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What does 'levelling up' actually mean?

The government's levelling up agenda now has a legal framework, but many are still unsure about what it spells for the property sector
May 20, 2022
  • Levelling Up and Regeneration Bill tied to property sector
  • Agenda described by some as "anti-development"

City mayors, council leaders and Whitehall politicians rub shoulders and share beers with local property developers, proptech companies and construction firms on a sunny day in Leeds. This is the government’s 'levelling up' agenda in action. A week after the government’s Levelling Up and Regeneration Bill had its first reading in the House of Commons, the inaugural UK Real Estate Infrastructure and Investment Forum (UKREiiF) last week saw more than 4,000 property professionals and government officials head to Yorkshire to network, make deals and – so the government hopes – level up the UK’s many regions through the medium of property investment and development.

The optimism is palpable. In the exhibition hall, stall after stall pitches region after region: London, Glasgow, Basingstoke, Belfast, Fife, Cheshire, Coventry, Blackpool, Cornwall, Hull – the list goes on, with almost every city and county council in the UK there asking businesses to help level up their part of the country.

But what will all this levelling up actually look like? And how will the levelling up agenda impact the property industry – whether that’s listed housebuilders, real estate investment trusts (Reits) or private equity?

There’s little doubt that levelling up is an idea intimately tied to the real estate sector. After the government sacked housing secretary Robert Jenrick at the end of last year, the Ministry for Housing, Communities and Local Government was renamed the Ministry for Levelling Up, Housing and Communities. To show how serious it was about all of this, the government named political heavyweight and long-time Boris Johnson ally Michael Gove as the levelling up secretary.

This is significant. The government could have chosen the departments of education, travel, trade, health or business to drive through its levelling up agenda. Instead, it chose to push it through a department chiefly responsible for planning, housing and real estate policy. As such, the levelling up bill is chiefly a planning, housing and real estate bill. “Planning is basically all this bill does,” says Nichola Gooch, partner at law firm Irwin Mitchell.

The bill is intended to be the manifesto for the levelling up agenda, described by the government as legislation that sets “levelling-up missions” and reports on progress in delivering them. However, many experts argue that despite its lofty title and its reams of policies, the bill is in fact a vague outline of what the government could do. Much of the heavy legislative lifting will be done by secondary legislation, something that bothers Gooch.

“We’re all going to have to keep a very close eye on secondary legislation around future consultations because there’s a lot in the bill [that] sets the framework for the future changes without having the detail in it,” she says. 

“This isn’t unusual,” she adds. “It happens quite a lot, but it’s becoming increasingly frequent and it annoys the hell out of me because secondary legislation does not have the same level of parliamentary scrutiny as primary legislation.”

There are many other criticisms of the bill too. The chief one is that it is contradictory. Despite the government’s claims that devolution and localism are at the heart of the levelling up agenda, the bill contains within it the ability to completely centralise the planning system via national planning policies, which would supersede local planning policies.

“If there was a conflict between a local plan and these national planning policies, the national policy overrides the local plan,” says Gooch. “It’s a very big move towards centralism.” 

Another criticism of the bill is its power to force high street units to be filled. The government would be able to put empty retail units that landlords fail to find occupiers for on an open auction – something which many in the property sector see as overreach. Melanie Leech, chief executive of the British Property Federation, has described it as a “political gimmick”.

Real estate professionals also worry that the bill could enfranchise NIMBYs. Dropping local authorities’ requirement to maintain five-year’s worth of housing land, scrapping their “duty to cooperate” with other local authorities on local plans and granting streets the ability to vote together on planning issues: all of these are measures that critics believe could further reduce the supply of housing. 

The bill also contains little reference to rental homes, something that frustrates those in the build-to-rent (BTR) sector. They argue that BTR homes will need to be part of the housing mix if the government is going to hit its housing targets.

“The government has been far too preoccupied with owner occupation,” says James Blakey, planning director of BTR developer Moda. “We’re never going to get to 300,000-plus new homes a year without more flexibility in the housing market.”

Yet, there has been praise for parts of the bill. Blakey likes its promises to make minor alterations to planning applications easier and to digitise the planning system in order to allow more transparency regarding planning applications. Both of these ideas, particularly the latter, will need resourcing. In theory, this too could be achieved by an increase in the fees developers pay for planning applications, but Blakey has concerns here as well.

“The challenge for that is that there is no mention of ring-fencing that money so that money can be spent supporting additional officers in the planning department,” he says. “You can’t service planning unless it’s better resourced.”

Another cost that Reits and housebuilders will need to stomach under the bill is the new infrastructure levy. Under the current system, property companies have to pay a Community Infrastructure Levy and complete a Section 106 agreement as part of the process of achieving planning permission. While the former is a straightforward payment, the latter is an agreement that can and often does come in the form of a payment, but which could also be a commitment to build a new road, school, playground, affordable housing or something else.

The new system would erase all of that and replace it with a single tax. Like so much else in the bill, how exactly that will work has been kicked down the road to be dealt with by secondary legislation, yet Irwin Mitchell’s Gooch believes it will mean developers are either levied the same or more for property development – not less.

One of the biggest naysayers on the bill is the Home Builders Federation (HBF). It told the Financial Times that the legislation was “anti-development”. Though, considering its myriad of policies, many believe that’s too simplistic a description of the bill – and argue that HBF’s negative attitude towards it comes from their position as representatives of housebuilders.

“I think the bill is anti-development at pace,” says Hari Sothinathan, national planning and development partner at property consultancy Gerald Eve. “The bill takes a longer-term view. Everyone wants to see immediate impact, but I think the reality of it is that it will take a few years to materialise.”

Sothinathan says what the bill means for housebuilders is a “push for housing beyond the south-east”. This indicates where the levelling up agenda is headed. UKREiiF, which even had its own “levelling up” stage, was held in Leeds and was well-attended by regional players, but less well-attended by organisations associated with London and the south-east. Explaining its non-attendance, a source close to West End landlord Shaftesbury (SHB) said that “there isn’t much point it going to events like [UKREiiF], when it can see the people it needs to on the streets nearby”.

All of this is best summed up by Kate Pix, regeneration director at Kajima, who says that success for the levelling up agenda looks like “less people moving to major cities, more people staying in their communities and more communities being prosperous”. Unsurprisingly, however, this is not a notion supported by those companies who depend on London, such as Paul Williams, chief executive of Derwent London (DLN), who told real estate magazine Property Week in November last year: “You don’t level up the country by levelling down London.”

The hope will be that the levelling up agenda is a non-zero-sum game whereby everyone can benefit – businesses and councils in London and the regions alike – but the property industry and local politicians will need to wait and see how the secondary legislation and resourcing shakes out to know for sure.