across the regions as discussed further in Briefing Note 5 (Land Requirements Implicit in Policy Targets) but offer an indication of the challenges for a National Brownfield Strategy that are inherent in current policy targets ESTIMATED FUTURE TAKE-UP OF PDL Rather than just depend upon the simple extrapolation of past take-up of PDL into the future, an econometric model of the dynamics of the demand for PDL for a range of different land uses, and by region, until 2013 has been developed. The model is further discussed in Briefing Note 6 (Forecasting the Creation and Reuse (Take-up) of PDL). At the national level, for example, specific outputs from the model include: the demand from housing development for all types of PDL is forecast to increase to around 3,800ha per annum by 2008 and 4,000ha of land per annum by 2013, the amount of housing development on vacant or derelict PDL is forecast to increase to around 2,100ha per annum by 2008 and 2,2500ha of land per annum by 2013, the amount of employment development on all PDL is forecast to increase to around 1,700ha per annum by 2011/12 and then decline due to the simulated sudden drop in the growth rate of GDP per capita in the previous period, the amount of employment development on vacant or derelict PDL is forecast to increase to around 600ha per annum by 2011/12 and then decline due to the simulated sudden drop in the growth rate of GDP per capita in the previous period, the amount of retail development on all PDL is forecast to increase to around 650ha per annum by 2011/12 and then decline due to the simulated sudden drop in the growth rate of GDP per capita in the previous period, the amount of retail development on vacant or derelict PDL is forecast to increase to around 450ha per annum by 2011/12 and then decline due to the simulated sudden drop in the growth rate of GDP per capita in the previous period, Towards a National Brownfield Strategy 10

13 the amount of other hard end use development on all PDL is forecast to increase to around 3,500ha per annum to 2013, and the amount of other hard end use development on vacant or derelict PDL is forecast to remain broadly flat at around 350ha per annum. The model is judged to have within it a degree of upward bias in the forecasts it produces. Therefore, the underlying message is that future demand for PDL by the development process is considered to be broadly the same as the rate of take-up in recent years, in the absence of any significant new policy intervention. The model also attempts to come to a view of the likely stock of PDL in the foreseeable future, although as the quality of data about the pace of creation of PDL is less robust (and any errors will compound over time in the model), these estimates can only be projected meaningfully to 2008 (and greater caution needs to be applied to them than the forecast pace of future demand). Nevertheless, the model suggests that nationally the aggregate stock of PDL is likely to increase by around 3% between 2001 and 2008, albeit with significant regional variations. Further results from the econometric modelling are presented in Briefing Note IMPLICATIONS FOR A NATIONAL BROWNFIELD STRATEGY The following findings are of relevance to a National Brownfield Strategy: the use of undefined terms can be a cause for confusion only "previously developed land", or PDL, is formally defined, already there are several PDL-related targets, indicating that the required policy response is unlikely to be one-dimensional, the re-use of PDL needs to be pursued in ways compatible with the achievement of "sustainable development", the "stock" of PDL is measured by NLUD and separately LUCS records the "flow" of PDL into new uses (but is far less able to measure the pace of creation of PDL), a "hardcore" of PDL that has persistently remained unused for nine or more years can be identified, there are regional (and sub-regional) variations in the "stocks" and "flows" of PDL, and in the scale of the "hardcore", comparison of recent take-up of PDL and the anticipated land use requirements suggest that take-up rates may need to increase by around 1,000ha per annum, and econometric modelling indicates that, in the absence of any significant new policy intervention, future demand for PDL will be broadly the same as that taken up in recent years. Towards a National Brownfield Strategy 11

14 3. PDL AND THE PROPERTY MARKET 3.1 PREVIOUSLY DEVELOPED LAND AND THE DEVELOPMENT PROCESS The nature and character of previously developed land varies markedly in terms of its site characteristics and locational quality. However, there is one unifying factor for all previously developed land, when compared to greenfield land namely, the probability of additional costs involved in development due to site abnormals, or a perception that such site abnormals may well apply. These site abnormals, which represent the additional costs incurred when developing PDL, vary markedly from site to site. Some sites will be contaminated, some sites may have costs associated with land assembly, some sites may have conservation or other planning issues constraining in the form of acceptable development, and other sites may have material infrastructure constraints. Typically, these factors are brought together by the planning system whether during the preparation of Development Plans or when specific development proposals seek planning permission. 3.2 CATEGORIES OF PDL A clear demonstration of the variability of PDL, particularly from the point of view of the property market, is the manner in which a significant portion of the stock of PDL has remained vacant or derelict for 10 or more years (the persistent or hardcore sites). Conversely, much reuse of PDL takes place on its own accord, often without a period of vacancy other than that associated with the normal development process. Between these two extremes are a range of sites that are best marginally viable under prevailing market conditions. PDL can be categorised according to the impact of site abnormals on the ability of the private sector to redevelop a given site. This is illustrated in the diagram below Costs & Values COMMERCIALLY ATTRACTIVE MARGINAL VIABILITY NON-VIABLE LOSS Value of Hard End-Use BREAKEVEN PROFIT Site Abnormals Site Abnormals Category 1 Value of Soft End-Use Category 2 Category 3 0 Value of Soft End-Use, after commuted sum (Category 4 ) Towards a National Brownfield Strategy 12

15 which compares the value inherent in a given use (say, residential or industrial) with the differing "abnormals" involved in a range of PDL sites at a given location. (The value after development is indicated by the upper horizontal line and the three columns represent the indicative costs involved in developing different sites for the same end use). For certain sites (indicated as Category 1 ), the development costs are sufficiently below the value of the resulting development to yield the necessary commercial profit and thus are demonstrably viable. For certain other sites, real or perceived site abnormals are sufficient to erode the required profit margin and thus these sites are at best marginal, achieving a breakeven between costs and profits (as indicated by Category 2 ). The third category of sites are those where site abnormals are such that, not only would the required profit margin be eroded, but they materially exceed the anticipated value of the completed development. These sites (Category 3 ) are non-viable and are unlikely to be attractive to the private sector. There is a further development to this model, related to those sites for which only "soft" end uses (e.g. amenity space) are judged appropriate, for whatever reason (Category 4 ). Costs of development may well be lower, but following development these sites are unlikely to achieve a high value as indicated by the lower of the horizontal lines. Furthermore, recognising that such sites are likely to require long term maintenance following remediation, the lifetime costs of an appropriate management regime would further erode end-use values, even to the extent of turning them negative. Again, these sites are unlikely to be taken forward for development by the private sector. 3.3 PUBLIC POLICY IMPLICATIONS The above categorisation of PDL indicates that a mix of policy responses will be required if the objective of returning the majority of previously developed land to productive or beneficial use is to be achieved Commercially Attractive Sites Certain sites (i.e. Category 1 ) are essentially self resolving. Whilst the redevelopment is likely to be recorded, retrospectively, on data sets such as Land Use Change Statistics (LUCS), these sites may not always be recorded as potential development opportunities in databases such as the National Land Use Database (NLUD). There are no direct policy implications for the encouragement of the redevelopment of these sites other than the normal regulatory processes. However, a National Brownfield Strategy will need to acknowledge that redevelopment of latent PDL (i.e. land currently in beneficial use but which the market can profitably redevelop for higher value uses) takes place in the normal course of events. This should be taken into account when setting targets and measuring outcomes. An added factor to be borne in mind, relates to the manner in which redevelopment of latent PDL might be accelerated as an unintended consequence of public policy seeking to bring forward for development more visible PDL this topic is discussed further in Section 5 of this document Marginally Viable Sites For commercially marginal sites, indicated by Category 2, market interventions may well be required to facilitate the commercial development of such sites typically this Towards a National Brownfield Strategy 13

16 has involved a broad variety of policy instruments (discussed further in Section 4) that effectively transform a proportion of Category "2" sites into Category "1" sites Non-viable Sites PDL sites with more deep-seated development constraints - Category 3 in the diagram above - characterise the persistent hardcore of sites that have remained largely unused for significant periods of time. The fundamentals of the project economics remain the same as for Category 2 sites - costs exceed value but to a markedly greater extent. Consequently, more deliberate, probably multifaceted, public sector initiatives are likely to be required to stimulate development interest in these sites. (Again, these matters are discussed further in Section 4) Non-development Sites For PDL sites judged, for whatever reason, to be only suited to soft or amenity use (Category 4 ) the site values are likely to be severely reduced, and not necessarily related to the costs of bringing them back into use. Most probably, for these sites the relevant cost-value equation should relate to social costs and benefits rather than just financial returns. In other words, the costs of remediation need to be compared with the negative consequences of under-used, potentially derelict, sites blighting their surroundings and with the community advantages of beneficial use such as, open space, community woodland, nature reserves etc. Such social considerations are difficult for the private sector to take into account implying a clear role for the public sector. 3.4 ORIGINS OF "ABNORMAL" COSTS A range of factors lead to the inherent variability of the stock of PDL in terms of its effectively available for development in the foreseeable future. These factors are a combination of regulatory and market-driven constraints on re-use Regulatory Constraints The fact that a given parcel of land or property was once in a particular productive use does not mean that a similar use would be judged appropriate at the current time. For example, a resource-based economic activity (e.g. coal mining) could have been long established at a given location but, as mineral reserves deplete or market conditions change, the activity may cease to be viable and thus the land and property in question fall into disuse. At the same time, regulatory change of one form or another may dictate that alternative economic activities are no longer appropriate at that location. Factors that could influence such changes include: specific land protection policies (e.g. Green Belts or AONBs), strategic land use planning policies (e.g. the presumption against freestanding development outside established urban areas), nature conservation factors, and Towards a National Brownfield Strategy 14

17 altered perceptions of risks from nearby major hazards (as supervised by the Health and Safety Executive). Similar perspectives could apply to, say, former isolation hospitals located in rural areas, with poor accessibility to other services. Clearly, the regulatory constraints can vary in the degree of their impact. Certain constraints may be fairly absolute and preclude a given form of development. Others may, on investigation, be subject to amelioration, albeit with the consequence that addressing these constraints adds to the uncertainty, and therefore to the costs of redeveloping such sites Market-driven Constraints In addition to the regulatory constraints upon redevelopment of PDL sites, there are various market-driven perspectives. At its simplest, areas of generally low demand exhibit lower property market values, and thus actual or perceived site abnormals can more readily erode the profit margin. Another factor, of a market-driven nature, that may well add to the costs of redevelopment of certain PDL sites is the need to consolidate ownerships to achieve manageable parcels of land. By comparison, greenfield development is more often on land in sole ownership, allowing a developer to negotiate to purchase a site from a single vendor, with far fewer risks of ransom ownerships arising. Previously developed land is also typically more of an unknown quantity, in that the due diligence involved in acquiring a greenfield site will be far less onerous than that for a brownfield site especially if the latter has been in various ownerships and various uses in its history. A further adverse consideration for the private sector when dealing with PDL relates to the holding costs of land banks. For greenfield sites, typically in agricultural use, the costs of acquisition, whether directly or via an option, is comparatively modest. Furthermore, agricultural land can provide a holding revenue by continuing in agricultural use prior to development. By contrast, the direct land acquisition costs are likely to be greater within urban areas, the timescales involved in consolidating sites are more extended and the prospect of achieving a continuing return throughout this period are less certain. Another, potentially very significant, factor relates to market perceptions of blight. PDL that has been visibly unused for a long period of time carries with it the stigma that no-one else has shown interest in the site, or may well have been discouraged by what they learned. Similarly, in areas characterised by significant proportions of vacant or under used PDL, developers may be concerned that end-user occupiers may not find the location attractive, no matter what the project economics of a particular site might suggest implying a need for area-based initiatives to complement site-specific actions. Towards a National Brownfield Strategy 15

18 3.5 EFFECTIVE AVAILABILITY The combination of regulatory constraints, overlain with potentially adverse market perceptions, is likely to constrain the commercial redevelopment of significant proportions of the identifiable PDL. Certain of these constraints are locational in nature reflecting spatial designations or spatial variations in property markets. Others are far more likely to be site-specific reflecting, say, ground conditions (such as contamination or former foundations), bio-diversity becoming re-established, local access constraints, recalcitrant land owners etc. From a national perspective, site-specific factors cannot be readily analysed, however, locational factors can be. As set out in Briefing Note 4 (The Availability of PDL for Development), accompanying this document, we have attempted to analyse the key locational factors in order to cut through the stock of PDL as recorded on NLUD as at March Of the overall stock of land identified on NLUD in 2001 (some 65,500ha) around 32% is subject to one or other regulatory constraint. Similarly, some 58% would appear to have market-driven constraints. Applying both sets of constraints, the potentially available stock of PDL falls to 20,010ha, or some 31% of the total identified stock. Not all the unconstrained sites will be commercially viable, and therefore the amount of effectively available PDL would be reduced further if consideration is given to more site-specific factors, for which data is not so readily available from a national perspective. Some indications of the scale of this effect can be gauged from consideration of that portion of PDL that is currently unoccupied (and so without a need for the current use to cease prior to redevelopment). In aggregate, some 36,140ha of PDL is identified on NLUD as either vacant or derelict, and of this some 23% is subject to significant regulatory constraint and some 76% is subject to market driven constraints. Taken together, these reduce the amount of effectively available vacant PDL to just 7,330ha (or just 11% of the total identified stock of 65,500ha of all PDL). In order to gain an appreciation of the tightness, or otherwise, of supply of previously developed land, compatible with current PDL land requirements, it is possible to compare land requirements at a regional level with the stock of PDL identified on NLUD. This is discussed further in Briefing Note 5 (Land Requirements Implicit in Policy Targets) - considering both the total stock of PDL and that portion judged likely to be more readily available. In this way, a very broad impression of the potential years supply of PDL can be presented. 3.6 CONSEQUENCES FOR THE RE-USE OF PDL The identifiable stock of PDL, demonstrably, is not homogeneous, in that significant constraints are faced by much of the land identified on NLUD as PDL. If comparison of the total stock of PDL, as recorded on NLUD, is made with estimated requirements for PDL in coming years, it would appear that there is more than adequate supply - approximately 8 years of pipeline supply. Clearly, there are regional variations on this national statistic. Under this scenario, within each region Towards a National Brownfield Strategy 16

19 there would appear to be a more than adequate supply of PDL to allow the achievement of policy aspirations and PDL-specific targets. Consequently, the policy challenge for the future would appear to be simply one of accelerating the pace of take-up of PDL in order that the historic back-log is brought back into beneficial use in as short a period as possible. However, the processes at play in the re-use of PDL have contributed to the creation of a "hardcore" of persistently unused sites. It would appear that much of the development on PDL circles around this hardcore, making little material impact upon the persistently unused sites. Therefore, looking at the unconstrained supply of PDL, the identifiable stock of land shrinks materially, to approximately 2-3 years' supply across England as a whole, and regional supplies in the range of 1.5 to 4 years' supply. These latter statistics exclude the amount of latent PDL that might be stimulated by market pressures in response to the current policy framework. Conversely, a proportion of the unconstrained PDL supply is likely, on closer inspection, to be commercially nonviable due to site-specific factors. Under this alternative scenario, there would appear to be a double challenge - namely improving the supply of developable PDL (in order to ensure that there are no supply side constraints on the achievement of development targets) and the prospect that many more years will be required to address the historic back-log of visible PDL. There are indications to suggest the latter scenario may be more appropriate. For example, the econometric modelling, whilst indicating that the aggregate pace of development on all PDL is driven by demand side factors (such as the GDP per head, interest rates, and employment indicators) suggest that the pace of development of vacant and derelict PDL are more strongly associated with supply side factors (notably the pace of decline of the industrial and extractive industries employment). In other words, it would suggest that as structural change releases land for development for alternative uses, the quick fix sites readily become re-used but the balance becomes classified as too difficult and are added to the "back-log" of sites. If this too difficult land is to become available for commercial redevelopment in the foreseeable future, deliberate interventions by the public sector are likely to be required - and in the form of policies that can respond to particular mixes of problems. No single policy instrument is likely to resolve the position. Similarly, only public sector interventions are likely to result in such "too difficult" land being used for amenity purposes. For such sites, the role of the private sector may be only that of a contractor rather than the developer. Furthermore, there are indications that additional latent PDL might be brought forward by market forces and/or there may be adverse consequences for the overall pace of development. Strengthening policies to divert development attention from greenfield to brownfield sites, without a complementary package of measures to address the cost-value equation for commercially non-viable PDL sites, may perpetuate the current state of affairs. To summarise, it would appear that only a portion of the identifiable stock of PDL can be considered as "developable" in the foreseeable future. This restricted supply of Towards a National Brownfield Strategy 17

20 developable land, despite the much greater overall stock of PDL, may place limits on the proportion of all development that can be accommodated on currently identifiable PDL. 3.7 IMPLICATIONS FOR A NATIONAL BROWNFIELD STRATEGY A paradox is emerging. On the one hand there are signs of an emerging shortage of readily developable PDL. On the other hand, a persistent backlog of "hardcore" sites has been created with little prospect of re-use and which blights its surrounding areas and communities. Therefore, if the aspirations for the re-use of PDL are to be achieved, the following factors need to be taken into account by a National Brownfield Strategy: to ensure that there are few supply side problems in the development process accessing previously developed land, to focus effective demand, as far as practicable, on existing identifiable PDL rather than stimulating additional latent PDL, to recognise the back-log of identifiable PDL includes sites with deep-seated constraints that can only be addressed by non-market solutions. Some of the cost value barriers to the re-use of PDL reflect the location of a site whereas others relate to site-specific considerations. The former may well be capable of resolution by means of national, or "top down" interventions. The latter, however, also require a strong local perspective to be properly understood and therefore addressed. Towards a National Brownfield Strategy 18

21 4. POLICY OPPORTUNITIES 4.1 THE COST-VALUE EQUATION Inherently, there are two fundamental approaches by which public policy can encourage the private sector to take forward a greater number of PDL sites. On the one hand, policy can seek to manage down the costs of development of a particular PDL site or, on the other hand, steps can be taken to increase values from the development at that location. These processes are illustrated in the diagram below: Costs B1 Loss Profit A B2 C Value Breakeven Points The above graph attempts to illustrate the cost-value relationship involved in developing a range of sites for a particular use. Under existing conditions the breakeven point is indicated by A. Sites for which the costs are less than the values are to the left of point A (i.e. are in profit) whereas sites where costs exceed value are to the right (and therefore exhibit a loss on redevelopment). Policy shifts to increase the site values (say, by area-based environmental improvements, or by rezoning for higher value uses such as retail development), as indicated by the dashed line, cause the breakeven point to move towards B1, such that former marginal sites now move into profit. Under an alternative scenario, development costs (say, by predevelopment preparation being undertaken by the public sector), indicated by the dotted line, could instead be used to shift the breakeven point to the right, to point B2. Clearly, a combination of both the value enhancement and cost reduction would have a combined effect, such as the breakeven would move to point C, allowing further sites to become profitable ADDITIONAL PUBLIC SECTOR PERSPECTIVES A different mix of costs and values should apply when considering the public perspectives involved in achieving a greater reuse of PDL. Fundamentally, the criteria relate to the sustainability of development namely the balance between social, economic and environmental perspectives. In other words, demonstrable Towards a National Brownfield Strategy 19

22 environmental and community benefit is the justification for off-setting the financial cost involved in the reuse of PDL, as opposed to alternative greenfield locations. Typically, these factors are capitalised in specific value for money benchmarks these benchmarks are often used to cap the level of public subsidy to be granted related to the desired outputs that are to be achieved. Alternatively, minimum absolute standards of environmental quality are established through the regulatory process. We are also aware of differing methods of recording the comparative social and environmental benefits of redeveloping a particular site for example the Public Sector Benefits Recording (PSBR) techniques developed by the Forestry Commission when considering sites for community woodland. The existing methods of measuring public cost and benefit run the danger that certain PDL sites may have consistently failed the usual value for money test applicable to the public sector activity. Unless such sites, with particularly acute abnormal costs are caught by absolute regulatory standards (e.g. contaminating the wider environment), neither the private sector nor the public sector may be able to justify the costs involved in remediating such sites and in returning them to beneficial use. It is factors such as these that, undoubtedly, contribute to the creation of a persistent hardcore of PDL sites that remain vacant or derelict for considerable periods of time (and thereby contribute to a general blighting of their surroundings). Consequently, if the worst sites, in terms of the cost-value equation, are to become the focus of action by the private or public sector, there is a requirement to most appropriately measure the non-financial aspects of their reuse, in order that these factors might be better reflected in the appraisal techniques that are used to determine the pattern (and scale) of public sector investment in PDL. Traditional public sector costs bench-mark approaches may well have inadvertently contributed to the build up of a backlog of hardcore sites. It remains an issue as to the degree to which the assessment of social costs and values can be further developed to assist in the setting of priorities of public intervention remediation of PDL sites that lack a demonstrable hard end use. 4.3 POLICY OPTIONS There is a broad range of individual policies that can be used to increase the pace of take up of previously development land, or to reduce the pace of creation of PDL. Certain policies seek to augment market signals and processes, whereas others effectively replace the market. This differentiation is perhaps of greater importance when considering the relationship between domestic policy and EU Policy (which seeks to minimise distortions within the Single Market). By their nature, market replacement policies are less likely to fall foul of state aid rules, in that they bypass the private sector and so cannot be deemed to give private enterprises unfair competitive advantage within the EU Single Market. Market augmentation policies need greater care in their design in this respect. Nevertheless, policies can be targeted at several objectives to achieve a progressive reduction in the identifiable stock of PDL: reduce the availability of greenfield land thereby diverting development interest towards the available PDL, Towards a National Brownfield Strategy 20

23 increase the take-up of PDL encouraging developers to deliberately seek our PDL, increase the availability of viable PDL reducing site abnormals or increasing values, reduce the creation of difficult PDL obliging existing land owners to take more responsibility for re-use of PDL, and increase the use of "difficult" PDL for non-commercial uses implying greater public sector intervention. Below, a range of existing and potential future policies are considered in terms of their contribution to increasing the re-use of PDL and / or containing the creation of new PDL grouped according to these objectives Reduce the Availability of Greenfield Land Certain measures are already in place that reduce the effective availability of greenfield development opportunities and so divert development interests towards previously developed land. Primarily these are achieved through the planning system, ranging from prohibition of development in Green Belts and AONBs, and on grade 1 agricultural land. They are also achieved through obligations for sequential testing of sites when local authorities consider planning applications, even for sites formally allocated within a statutory Development Plan. Indirect fiscal measures are also taken to reduce the comparative attractiveness of greenfield development, to the extent that the RDAs, for example, are actively discouraged from providing public sector support to development schemes involving greenfield land as opposed to previously developed land. A further regulatory measure that will contribute to a reduction in demand for greenfield sites is an increase in development densities, particularly for housing. If achieved, such moves would reduce the aggregate amount of development land, other things being equal, and thereby reduce the pressure to release greenfield land but may, conversely, reduce the amount of development available to divert onto PDL. Looking forward, additional policy tools might include the manner in which extant greenfield planning permissions are either renewed upon application or potentially rescinded, and the application of sequential tests to sub-regional property markets rather than administrative boundaries Increasing the take-up of PDL There is a broad range of policy initiatives that can stimulate demand (especially from the private sector) for PDL to meet their development aspirations, by increasing values and / or reducing the costs of development. Demonstration projects (e.g. the Millennium Communities) and the development of design standards all contribute to raising perceptions among developers of the potential for brownfield development. Towards a National Brownfield Strategy 21