Behavioural insights research transforms community infrastructure investment through policy changes to developer contributions

Dr Yiquan Gu's behavioural insights research has reformed three key policy areas on the financial and in-kind investments that accompany real estate development in England.

Introduction

Behavioural insights research at Liverpool undertaken by Professor Lord, Dr Dunning, and Dr Gu, has reformed three key policy areas on the financial and in-kind investments that accompany real estate development in England, known as ‘developer contributions’: the removal of restrictions on the pooling of developer contributions from multiple sites (I1), the roll-out of the Community Infrastructure Levy (CIL) into new geographies (I2) and supporting greater local flexibility in the exaction and expenditure of developer contributions (I3).

These reforms have changed planning practice, resulting in economic, social and environmental benefits for local authorities and a fairer distribution of investment across England. Communities are benefitting through increased investment in local infrastructure such as affordable housing, transport, and schools:

  • An additional GBP1,000,000,000 in developer contributions made to local authorities between 2016-17 and 2018-19
  • Investment distributed more fairly across England - share of total investment has doubled in the North West and East Midlands
  • Developers responding to reforms. For example, Liverpool-based housing association to build 1,000 new affordable extra-care homes for vulnerable older people.

Background

Lord, Dunning and Gu made theoretical and conceptual advances using behavioural economics and game theory to better understand the state-civil-market relationships that come together in the real estate development process. A significant strand in this body of work is the economics of how the uplift in land value associated with the granting of planning consent can be recovered by the awarding agency (usually local government) to support investment in public goods such as physical infrastructure and affordable housing. These attendant investments to the real estate development process are widely described as ‘developer contributions’.

Research

Our work has shown that national planning policy on developer contributions can produce spatially unequal outcomes that are not solely explained by market circumstances but may also result from the negotiating practices of planning professionals. Consequently, national policy should ideally allow for locally-specific approaches to the exaction of developer contributions to account for spatial, market and behavioural variations.

To respond to this public policy issue a combination of conceptual and empirical work has been undertaken by researchers at Liverpool. At the core of this work are two consecutive large Economic and Social Research Council grant awards made through the Joint Programming Initiative which allowed for international collaboration with partners from France, Belgium, the Netherlands, Norway and China. This research council-funded work has allowed for significant advances in the underlying theory and concepts to the point where empirical application became viable.

A suite of projects followed these academic advances as the worlds of policy and practice came to value the behavioural insights approach to planning and real estate economics that had been pioneered at Liverpool.

Impact

The most significant impact of this applied academic research can be seen in the attention it has garnered from policy makers in UK central government. Evidence of this influence can be found in two pieces of work commissioned by the Ministry of Housing, Communities and Local Government (MHCLG) that were led by Liverpool.

The results of the first project from 2016/17 went on to influence three specific reforms to legislation, policy and practice on developer contributions: the removal of restrictions on the pooling of developer contributions from multiple sites (I1), the roll-out of the Community Infrastructure Levy (CIL) into new geographies (I2) and supporting greater local flexibility in the exaction and expenditure of developer contributions (I3). The second study demonstrated the effects of these policy changes instigated on the basis of the findings of the first project: developer contributions had grown from GBP6,000,000,000 in 2016/17 to GBP7,000,000,000 in 2018/19 and were more evenly distributed across England.

Ongoing Research

Research is ongoing to further advance theoretical and conceptual understanding of the state-civil-market relationships which are central to the pursuit of socially desirable housing outcomes. Based on this theoretical foundation and using a combination of secondary and primary data, we continue to offer evidence-based analyses to a wide range of stakeholders including the MHCLG, local authorities, housing providers as well as charitable organisations.

Yiquan Gu

Dr Yiquan Gu

Back to: Management School