Savills World Research UK Development

Garden Cities Breaking new ground June 2014

SUMMARY New settlements are only part of the solution to the demand for housing spilling out of London

■ Housing undersupply: London and should be ‘at or above 15,000 landowners to bring forward land the wider South East face an acute homes’. At this level we would willingly and achieving the right price shortage of housing. Building rates need to build one new Garden City for land that allows schemes to be are below planning targets and our a year simply to accommodate the deliverable. However, the assumption research reveals that these targets are London overspill. p.2/3 that all Garden City infrastructure can well below housing need. p.2/3 be funded from land value capture ■ Beyond targets: The Garden alone is heroic. p.6/7 ■ Planning shortfall: We calculate Cities programme will not meet that the deficiency will leave London, housing need and address the ■ Public funding: Land value the South East and the East short housing crisis unless locally-set uplift would supplement rather of 129,000 homes over the next five targets add up to current household than replace central and local years. London’s planned undersupply projections of 240,000 new Government funding. p.6/7 will total 72,000 homes over the households a year in England. p.2/3 same period. This shortfall plus high ■ Affordable housing: There are property values in London will prompt ■ Best locations: We take a look trade-offs to be considered between migration out of the capital. p.2/3 at the possibilities with the greatest a variety of tenures for new homes potential. p.4/5 including innovative hybrids on a ■ Garden Cities not a panacea: The site by site basis. Generic Government prospectus for Garden ■ Land value uplift: A balance must requirements for Garden Cities Cities states these new settlements be struck between encouraging should be avoided. p.6/7

savills.co.uk/research 01 Spotlight | Garden Cities

Market analysis There is no single solution to this housing crisis. Savills believes that The Case for the creation of new Garden Cities, as defined by the Government’s prospectus launched this spring, is Garden Cities not a panacea but a piece in a much bigger jigsaw. It is within this context that we examine the need for large scale developments, consider the best locations for new settlements (pages 4-5) and look at some of the factors affecting the viability of such As London and the South East face ll three main political schemes (pages 6-7). parties agree that we an acute shortage of housing, we are experiencing a Housing shortfall examine the need for large scale major housing shortage Last year we built just 112,630 and that the rate of homes in England. That is less than developments around the capital housebuildingA needs to increase. half the numbers needed and 34% Within this debate, the creation of below what we were building in new Garden Cities is often cited as 2007/8. Yet low building rates are not one way to increase the numbers, the only problem. particularly in the South East where In Planning: Countdown to the the problem is greatest. Election, published earlier this Strong price rises in London, year, we revealed that many Local which suffers an acute imbalance Authorities are failing to plan between the supply and demand for adequately for housing need in the homes, has priced out large numbers first place. Our study of southern of households. Many will leave the England showed that even if all Local capital in search of better value, Authorities (LPAs) met their local placing added pressure in the property plan targets, the region would still markets with the strongest migration face a shortfall of more than 160,000 links to London. homes over the next five years. That is before we take into account the backlog in demand resulting from MAP 1 years of undersupply. Large development sites in and around London over 4,500 homes London, the South East and the East will suffer 80% of that shortfall, a total of 129,000 homes over the Large Sites next five years according to our By total number of units analysis, which compared the number 11,000 of homes planned for by LPAs with 4,500 household projections for Town and Country Planning Association (TCPA). By the same measure, London alone will be short of 72,000 homes over the next five years. High quality new settlements, built along existing public transport links to major cities or where there are real plans in place for its provision, would relieve some of the pressure. Back to the future Garden Cities are not a new idea. The New Towns Act of 1946 launched a programme through which Britain built 32 new towns over the twentieth century and, according to the TCPA, these currently provide homes for 2.5 million people. Welwyn Garden City and Letchworth are thriving examples. The Eco Towns championed by the previous Government were Source: Savills Research another, if less successful, version

02 June 2014

of the concept. Labour’s aim was to build zero-carbon, largely car free, self contained small towns of up to Ebbsfleet & the Thames Estuary 20,000 homes. However, of the four winning bids announced in 2009, Government identifies site in Kent as a suitable location only North West Bicester is still planned to be built to the standards Ebbsfleet has been identified by the Swanscombe Peninsula would provide that were originally proposed. Government as a Garden City, with some employment and enhance the city’s profile. 15,000 homes planned around the station that Directly across the Thames to the north lies Defining Garden Cities offers links to London St Pancras in less than the new settlement of Chafford Hundred, In contrast with previous “new 20 minutes via High Speed 1. With targets at where over 5,000 homes were delivered settlements” where the concept these levels, we would need to build a ‘new around the turn of the century. originated with and was driven by Ebbsfleet’ every year just to accommodate a central body, the Government’s London’s overspill. Additional development around this area prospectus for Locally-led Garden may be possible as it is not designated as Cities published in April 2014 states Proposals from London Paramount to create Green Belt. Existing property values are low that the next generation of Garden the UK’s largest leisure resort in the adjoining given the proximity to London. Cities are to be instigated and supported by Local Authorities. The document offers no detailed definition of what constitutes a Garden City, but invites localities to consider the view of the TCPA, that they should be “holistically planned new settlements which enhance the natural environment, tackle climate change and provide high quality affordable housing and locally accessible jobs in beautiful, healthy and sociable communities”. Beyond that, the Government expects these new towns to comprise some 15,000 homes with access to existing or planned transport infrastructure. It prescribes no particular mode for delivery but suggests arrangements such as joint venture companies or statutory bodies such as Development Corporations, as proposed for Ebbsfleet in Kent. Breaking ground The Savills development database New Garden Cities should integrating green spaces, amenities, identifies several large developments complement these existing sources, employment options and public being openly promoted or currently not replace them. Extending existing services into the design from the going through the planning system. towns and cities must therefore start. It also provides an alternative These include a MOD site for remain part of the wider strategy for to placing greater pressure on 10,000 homes in Waterbeach, meeting housing need. infrastructure and services in existing north east of Cambridge; 9,500 However, creating completely towns and villages. However, the homes in Northstowe, north west new settlements is not just about cost of building an entirely new of Cambridge; and outline planning housing numbers. Building Garden infrastructure to support a new permission for 6,200 new homes at Cities allows for the delivery of Garden City is an important challenge Rugby Radio Station, north of Rugby. new housing on a large scale while to their delivery. n

South East still short of We would need a new 32 new towns 129,000 homes over next Ebbsfleet every year to provide homes for five years after meeting cater for London overspill 2.5 million people planning targets

savills.co.uk/research 03 Spotlight | Garden Cities

Potential sites Location, Location, Location… but where?

The Government has made it clear A. Northamptonshire and the decision should be ‘locally-led’. There is good availability of land across Northamptonshire, around Here are a few ideas Local Authorities towns such as , Kettering and . Large strategic sites include a 5,000 unit urban extension being promoted at West Corby and developers may consider and an 8,000 unit development under construction in The Hamptons, a collection of new villages south of Peterborough. hile the Urban extensions of more than 5,000 units have also been proposed development at both Rugby and and are currently going through the of the next planning process. Infrastructure improvements and major regeneration generation of schemes could be key to moving development forward and improving Garden Cities is values in the area. Wto be locally-led, certain areas have particular potential. The map shows some of the factors influencing development – B. The “arc of prosperity” the average property price in existing urban locations against factors that The arc outside London’s Green Belt, from west to north east, is a constrain development. For the thriving economic area. Major centres such as Cambridge and Oxford purposes of this exercise, we have are amongst the fastest growing local economies, adding skilled jobs assumed existing constraints will in technology and R&D. Property markets are mixed, ranging from very remain, such as the Green Belt (light strong in Oxford and Cambridge to more affordable locations such as and Bedford. Land values reflect this, and can therefore grey), Areas of Outstanding Natural support “traditional” development routes in the more popular locations. Beauty (AONB) or Sites of Special Scientific Interests (both in dark grey). Transport infrastructure improvements to both road and rail are We’ve also considered current underway, and more are planned – this is likely to open up new areas development sites as well as journey for development. At present there is a lot of activity in the east of times into London via existing roads the arc, with large sites around Cambridge (Alconbury, Cambourne, and railways. These are some of the Waterbeach and Northstowe) and Bedford (Houghton Regis and areas across the wider South East Wixams) at various stages of the planning and construction process. where the potential for large scale development exists. n

C. M11 and east

A large area of relatively unconstrained land exists along the M11 corridor and to the east of the motorway. In locations with good transport links, land values are relatively high. Higher housing targets are needed for Additional supply here could take pressure off local authorities north of London where growth is constrained by the Green Belt. Large strategic Garden Cities to make sites include 9,000 units at Easton Park near Stansted and 4,000 at a difference Beaulieu Park to the north of Chelmsford – both at the early planning and promotion stage.

D. The M3 & M4 corridors Generic To the west and south west of the capital, towns such as Reading, requirements Bracknell, and Wokingham offer good transport links for Garden Cities around the region and into London. House prices are generally in line with or above the regional average. Greenfield land values are such should be avoided that development through urban extensions should be viable.

04 June 2014

MAP 2 Garden Cities of the Future Possible locations for large scale developments

Average house price 2013 by urban area  Over £500,000  £400,000 to £500,000  £350,000 to £400,000 A  £300,000 to £350,000  £250,000 to £300,000  £200,000 to £250,000  Up to £200,000

 Green Belt  Other Constraints

B c

D F E

F. Around Ashford

Ashford International is a stop on the High E. Surrey and Sussex Speed 1 line in Kent, along with other main lines. With house prices well below the London The constraints on the expansion of Brighton is one of the average and the potential of a fast commute factors putting upwards pressure on house prices. The into the capital, major development was limited area between the South Downs National Park and proposed for the area under previous strategic the High Weald AONB offers potential sites to meet demand plans. However, recent delivery levels have from the south and from London, with transport links via the been relatively low. 5,750 homes at Chilmington main line into Waterloo and Victoria. Green currently have outline permission.

Source: Savills Research

savills.co.uk/research 05 Spotlight | Garden Cities

Delivery One of the challenges with the locally- led approach is that new settlements Piecing together are unlikely to be justified purely on local requirements. However, if the ultimate objective of creating a a new community settlement is to increase build numbers drastically to cater for the wider national need, we believe locally set planning targets should add up to the latest estimates for housing requirements of 240,000 new homes a year. Local authorities will then find ways We need a strong larger-than- he Garden Cities of working together, perhaps through prospectus emphasises stronger city regions and/or Local local body to bring together all that the proposals Enterprise Partnerships (LEPs), to interested parties need to attract private meet a fully assessed level of need in capital and make use the south, with Garden Cities being ofT land value uplift to finance part of the solution. Existing plans infrastructure. The project must for urban extensions and the homes also be locally-led, brought forward already allocated in Local Plans should by Local Authorities with the continue to underpin delivery. support of the community. The delivery process also needs to This is a tall order. Given the recognise that the beneficiaries of new complexity of a development project towns are by definition people who do on this scale, we would advocate not live there yet. Given the long-term that the delivery process is facilitated nature of the concept, these future by a larger-than-local body to bring residents may not have been born or all interested parties together. We are likely to be too young to vote. The anticipate that the land needed to case for Garden Cities needs to be accommodate 15,000 homes will made on behalf of future generations. come from a number of landowners Designation process requires more and could stretch across Local than a local planning framework. Authority boundaries. Hence there will be considerations that would Land value uplift need to be addressed on a wider than The planning system is based on local scale. the premise that there should be To achieve the scale necessary in competitive returns to landowners to locations where people want to live encourage them to bring forward land. at a realistic cost to the landowner, For owners of Greenfield land, this developer and end user, requires a represents the ‘life changing sum’ that solid and accountable framework. persuades them to give up long-term A New Town Development ownership of that land, typically in Corporation (NTDC) could be the agricultural use, after paying taxes and vehicle that helps deliver a long-term costs of sale. vision and reduce risk to investors There are broad benchmarks that and developers. Ensuring that it is represent this ‘life changing sum’ for locally-based and controlled (it could large scale urban extensions. We need be set up by Local Authorities, for to ask whether the benchmark land example) would ensure transparency, value for Garden Cities is any different accountability and help build support on account of the scale of land take. at grass roots. The only way to discover this is to hold NTDCs could create a planning a national competition for sites to come framework, borrow money to fund forward, from private land owners and infrastructure, share land value uplift Local Authorities. with the private sector and instigate Assuming a number of proposals compulsory purchase where necessary are put forward, the competitive to complete land assembly. element would test the potential for lower land prices so that gains from Planning numbers value uplift could be used to fund As we discussed on p.2/3, many infrastructure. Bidders would have Local Authorities are failing to plan the option to compete on land value for housing need. Even if current by proposing Joint Ventures or other planning targets are met, southern delivery structures. England faces a shortfall of 160,000 One, possibly complementary, homes over the next five years. route could be via a vehicle whereby

06 June 2014

existing landowners retain a minority infrastructure can be funded from land of affordable housing for housing share in the project value. This allows value capture is heroic. Contributions schemes” in Garden Cities. There the landowner to benefit from rising from landowners and developers is a realisation that prescriptive land values but requires them to share would supplement, rather than replace, requirements on tenure mix can some of the risks inherent in large- central and local Government funding. deter development. scale development. The process for setting the rates Garden Cities offer the On a note of caution, the for Community Infrastructure Levy opportunity to provide for a range assumption that all Garden City (CIL), recognises that the levy is of need by delivering a variety only one source of infrastructure of housing tenures – from social funding amongst many. Garden City rent to market sale and rent, “The assumption infrastructure is no different. The with various forms of subsidised merits of any proposed site will be housing in between. that all Garden City underpinned by its location relative to This could come in the shape infrastructure can existing and planned infrastructure, of shared equity, shared-ownership together with its capacity to and homes at discounted and be funded from contribute funding from land value market rent as well innovative towards new infrastructure. hybrids. Hence there are a number land value capture of trade-offs to be considered is heroic” Affordable housing on a site by site basis. Generic Savills Research The Government has stated that it requirements for Garden Cities would “not impose a particular level should be avoided. n

Graph 1 Viability and the Willing Landowner

Bringing forward land

National competition: Land purchased at Landowner retains existing use value: to encourage landowners a share in to bring forward would require CPO land willingly the project

Value uplift captured to repay Competition would test the Could complement debt and fund infrastructure. market. Competitive element competitions: landowners Principle embodied in the could drive down prices so that benefit from rising land New Towns Act gains from value uplift can be values over the longer term used to fund infrastructure

Diminishes the need for public subsidy Local authority housing Deal structured via New Town but would not incentivise landowners targets should add up to Development Corporations to bring forward land willingly 240,000 homes per annum

Source: Savills Research

savills.co.uk/research 07 Spotlight | Garden Cities June 2014

OUTLOOK The way forward for Garden Cities

■ Beyond locally-set targets: Garden to the city. High quality new settlements, and developers. NTDCs could create Cities are a mechanism to increase the built along public transport links to major a planning framework, borrow money supply of housing. Our research reveals cities or where there are real plans in to fund infrastructure, share land value that many Local Authorities are failing to place for its provision, would relieve some uplift with the private sector and instigate plan adequately for need. Even if planning of the pressure. compulsory purchase where necessary targets are achieved, southern England to complete land assembly. faces a shortfall of 160,000 homes over ■ Plans must be larger-than-local: the next five years. Therefore, if Garden The case for Garden Cities needs to be ■ Land value uplift: We need to encourage Cities are to make a difference, they made on behalf of future generations. landowners to bring forward sites at a price should be seen as part of the answer, The designation process requires more that ensures schemes are deliverable. Two in addition to existing plans for urban than a local planning framework and rests possible and potentially complementary extensions and the homes already on meeting wider than local needs. The routes include a national competition and allocated in the local plans. creation of new settlements will not help for sites to come forward and the creation solve the housing crisis unless locally-set of contracts through which landowners ■ London overspill: Plans for new targets add up to the latest estimates retain an equity share in the project. settlements need to consider the acute for housing requirement of 240,000 new housing shortage in the capital. Value homes a year in England. ■ Garden Cities are only part of the growth in London has priced out large solution: There is no single solution numbers of households. Many will leave ■ New Town Development to this housing crisis. Savills believes the capital in search of better value, Corporations: These could be the that the creation of new Garden Cities placing added pressure in the property vehicle that helps deliver a long-term is not a panacea but a piece in a much markets with the strongest migration links vision and reduce risk to investors bigger jigsaw.

Savills team Research

Susan Emmett Jim Ward Chris Buckle Nick Gregori Emily Williams UK Residential Development Development UK Residential Housing Supply Pipeline 020 3107 5460 020 7409 8841 020 7016 3881 020 7409 5907 020 7016 3896 [email protected] [email protected] [email protected] [email protected] [email protected] Twitter: @saemmett Development & Planning

Richard Rees Mike Shaw David Jackson Jonathan Steele Charles Collins Head of Development Head of National Head of Operations Head of Housing Planning Research Services Strategic Development Planning Planning 07870 999 596 020 7016 3726 07967 555 456 07967 555 796 07967 555 818 [email protected] [email protected] [email protected] [email protected] [email protected]

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