Sector raises two cheers for Glasgow 'pay later' plan

By STEWART McINTOSH

THERE has been a broad, if qualified, welcome by the sector to Glasgow City Council’s message last week that bureaucracy was being chucked overboard and lifebelts thrown to developers – via the postponement of upfront development costs.

Council Leader Steven Purcell said: "We are willing to be much more flexible in the way we dispose of land if it means projects get off the ground. We are willing to look at deferred payments, profit sharing, joint ventures and greater risk-taking on the part of the council.

"We will no longer ask developers for payment to develop a site at the planning stage. This is a significant upfront cost and a barrier to development in the current climate."

Arguing that the new measures “could mean the difference between a development going ahead or not,” he made clear the city council’s determination to do its bit to keep the development pipeline flowing during the credit crisis.

The value of private sector development across the city now totals £4.3bn –an increase of 2 per cent on 2007, despite the current downturn.

David Smith, head of Lambert Smith Hampton in Scotland, was among those who welcomedthe plan. He said: “Like every other local authority, Glasgow has a hole in its capital receipts. There’s no doubt that this initiative is the way to go. Other landowners, including the private sector, will have to do something similar.”

Endorsing the postponement of planning gain payments, he said: “This will be especially useful for those who already have their planning consents – many developers will want to change their current consents to take account of market realities.

“One potential problem here is that these payments are for infrastructure. Most developments need infrastructure improvements, so

The value of private sector development (this is West Nile St) across Glasgow now totals £4.3 billion

who will pay for these if the developer’s charge is deferred? You can’t sell a house unless the infrastructure is in place, and the same goes for a lot of commercial developments. There’s a ‘Catch 22’ here.”

Despite that reservation, Smith felt that Glasgow was showing other cities that some action can be taken to encourage development activity.

Meanwhile, leaving no stone unturned in his search for development incentives, Steven Purcell said: “There is also a new European Union scheme which would allow us to borrow money from the European Investment Bank and lend that to developers planning regeneration projects in Glasgow. We are currently in discussions with the Scottish Government about this new European initiative and we are hopeful that we will get a quick go-ahead.”

Russell Rutherford of Ryden’s Glasgow office said: “You’ve got to give the council credit for taking a pioneering stance on this matter. They certainly seem prepared to do what they can to keep development going in the city.

“But the biggest problem is the shortage of development finance, not the price of land –land costs are a relatively small part of the total cost of development. But Steven

Purcell is correct – in some cases this initiative could make all the difference in getting a development going.”

While welcoming the scheme, Rutherford foresees potential problems down the line if private sector land-owners feel themselves disadvantaged when in competition with the council to sell sites.

Douglas Patrick of King Sturge also welcomed the initiative, saying: “It’s a bold move; they’are clearly saying, ‘if you’re prepared to go ahead with a development, we’ll work with you on the red tape’. They also seem to be saying that if developers can get the funding to begin on a scheme, the council will postpone the payments it is due until the scheme is making money. It’s quite ballsy, quite interesting.”

Likening the initiative to the sort of powers once held by the now-defunct Scottish new town development corporations, he said: “They’re offering to act as a catalyst and to work in partnership with developers to ease cash flow and smooth the workings of the project. I’m a great admirer of what the council is already doing in the East End and in places like Rutherglen, Farme Cross and Oatlands. This ‘pay later’ initiative could kick-start projects in those outlying areas.”

Next >>