What is a planning gain?
Planning gain is the uplift in land value that comes from obtaining planning permission. It's the difference between what your land is worth today and what it's worth once permission is granted. Understanding planning gain is essential to getting a fair deal-because most landowners underestimate it.
A concrete example
Say you own 0.5 hectares of agricultural land near London. Current use value: £50,000. A developer approaches and offers to secure outline planning permission for 10 homes, then split the development value with you 50/50 at the end. The developer invests £15,000 in professional fees (architects, planners, surveyors, legal). Permission is granted. The land with planning permission is now worth £500,000. The developer has created a £450,000 planning gain. You share it 50/50, netting £225,000. But the developer spent only £15,000 to unlock that gain-a brilliant return.
This is why developers compete to work with landowners. Planning gain is enormous.
Why developers pay for planning gain
Developers and house builders don't make profit from construction-they make profit from land value uplift. A house-builder buying raw farmland at £50k per hectare and selling completed homes for £400k per hectare makes money on the planning gain, not on the construction markup. Planning gain is the economics of development.
How planning gain is captured or lost
If you sell unconditionally to a developer for £60,000 before they pursue planning, you've captured £10,000 of gain but given away £440,000. The developer captures that. This is common because landowners want cash now, not a speculative profit in 2–3 years.
If you sign a promotion agreement with a specialist promoter, you typically share planning gain 70/30 or 80/20 in your favour-they invest the planning cost upfront.
If you own and develop yourself (or joint venture), you capture the full planning gain minus construction, marketing, and financing costs.
Infrastructure contributions and Section 106 agreements
When planning permission is granted for new development, councils often require developers to pay for infrastructure-schools, roads, utilities, affordable housing. These are called Section 106 agreements (or planning obligations). This cost comes out of planning gain. A site with £500,000 planning gain might have £150,000 in Section 106 obligations. The developer nets £350,000.
You need to factor this into your valuation. An experienced surveyor or developer will explain Section 106 obligations for your site.
Strategic thinking about planning gain
Planning gain exists whether you realise it or not. The question is who captures it: you, the developer, the council (via Section 106), or the constructor. Being aware of planning gain means you can negotiate fairly. You know roughly what the uplift is. You can choose a deal structure-option, promotion, JV, or unconditional-that captures your fair share.
What to do next
Get a professional valuation of your land including realistic planning gain. Understand what Section 106 obligations apply in your area. Then negotiate from knowledge.
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