One North …. Plus?

On Tuesday something strange happened. Everyone in politics agreed on something.

One North – a collection of five cities working together – put forward an ambitious proposal on how to improve transport connectivity, dubbed the “Crossrail of the North”.

George Osborne pledged support, stating he’d make the plans the centrepiece of his Autumn Statement. And Ed Balls welcomed the proposals too.

However, before everyone runs away with themselves I want to offer an amendment, an addition to the plans. Let’s call it One North Plus.

Whilst the report provides a comprehensive vision for transport, it misses a big opportunity to integrate this investment and strategic planning with housing. In fact – there was no mention of housing at all in the entire document.

Tying the two together would provide a means to substantially increase housing supply, and thereby improve the lives of hundreds of thousands of people. But it would also make the investment in infrastructure much more socially valuable.

This fits with one of the key recommendations outlined in Shelter and KPMG’s joint report: ‘Building the homes we need: A programme for the 2015 Government’. Integration of housing and infrastructure projects is a win-win policy which maximises the potential of transport and housing developments, and allows public investment in infrastructure to be much more effectively spent.

So what would this integration look like? (FYI: I’m going to talk about the land market now. Please don’t go away – I’ll try and make it worth sticking around.)

Land without planning permission is pretty cheap. Mostly because of the uncertainty that stems from whether you can do anything with it. Conversely, land with planning permission is extremely expensive, given the guaranteed commercial value from property sales. And land with planning permission, and a brand new transport upgrade linked to it? Well that’s the holy-grail – and that means extremely high land values.

The Jubilee line extension is a great example of what transport investment does to land and property prices. £3 billion worth of Government investment went into this project. That created a £2.8 billion increase in property values in the surrounding area according to Transport for London / Jones Lang LaSalle.

But there was little integration of housing into these project plans. That meant this increase in property prices, caused by transport investment, couldn’t be reinvested or captured for the benefit of the local community.

There’s a much better way. And it’s one that we think the One North proposals should benefit from.

KPMG and Shelter believe that transport infrastructure should be planned in conjunction with new homes. By joining up our plans for new transport connectivity with new homes, we can even help pay for the transport links (by using the increase in land values that results to fund capital spending).

To achieve this, joint private/public ventures can purchase land through ‘New Homes Zones’ which are designated by the local planning authority. The zoning effectively freezes land values at pre-planning levels (with some compensation to land owners) and allows the joint venture to capture some of the uplift in value. This can then be used for financing affordable homes, transport or even community compensation. Finally, serviced plots for homes are sold on to self-builders; small and medium-sized enterprises (SME); house builders; and housing associations, who build the homes on contract at a competitive margin.

This approach is well developed in continental Europe, where places such as Hamburg’s HafenCity or the VINEX programme in the Netherlands have seen many homes built to a high standard with excellent connectivity.

The final piece of the jigsaw is devolution of these powers. New connectivity, employment and homes must be financed and planned by the Northern power-house cities themselves, not from Whitehall. This is both to improve the quality of the developments through local leadership; and to improve local involvement in the development of the proposals, enhancing local democracy and therefore also hopefully support for new housing.

We think it is excellent that new infrastructure investment is being proposed for the North, but let’s use that opportunity to build high quality, locally affordable homes too.

NB: You can find out more on linking infrastructure investment and housing in the Shelter and KPMG report, on pages 86 – 87.