A new government - and a new planning agenda. It is far from business as usual for the British Property Federation, says Liz Peace who talked to Shayla Walmsley
The formation of a coalition government has created a new set of concerns for the British Property Federation (BPF). One area of concern is a promised move to localise planning decisions. Even before they formed the governing coalition, both the centre-right Conservative Party and the Liberal Democrats had advocated a reduced central government with increased power going to communities. "That's fine - but if a developer comes along with a shopping centre plan, a strict central policy sets the way," says BPF's CEO, Liz Peace.
A Bill scheduled to go before Parliament later this year will not only codify the principle of decentralisation but will also abolish regional planning bodies, which are meant to increase housing members. With responsibility for housing handed over to local government, planning groups believe that the loss of regional planning will make it harder to co-ordinate across boundaries. "It will now be up to local authorities to work out what they need. That's fine in principle, except if local authorities are not keen on new developments," says Peace.
"The government says there will be a broad central framework but we don't know what it will look like yet, though it has promised financial incentives for local developments. "We've had endless debates and they rather charmingly say, ‘Don't worry - it'll be fine'. We'd like to give them the benefit of the doubt but it doesn't always work in practice. The details need to be ironed out.The industry is very, very nervous about how it will all pan out in practice."
Even if planning legislation can be worked out in a way that the industry can live with, that still leaves the issue of financing for developments that regional strategies were meant to encourage.
Not in my backyard
"The planning system doesn't work well but we have got used to it and we know the ground rules. Now there will be the two to three years when nothing happens. Ministers say they're listening. But when it comes to development policy, I'm slightly surprised that they don't understand what impact the hiatus will have," she says.
"No one can afford to do development anymore. The question is, who will - and how? Rents are not rising. Values are not rising as quickly as they were. Banks are not lending. Developers can't be sure of demand. The [previous Labour government's] programme of regeneration has been put on hold."
A modest piece of good news comes from what Peace describes as "serious talks" between the Housing and Communities Agency, a regeneration quango, and "four or five different groups", including Aviva, about the possibility of developing residential.
"To create momentum, you need one to do it," she says. "But if you're looking at 4% or 5% yields for residential and 9% yields elsewhere, it isn't attractive."
She argues that if the government were to put in public-sector land to kickstart schemes - effectively, offering potential developers subsidised stock - it would "make the proposition a little bit more appealing".
If the UK government's policies are not concern enough, the BPF is battling European legislation that nets UK property companies and joint ventures under new rules aimed primarily at curbing the high-risk activities of hedge funds and private equity operators. Although it won't be signed off until at the earliest September, the Alternative Investment Fund Managers (AIFM) directive looks certain to impose constraints on custody and valuations.
"There's no getting around it. But we have found people to talk to in Brussels, who're listening, and we're making representations," says Peace.
A second significant focus for the BPF's Brussels lobbying effort - in concert with the European Property Federation - is over-the-counter derivatives. "The problem is regulators think they're getting at irresponsible hedge funds but companies use derivatives for sound financial reasons," says Peace. "The legislation is not well drafted and it had difficulty defining the scope."
The UK Financial Services Authority, she says, is sympathetic. "But it does show that you can't afford to relax at all. The strangest things come out of draft legislation from Brussels."
…. and boiling on the back burner
As it tackles UK and European regulatory agendas, there has been no let-up in lobbying on longstanding issues. They include what Peace calls "unrealistic" government targets on sustainability and amendments to REITs legislation.
Despite a BPF poll suggesting most members think zero-carbon targets for commercial are unreasonable, the BPF is pretty much resigned to them. "We're learning to live with it even though it's clear that it is badly thought through in terms of how the industry works," says Peace. She points out that if you buy all the energy for a building, it's simple, "but the bulk of buildings are not occupied like that. We agree with where they're trying to go but not with how."
Peace says the BPF continues to favour private companies being allowed to become REITs. "We haven't really scored with ministers on this one. It is a long-term thing but that doesn't mean we won't keep on about simple things the government can do [to improve the REITs regime]."
She adds: "The government has a few other priorities. There is no appetite for a major reworking of the rules. But if we can persuade them that it would be a good way of bringing in equity..."