An additional 8.6 bn for Edinburgh by capturing land value

BEFS welcomes new research on financing local infrastructure using land value capture and the potential levels of investment for the Edinburgh City region.

This report prepared by the Centre for Progressive Capitalism for BEFS, following an event looking at cracking the housing nut in Scotland earlier this year, estimates the returns from land value capture for the Edinburgh City Region over a 20-year period. It is especially timely given the Scottish Governments consultation on the future of the Scottish planning system and the challenge of housing across the country today.

The research states that the Scottish Government is right to argue in its planning consultation that actively enabling infrastructure has a critical role to play in supporting housing delivery. However, it suggests that there is a risk that the current proposals of utilising an infrastructure levy ignore both its failure in England and best practice across Europe and Asia in financing infrastructure.

The report suggests that if the Scottish Government is to be successful in actively enabling infrastructure it must start learning from European and Asian countries and implement a land value capture system instead. This would require the Scottish Parliament to amend the Land Compensation Act (Scotland) 1963, permitting public authorities to capture the uplift in land values to finance the infrastructure.

Analysis by the Centre for Progressive Capitalism suggests this would unlock around £8.6bn of additional funds for the Edinburgh City Region alone to finance infrastructure over the next 20 years. Furthermore, these additional funds would have no negative impact on the public finances.

This issue lies at the core of the housing challenge. Scotland needs to invest in infrastructure to open up new areas of land for housing to increase supply. This investment generally needs to be financed by government, but it is expensive. In most other European and Asian countries, the uplift in land values is captured by the local municipality to finance the infrastructure. But things are different in England and Scotland where it is the landowner who benefits instead.

“This begs the question of whether it is right to continue to reward landowners for doing nothing, while foregoing the precious funds the country needs to finance infrastructure to enable families to live somewhere called home”, said Thomas Aubrey, Director of the Centre for Progressive Capitalism.

“These figures can support city region infrastructure planning and provide indicative estimates of the scale of infrastructure that could be financed from land value capture”, said BEFS Director, Euan Leitch.

Based on the findings of the report, Built Environment Forum Scotland and the Centre for Progressive Capitalism recommend the Scottish Government re-examine their proposals for funding infrastructure as part of the review of the Scottish planning system.

Read the full report.