Why the devolution of business rates might not be brilliant news for housing delivery…

The Queen’s Speech contained details of the Government’s intention to devolve the full £26bn of local business rates income to councils, and on the face of it, this is a good thing.  Authorities with directly elected mayors will be able to use the revenue to fund infrastructure projects, and there’s the potential for local authorities to also plan more proactively for new forms of employment space.  It might even encourage some authorities to impose Article 4 directions to protect the existing stock of offices that continue to be viable, but under pressure to be released for residential conversions.

However, there could be a sting in the tail.  Cash-strapped authorities could face the dilemma of wanting to see under-utilised employment sites redeveloped for residential, but also looking to preserve their existing income stream.  And of course, business rates do not simply apply to the B class employment generating uses; a potentially fertile stock of future housing is locked up in 1980s retail parks that are reaching the end of their shelf life.  They are often situated in excellent locations for residential redevelopment, close to existing residential neighbourhoods and public transport, without carrying the policy stigma of ‘loss of employment’ associated with their B Class cousins higher up the employment hierarchy (which isn’t to be endorsed, but is a fact of life south of Peterborough).

Developers will need to be alive to the practical implications of this issue, and where possible, seek to make provision for the retention of some form of employment use when promoting redevelopment.  Whilst the retention of business rates is not in isolation a planning issue, it could nevertheless influence the thinking of decision makers when considering residential proposals on former ‘employment’ sites.

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