Sums of a zero-sum game: Part 2, reports from the field
[Continued from yesterday’s Part 1.]
Even before examining the specific practice, we’d expect a zero-sum-game form of inclusionary zoning to be beset by protracted negotiations and ongoing acrimony between developers and localities.
Talking about you and me, and the games people play
We’d also expect a migration toward a homes-produced number and away from deep affordability, simply because the optics will be better.
I have seen the future in the blink of an eye [Look closely — Ed.]
And over and over again, in the findings below, we see these fundamental problems repeated. What’s remarkable, in fact, is not that they arise, but rather that the zero-sum tension is never explicitly mentioned.
Planning Policy Statement 3: Housing (PPS3), published in March 2007 after lengthy consultation, introduced new definitions of affordable housing, which have largely been welcomed. Local development frameworks have been brought in with the aims of speeding up the planning system and increasing consistency, but few are yet in place and many authorities are operating with very out-of-date plans. New guidance has been issued on how to identify needs.
Making the machine more efficient, reducing economic friction, and lowering economic entropy.
That’s not efficient
These changes continued with the publication of the Housing Green Paper – Homes for the future: more affordable, more sustainable – in July 2007 raising further uncertainties about the potential introduction of a planning-gain supplement (PGS). It has more recently been announced that a national PGS will not go ahead. Instead a system of local planning charges will be introduced, again creating uncertainty about the impact on the provision of affordable housing through Section 106.
How have local authorities been coping in response to this plethora of advice and initiatives?
Fighting it out one by one — how else could they cope?
The authors looked at this question first, using website and email surveys across all planning authorities together with supporting interviews undertaken for the Royal Institution of Chartered Surveyors (RICS) Education Trust (The provision of affordable housing through Section 106: the situation in 2007, Gemma Burgess, Sarah Monk and Christine Whitehead, 2007, RICS Education Trust).
This showed that different authorities were taking very different stances on how much and what to provide and about their role in ensuring developer contributions;
I can use your own momentum against you
Naturally local authorities will choose differently, because their circumstances are locally variant, not the same. This implies that local authorities need a trade association or information network, where they can swap war stories and learn, peer-to-peer, how to play this zero-sum game.
that authorities see increasing pressures in all directions;
Usually downward
Zero-sum will do that to you.
that they are focused on expanding the amount of affordable housing through Section 106 but that fewer affordable homes are coming from other sources.
Here’s a particular risk of moving housing policy to the local level; the national government can decide the locals have enough to work with, and tiptoe away from their funding responsibilities. Indeed, though I support right-to-buy, when coupled with Section 106 it shifts the housing-subsidy burden onto local governments, even though
Maximising financial contributions whilst not forgoing units is a problem for some Local Planning Authorities (LPAs).
Some? How about all?
One for all, and all for me!
The most common issue in one of the case studies has been dealing with developer claims that sites are not viable with the proportion of affordable housing the LPA seeks.
Each negotiation is an exercise in complex real estate development finance. Local negotiators, who are entirely inexperienced in this arena, are at an enormous handicap relative to their developer counterparts.
The council has invested considerable resources in overcoming this: “The biggest barrier is demonstrating viability on the site. We have spent a huge amount of money used the Three Dragons tool kit (a spreadsheet-based appraisal for applications that propose less than the 50 per cent minimum of affordable housing), got professional valuations, and now have a fairly robust model to help challenge developers but it all depends on the data.”
In the context of AHI’s activity in
The use of financial models and toolkits to consider the viability of a scheme has become much more common, particularly as affordable housing targets increase and difficult sites come forward. In one case study where the target is a relatively low 25 per cent, there has been little need for models, but the target is likely to increase to 30 or 35 per cent in the near future and the interviewee foresaw a need for more viability studies, a larger workload and more lengthy negotiations.
Zero sum, remember?
Zero-sum further means your counterpart’s objectives are misaligned with yours. When the game is positive-sum, you and I can help one another. Not here. Thus the locality has to do — and pay for — its own analysis.
The study suggests there is still an unequal playing field between developers and Local Planning Authorities (LPAs).
Well, duh!
As one interviewee commented: “It is easier to believe a developer and their legion of staff, with their sharp suits and nice spreadsheets and presentations, than your own officers.”
The smaller the font, the bigger the bucks?
Though there’s nothing wrong with nice spreadsheets J — but the interviewee is right. In a zero-sum negotiation, any materials presented exist for the sole purpose of persuading the other party to agree with our proposal.
“In most 106 negotiations it will be me sat against three or four developer staff who won’t be on less than a £70,000 salary and there is an expertise and a manner that comes with that. It can be difficult for members to stand up against that.”
Because of what I call the talent updraft, government usually competes unequally with the private sector.
Which is yet another reason to eliminate zero-sum games; if the private sector can make more money by helping the public, it will do so. When the game is I-win-by-your-loss, any collegiality is merely false.
I’m the developer’s consultant and I’m here to help you
[Concluded tomorrow in Part 3.]
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