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From Trowers & Hamlins
Our work at Trowers & Hamlins is rooted in the belief that real estate is the backbone of society,
where culture, communities and commerce meet. We stand at an interesting point in the development
landscape, one in which the built environment contributes to some of the most significant and engaging
conversations happening today.

In the United Kingdom we are, to some extent, seeing the interests of the public and private sectors
becoming aligned. Developers need the land held by local authorities, while in the wake of spending
cuts, local authorities are looking to make a profit on that land, and at the same time ensure long-term
benefit for communities.

We see this as an opportunity to ensure that new developments are initiated and appraised for more than
just their monetary worth. In many instances, current methods of valuation look solely at the financial
bottom line, falling short of considering the broader value of a place that incorporates other factors such as
cultural, social, and environmental value. This led us to ask, why isn’t there a measurement of best practice
in real estate development?

To find out, we realised that we needed to go back to first principles, to look at the important factors
which make developments great – those that are highly valued, yet hard to value. As such, we decided
to undertake research with the School of the Built Environment at Oxford Brookes University, seeking to
reconsider value in real estate. As part of the research we conducted a roundtable debate with leading
industry professionals and a national market poll of members of the public to gain a broad understanding
of what key stakeholders deem most important in the places they live and work.

Our findings indicate that a broader definition of value will lead to long-term financial success. Our ultimate
goal is to build a metric or scorecard that can help developers and investors to identify commercial
opportunities, and can support local authorities to create places for business, industry and communities.
We are not seeking to create more obstacles to development, in fact quite the contrary; we are seeking to
create a tool that will enable development and address the interests of all parties involved by providing a
more informed picture of a development’s true value.

Whilst this research focuses on the UK real estate industry, the ideas and challenges translate to property
industries across the world that are involved in delivering successful and sustainable economies and
communities. We see this research extending in a number of ways and we want to hear your views. Let’s have
an informed conversation about development and be part of delivering a better and prosperous future. If you
would like to be part of the conversation email us at highlyvalued@trowers.com.

We look forward to talking to you.

Sara Bailey
Partner and Head of Residential Real Estate, Trowers & Hamlins
Contents
1 Executive summary
5 1. Introduction
7 2.  What makes for a good development?
7 2.1.  Values in urban design
9 2.2.  Value of urban design
11 2.3.  Measuring urban design values
13 2.4.  The costs of quality
14 2.5. Conclusions

15 3.  What is valued in developments?

15 3.1.  The public’s views
16 3.2.  The professionals’ views
18 3.3. Conclusions

19 4.  Research into what people and businesses are prepared to pay for
or to avoid
20 4.1.  Impacts of environmental features on value
21 4.2.  High-voltage overhead transmission lines
22 4.3.  Landfill and derelict industrial sites
23 4.4.  Wind farms
23 4.5.  Air quality
23 4.6.  Neighbourhood crime rates
24 4.7.  Proximity to water
25 4.8.  Forest/tree cover
25 4.9. Microgeneration
26 4.10.  Proximity to transport
26 4.11.  School quality
27 4.12.  Additional characteristics that add to or detract from the value of residential property
27 4.13. Regeneration
28 4.14. Conclusions

29 5.  Examples of good urban development

29 5.1.  King’s Cross, London
29 5.2.  Liverpool One
29 5.3.  Kidbrooke Village, London
29 5.4.  Birmingham Municipal Housing Trust

31 6.  The problem

31 6.1.  Development constraints
32 6.2.  Valuation issues
35 6.3. Conclusions

36 7.  Metrics for evaluating development proposal

36 7.1.  Enhancing valuations
37 7.2.  The objective measurement of visual character and visual quality
38 7.3.  Measurement and certification systems
41 7.4. Conclusions

43 8.  The ways forward

43 1. Inform the industry
43 2. Enhance current valuation methods
43 3. Provide policy back-up and influence

45 Annex I: YouGov Survey Questionnaire, 12-15 February 2016

45 Questions
46 Characteristics of respondents

47 Annex II Breakfast Forum Questionnaire, 27 January 2016

49 References
56 Consultancy and research reports
1 | Highly Valued, Hard To Value

Executive summary
In November 2015 Trowers and Hamlins LLP appointed Oxford Brookes University to undertake a research
project to rethink value in international real estate. Objectives of this research included: identify key aspects
of value in international real estate including cultural, design, functional, social, environmental, accessibility,
brand and long-term value; investigate the ways in which these aspects of value are currently measured in
the real estate industry; and interrogate the possibility of creating an integrated The overarching goal was
to find out if there could be a ‘best practice’ tool for stakeholders across the real estate industry to utilise
at various points in the development process to ensure the creation of a ‘good development’ that reflects
holistic concepts of value.

There are many examples of good practice in development and regeneration that produce positive financial
rewards for promoters and developers and attractive and well-designed places for people and businesses
that want to live in and trade from them. Unfortunately, there are also projects where this is not the case,
which raises the questions of why this should be so and how can one ensure that, in the future, decisions
about development and regeneration schemes reflect the range of characteristics that give rise to value.
In particular, we should ask whether it is possible to address the tendency in valuations of development
schemes to focus solely on the financial elements and, in the case of residential-led developments, on
short-term financial benefits.

This report examines the urban design practice literature to see what is thought to make for a ‘good place’.
Although the language and terminology used in different reports and guidance material varies, in essence
there is consensus summarised by the DETR and CABE 2000 report By Design that good urban areas have
the following characteristics:

• Character – promotes character in townscape and landscape by responding to and reinforcing

locally distinctive patterns of development and culture.
• Continuity and Enclosure – promotes the continuity of street frontages and the enclosure of space
by development, which clearly defines private and public areas.
• Quality of the Public Realm – promotes public spaces and routes that are attractive, safe,
uncluttered and work effectively for all in society, including disabled and elderly people.
• Ease of Movement – promotes accessibility and local permeability by making places that connect
with each other and are easy to move through, putting people before traffic and integrating land uses
and transport.
• Legibility – promotes legibility through development that provides recognisable routes, intersections
and landmarks to help people find their way around.
• Adaptability – promotes adaptability through development that can respond to changing social,
technological and economic conditions.
• Diversity – promotes diversity and choice through a mix of compatible developments and uses that
work together to create viable places that respond to local needs.

Since the publication of this report, there has been increasing interest in the impact of development on
the environment and its potential impacts on the well-being of residents and users, which in our judgment
requires the addition of two further characteristics.

• Cleanliness – promotes high levels of energy efficiency, minimises waste, minimises pollution and
protects and enhances the natural environment.
• Healthiness – promotes high levels of mental and physical well-being.

Places should reflect the needs of their stakeholders, which includes those who will live, work and carry on
business within them, as well as surrounding communities who may be affected by spillover effects. This
means addressing the aspects their residents and users might want or be adversely affected by. It is important,
therefore, that the views of stakeholders are listened to and there is engagement with those whom the scheme
will affect. We have therefore added a 10th characteristic of a good place – the process by which it is created:

• Participation – engages stakeholders in the place design and management process and is a vital
means of ensuring that design solutions. The engagement of local people in the place-making process
ensures that the resultant design is more likely to be culturally responsive.
 Full Report | 2

It is the duty of local authorities to promote not just the social and environmental well-being of their areas,
but also their economic well-being. This means providing employment opportunities, including training for
local residents, and an environment in which businesses can prosper. Local authorities need stable sources
of their own revenues from which to finance public services and will become increasingly dependent on
these with less finance coming from central government. They need therefore to ensure that developments
and regeneration schemes provide income from council tax and business rates and from stakes in future
rental and price growth. We have therefore added an additional two characteristics of good places:

• Economic prosperity – promotes an economically viable location in which businesses seek to locate
and people want to live; promotes long-term economic prosperity in the area and its surroundings;
creates employment opportunities (particularly for local residents) through construction phase and
long-term commercial options.
• Revenue generation – generates local authority income streams through business rates, council tax
and the retention of a stake in future rental and price growth, commercial gain through price growth
and higher rental yields.

These ideas have been derived through Oxford Brookes’ research, and were checked against the views
of the public and a panel of property professionals. YouGov undertook a survey in February 2016
in which 2,068 GB adults were asked to rate a series of characteristics in terms of their importance in
determining their decision to occupy their current property. Their responses were analysed according to
various socio-demographic groupings, including housing tenure, age, social class, working status and
household composition. While affordability was the key characteristic looked for in a home, respondents
valued highly the reputation of the neighbourhood and the design and attractiveness of the property. Other
important characteristics highly valued by approximately half the respondents were: proximity to education,
healthcare and other public services; access to public transport; a neighbourhood that was well provided
with shops, restaurants and other services; proximity to work; and proximity to family or friends. A Breakfast
Forum was held on 27 January 2016 and attended by leading property developers, property professionals
and representatives of property industry bodies. They were surveyed on how highly they valued particular
features of urban design derived from existing assessment systems, specifically BREEAM Communities
and LEED ND. Access to good public transport, community participation and engagement, affordable and
diverse housing and environmental sustainability were the features ranked mostly highly.

We undertook a survey of urban design literature to identify the evidence that exists as to what characteristics
enhance the value of properties and which features people and businesses are prepared to pay to avoid.
These mainly come from hedonic pricing models. Much of the evidence is for residential property, as
there have been fewer studies of this sort of commercial property. Some caution is needed in interpreting
this evidence, as it is likely to be context-specific, and most studies focus on the impact of one particular
attribute rather than the interactions between different attributes. Property prices and rents tend to respond
positively to factors such as:

• Proximity to rail links

• Proximity to waterside locations, coastal and lakeside views
• Within the catchment area of a good school – but not close proximity to a school
• Good air quality
• Overlooking a park, or at least in proximity to one
• Proximity to forests, tree cover, flowers and lawns – but adversely to proximity to dense vegetation
• Location in a national park
• Good-quality public realm
• High density of historic buildings
• Elevation and views
• Renewable energy
• Distinctiveness resulting from good urban design
• Quality of master planning.

Prices and rents tend to respond negatively to factors such as:

• High neighbourhood crime rates and anti-social behaviour

• Proximity to high-voltage overhead lines
• The visibility of wind turbines
3 | Highly Valued, Hard To Value

• Proximity to landfill sites

• Risk of flooding
• Views on to multi-storey apartments
• Traffic noise.

The weakness of this approach is that some of the characteristics of areas that are valued by people and
businesses are difficult to specify; for instance, the strength of a local community or the character of an
area. There is evidence that regeneration offers good value for money, but the returns vary according to
how investment is undertaken.

The degree of consensus about what makes for a good place by designers, the public and property
professionals raises the question of why developments and regeneration projects go ahead that do
not incorporate these features. There appears to be constraints on development, particularly where
a local authority is the developer or promoter and for residential-led developments. With residential-led
developments it is difficult for developers to share in any uplift in property value that takes place once
the build-out period is complete. These are enjoyed by subsequent owners. Many of the benefits of
regeneration spill over into neighbouring areas, which is to the benefit of neighbouring property owners.
The temptation is therefore to maximise short-term gains and for developers not to invest in features that
can produce longer-term benefits.

Local authorities must obtain best value for their assets, which puts them in a difficult situation if there are
important non-monetary benefits or ones that spill over into neighbouring areas, unless these are part of the
highest bids they receive. Local authorities will in the future benefit from rising commercial property prices
in areas undergoing regeneration as a result of revaluations in business rates and their ability to share in
rents. For residential-led developments, however, this is more problematic as there is no mechanism for
revaluing council tax assessments when property values rise. Additionally, retention of a long-term interest
in residential properties is complicated by leasehold enfranchisement and council tenants’ – and, in the
future, housing association tenants’ – Right to Buy.

The process of property valuations can also cause issues. Valuers value interests in property, so any
benefits from development that do not enhance the value of the interest they are valuing cannot be taken
into consideration. Valuers are faced with complex evidence as to what influences value and by how
much. They may resort to heuristics or rules of thumb to cope with this, which can be subject to bias. The
issues arising from the development process and from valuations indicate that better methods are needed
for evaluating the strengths and weaknesses of development and regeneration proposals that take into
account a wider range of factors.

There are various approaches that can be taken to the problem of how to make property valuations more
holistic. The methods reviewed take a variety of approaches and could be used in combination. The
monetary value of intangible costs and benefits, and those that cannot be measured conventionally by
market prices, can be estimated using the revealed preference approach and contingent valuation. With the
revealed preference approach, businesses and persons reveal the value of the characteristics they seek or
what they are prepared to pay to avoid (detrimental factors) through the prices they pay for properties. By
comparing property prices statistically with the characteristics of properties, the value placed on individual
attributes can be isolated. If an attribute cannot be purchased directly or indirectly through property
transactions, contingent valuations can be used to question respondents to discover what they are willing to
pay for things or services that they use, including passive valuations where the existence of items is valued
even if they are never used or where the value is of something to be passed on as an inheritance. There are
some problems with both of these methods in terms of the methodology and whether people’s behaviour is
in accordance with the assumptions in the model, but they can be useful techniques. Contingent valuations
can be a part of the process of engaging with the community over a proposed development.

In view of the problems in trying to place monetary values on items that are not directly traded, techniques
have been developed that enable a more objective view to be taken of proposals. Mathematical techniques
enable the composite visual effect of all the physical characteristics of a street in combination to be
assessed using the same data that the human eye and brain process in making visual quality judgements
of vistas and views. Currently, BREEAM Communities and LEED ND are measurement and certification
systems that enable developments to be benchmarked objectively and consistently using a variety of
factors. These systems can be used in a cost-effectiveness analysis in which the question is posed of
whether additional benefits are worth the additional cost.

We suggest four main ways towards achieving a more holistic valuation of development and regeneration
schemes:

• The industry can be better informed so that valuers have a clearer understanding of the potential value
 Full Report | 4

of good urban design and placemaking and their implications for property values; and developers,
promoters and designers understand how valuation is carried out and how to enhance property
values through placemaking.
• Valuation methods can be enhanced by making greater use of the revealed preference approach and
contingent valuations so that attributes which are not fully reflected in market prices can be identified
and a cost-benefit approach taken to decision-making.
• Policy changes are needed to encourage local authorities to take a ‘best value’ approach to
developments and the disposal of assets with an explicit aim of policy being to create good design
and places with the specification of metrics that are expected to be achieved.
• Metrics should be developed that measure how developments score against specific criteria but
which do not place a monetary value on them. Such measurements could be stood alongside current
valuation reports so that the trade-offs between bid prices and the extent to which highly valued
characteristics are realised is apparent.

Enough evidence exists to support the notion that doing things differently does not automatically lead to a
loss of value. Perhaps it isn’t necessary to append a specific monetary value to each attribute, as it is the
whole that creates value in the short, medium and long term. This attitude would help decision-makers to
come to terms with those aspects of developments that are highly valued but hard to value.
5 | Highly Valued, Hard To Value

1.  Introduction
This report presents the results of the research undertaken. It starts by looking at the consensus among
design professionals through the professional literature about what makes for a good place. The results are
presented in Section 2. The factors making for a good place were identified as being: character, continuity
and enclosure, the quality of public realm, ease of movement, legibility, adaptability, diversity, cleanliness,
and healthiness. To these must be added participation and engagement by stakeholders, residents and
the local community, as successful developments must have the support of those who will live, work and
undertake business there. Developments must promote economically viable locations for business and
long-term economic prosperity. Local authorities need to generate income streams through business rates
and council tax, as well as ways of benefiting from future rental and price growth in order to provide a sound
basis for future public services.

These ideas have been derived through Oxford Brookes’ research, were checked against the views of the
public and a panel of property professionals, and the results are discussed in Section 3. YouGov undertook
a survey in February 2016 in which 2,068 respondents were asked to rate a series of characteristics in
terms of their importance in determining their decision to occupy their current property. Their responses
were analysed according to various socio-demographic groupings, including housing tenure, age, social
class, working status and household composition. While affordability was the key characteristic looked for in
a home, respondents valued highly the reputation of the neighbourhood and the design and attractiveness
of the property. Other important characteristics highly valued by approximately half the respondents were:
proximity to education, healthcare and other public services, access to public transport, a neighbourhood
that was well provided with shops, restaurants and other services, proximity to work, and proximity to family
or friends. A Breakfast Forum was held on 27 January 2016 and attended by leading property developers,
property professionals and representatives of property industry bodies. They were surveyed on how highly
they valued particular features of urban design derived from existing assessment systems, specifically
BREEAM Communities and LEED ND. Access to good public transport, community participation and
engagement, affordable and diverse housing and environmental sustainability were the features ranked
mostly highly.

We undertook a survey of the literature, which is presented in Section 4, to identify the factors that studies
have identified as either enhancing property prices and rents or causing them to be depressed. Many of the
results are the product of applying a hedonic model of property prices that seeks to isolate the impact of
specific factors. Care needs to be taken in interpreting the results as they tend to be context-specific. The
factors that enhance property prices and rents tend to be attributes such as proximity to public transport,
good schools and parks, location in national parks and rural areas, good air quality, waterside locations,
good views, renewable energy, and good urban design. Those that undermine property prices include high
rates of crime and anti-social behaviour, proximity to high-voltage overhead lines, wind turbines and landfill
sites, traffic noise and risk of flooding.

The degree of consensus about what makes for a good place by designers, the public and property
professionals raises the question as to why developments and regeneration projects go ahead that do
not incorporate these features. We explore these issues in Section 6. There appear to be constraints on
development, particularly where a local authority is the developer or promoter and for residential-led
developments. It is difficult for developers of residential-led developments to share in any uplift in property
values that takes place once the build-out period is complete. The temptation is therefore to maximise
short-term gains and for developers not to invest in features that can produce longer-term benefits. Local
authorities can benefit from rising commercial property values through revaluations of business rates and
their ability to retain an interest in the scheme. For residential-led developments this is more problematic
as there is no mechanism for revaluing council-tax assessments, and retention of a long-term interest in
residential properties is complicated by leasehold enfranchisement and the Right to Buy. The process of
property valuations can also cause issues, as valuers are faced with how to tackle complex and incomplete
data. The issues arising from the development process and from valuations indicate that better methods are
needed for evaluating the strengths and weaknesses of development and regeneration proposals that take
into account a wider range of factors.

In Section 7 we explore how valuations can be improved so that a more holistic approach can be taken
to what gives rise to value. There are a number of possible approaches. The monetary value of specific
attributes can be explored using the revealed preference approach and contingent valuation. Revealed
preference identifies the value of characteristics by analysing statistically the prices that people and
businesses are prepared to pay to acquire them or to avoid detrimental factors. Contingent valuations is
applied in situations where the attribute cannot be traded because, for example, it is provided free or is
valued without ever being used. It is an approach that can enable a value to be placed on aspects of a
 Full Report | 6

proposed development, and as a part of the process of engaging with the community over a development.
There are various problems with both of these methods in terms of the techniques themselves and the
assumptions about human behaviour that they embody. As an alternative to trying to place monetary
values on items that are not directly traded, attempts have been made to develop techniques that enable
a more objective view to be taken of proposals. They include mathematical techniques to enable the
composite visual effect of all the physical characteristics of a street in combination to be assessed, and
measurement and certification systems, specifically BREEAM Communities and LEED ND. These can be
used in a cost-effectiveness analysis in which the question is posed of whether additional benefits are
worth the additional cost.

Finally, in Section 8 we suggest fours ways ahead towards achieving a more holistic valuation of development
and regeneration schemes:

• The industry can be better informed so that valuers have a clearer understanding of the potential value
of good urban design and placemaking and their implications for property values; and developers,
promoters and designers understand how a valuation is carried out and how to enhance property
values through placemaking.
• Valuation methods can be enhanced by making greater use of the revealed preference approach and
contingent valuations so that attributes which are not fully reflected in market prices can be identified
and a cost-benefit approach taken to decision-making.
• Policy changes are needed to encourage local authorities to take a ‘best value’ approach to
developments and the disposal of assets with an explicit aim of policy being to create good design
and places with the specification of metrics that are expected to be achieved.
• Metrics should be developed that measure how developments score against specific criteria but
which do not place a monetary value on them. Such measurements could be stood alongside current
valuation reports so that the trade-offs between bid prices and the extent to which highly valued
characteristics are realised is apparent.
7 | Highly Valued, Hard To Value

2.  What makes for a good

development?
Summary
This section reviews the practice literature and discussions and statements by urban designers
about what makes for a ‘good’ place. There is a high degree of consensus as to what designers
and practitioners value in a design. Factors include character, continuity and enclosure, quality
of the public realm, ease of movement, legibility, adaptability, diversity, cleanliness, healthiness,
participation and engagement, economic prosperity, and revenue generation. Designs must be
financially viable or they will not be undertaken. An important part of bringing an area back to life is
that the regeneration must be economically viable. The area has to become one in which businesses
seek to locate and people want to live. Regeneration needs to create employment opportunities,
particularly for local residents, and generate economic prosperity. This is a key responsibility of local
authorities when they consider regeneration options. As much of the employment generated is short
term, lasting just for the construction phase, long-term benefit is needed in the form of training and
apprenticeship opportunities and an environment in which businesses can thrive. As local authorities
come increasingly to rely on locally generated tax income, regeneration needs to result in a strong
tax base for business rates and council tax. There is evidence to suggest that the characteristics
identified by practitioners are being associated with good design are also those that help to provide
an economically viable basis for regeneration.

This section looks at the broader values a development should achieve. Three aspects of urban design can
be identified:

• Values in urban design

• Value of urban design
• Measuring urban design values.

2.1.  Values in urban design

Two quotations illustrate the basic foundations of current approaches to urban design:

“We start from the same idea as that which has inspired most socially-conscious designers of the last
hundred years: the idea that the built environment should provide its users an essentially democratic
setting, enriching their opportunities by maximising the degree of choice available to them. We call such
places responsive” (Bentley et al, 1985, p9).

“Urban design is the collaborative and multi-disciplinary process of shaping the physical setting for
life in cities, towns and villages; the art of making places; design in an urban context. Urban design
involves the design of buildings, groups of buildings, spaces and landscapes, and the establishment of
frameworks and processes that facilitate successful development” (Urban Design Group, 2015).

Urban design is primarily concerned with the creation of ‘good’ places. The definition of ‘good’ is value-driven,
and the values that underpin the urban design approach are encapsulated in the qualities that users and
professionals expect a place to have for it to be considered good. Good places are created by manipulating
the physical elements of the built environment and by configuring those elements, and managing their uses,
in ways that are believed to deliver the desired qualities. In this way the physical products and management
of urban design represent the manifestation and embodiment of urban design values.

2.1.1.  Users’ values

Based on research undertaken by Oxford Brookes University asking stakeholders, users, community
representatives and students at workshops and training events since 2001 to list the qualities that make a
good place, then good places have the following qualities:

• Feel safe
• Comfortable
• Easily accessible – by walking, bike, bus and car
 Full Report | 8

• Adequate parking
• Easily understood – legible
• Distinctive identity and character
• Contain greenery and open spaces
• Variety of experience – lively/busy, quiet/tranquil
• Aesthetically pleasing and visually interesting
• Sustainable – environmentally friendly and energy-efficient
• Combination of old and new – contain elements of history
• Clean – free from pollution
• Employment opportunities
• Functional – a variety of services and facilities
• Economically viable.

The process of creating urban design is the ability to manipulate the built and natural environments to
create positive psychological, environmental and economic effects. Urban design is a form of applied
psychology, science and economics.

2.1.2.  Academic and professional values

A synthesised review of urban design literature reveals the following list of qualities or intentions. These
encapsulate the values that are deemed important within the urban design academic and professional
world. From an academic and professionals’ perspective, a good place would have the following qualities.

• People-focused
• Permeable and well connected – easily accessed by multiple modes
• Reduced need for vehicular transport
• Legible
• Inclusive
• Space for everyone
• Restorative
• Have vitality
• Foster social interaction and community
• Character
• Distinctiveness
• Beauty and ornament
• Delight
• Liveable
• Engaging
• Lively
• Human comfort
• Individual and collective well-being
• Supportive
• Variety of uses and opportunity
• Flexible
• Environmentally responsive, resilient and robust.

2.1.3.  Combining and condensing user and professional values

By Design (DETR and CABE, 2000) provides a useful condensed summary of the essential aspects of
urban design as follows:

1. Character – to promote character in townscape and landscape by responding to and reinforcing

locally distinctive patterns of development and culture.

2. Continuity and Enclosure – to promote the continuity of street frontages and the enclosure of
space by development, which clearly defines private and public areas.
9 | Highly Valued, Hard To Value

3. Quality of the Public Realm – to promote public spaces and routes that are attractive, safe,
uncluttered and work effectively for all in society, including disabled and elderly people.

4. Ease of Movement – to promote accessibility and local permeability by making places that connect
with each other and are easy to move through, putting people before traffic and integrating land uses
and transport.

5. Legibility – to promote legibility through development that provides recognisable routes, intersections
and landmarks to help people find their way around.

6. Adaptability – to promote adaptability through development that can respond to changing social,
technological and economic conditions.

7. Diversity – to promote diversity and choice through a mix of compatible developments and uses that
work together to create viable places that respond to local needs.

The CABE/DETR publication does not address either environmental concerns or the emerging link between
built form and human health.

Two additional items need be added to this list as meta-values that underpin all of the above:

8. Cleanliness – to promote high levels of energy efficiency, minimise waste, minimise pollution and
protect and enhance the natural environment.

9. Healthiness – to promote high levels of mental and physical well-being. This is partly addressed by
implication in the first eight values, but requires more explicit expansion.

This list provides a neat encapsulation of the values that drive the production of the built environment using
an urban design approach. However, it is important at this stage to also include an additional value to
ensure that place design is more directly responsive to its locality:

10. Participation – the engagement of stakeholders and residents in the place design and management
process is a vital means of ensuring that design solutions respond to the cultural context of locations.
The engagement of local people in the placemaking process ensures that the resultant design is more
likely to be culturally responsive.

This 10-item list represents a more complete set of values that underpin the production of places that would
be considered ‘good’ from a wide variety of perspectives.

2.2.  Value of urban design

The key question is ‘are these values valued’? Carmona et al (2002, 2010) offer a useful summary of UK
stakeholder views (investor, developer, occupier, local authority, users) on the linkage between urban design
and economic, social and environmental values. Their research, initially carried out for CABE, is based on
interviews with stakeholders involved with six recognised UK urban design case studies. In summary, the
research finds that:

“The actual experiences of the stakeholders … indicate that better urban design leads to significant
long- and short-term benefits to investors, developers and designers and to largely long-term benefits for
occupiers, public authorities and the community” (Carmona et al, 2010, p166).

Carmona et al (2010) find that urban design schemes that deliver the values of urban design bring multiple
added social and environmental values to developments, which in combination positively affect economic value.

These findings are reinforced by the results of research carried out by the New Zealand Government’s
Ministry of the Environment (2005). This research undertook an international survey of relevant literature
addressing the relationship between urban design and multiple value, including Carmona et al’s work, and
presents results linking urban design elements, similar to the nine-point list shown above.

The research categorises each finding in terms of the supporting evidence being “conclusive, strong or
suggestive”. For this reason the summary table from this work is shown below (table 2.1).

It seems that links exist between the provision of urban design and the delivery of multiple economic, social
and environmental values. However, both of the above research projects were carried out by what could be
described as ‘urban design supportive’ researchers, so it is also interesting to find literature that is based
on a more focused real estate approach to the value of urban design.
 Full Report | 10

Nase et al (2015) investigate advances in real estate econometrics and hedonic modelling for estimating
different aspects of quality design by using utility theory to analyse the concepts of urban design quality
and real estate value. They interpret the larger set of urban design values through a multiple value framework
comprising “exchange value…use value…image value…social value…and environmental value”. Three key
points can be drawn from this work: i) the paper provides a basis for using “hedonic models to evaluate the
impact of different aspects of urban design quality on price”; ii) using econometric analysis in this context
needs further refinement to meet the challenge of using a very empirical and quantitative approach in relation
to the qualitative nature of urban design; and iii) due to the last point, both qualitative and quantitative methods
need to be employed when “constructing urban design quality variables” (Nase et al, 2015, pp577-578).

In conclusion, the literature suggests that urban design values embody multiple social, cultural and
environmental values and that these values in combination will also bring multiple economic benefits. This
is exemplified in Law et al (2013) where space syntax analysis is being used to create an “urban value tool”
that brings together several aspects of spatial layout and social analysis into a real estate valuation format.

The challenge now is to identify the means of measuring urban design values that help to quantify the
qualitative.

Table 2.1 Summary of the Findings about Key Urban Design Elements

“The table summarised the principal findings from the extensive survey of writings and empirical studies of
urban design discussed in this report. It focuses specifically on the elements of urban design about which
there are ‘useful’ findings. Asterisks are used to indicate the quality of evidence surveyed: *** conclusive, **
strong, * suggestive. Anecdotal findings have been excluded.”

Economic Value Social/ Cultural Value Environmental Value

Findings Findings Findings

Local Attracts highly skilled Reinforces a sense Supports conservation of

Character workers and new economy
enterprises*
Assists the promotion and
‘branding’ of cities and
regions*
Potentially adds a
premium to the value of
housing*
of identity among non-renewable resources*
the residents of a
neighbourhood*
Encourages people to
become actively involved
in managing their
neighbourhood*
Offers choice amon a wide
range of distinct places
and experiences*

Connectivity Increases viability of Rnhances natural Reduces vehicle emissions

local service shops and
facilities**
Increases a site or area’s
accessibility thereby
enhancing land value**
surveillance and security** through fewer non-work
Encourages walking trips**
and cycling mainly for
non-work trips, leading to
health benefits**
Shortens walking
distances, encouraging
people to walk**

Density Provides land savings** Is difficult to disentangle Reinforces green space

Provides infrastructure and
energy savings**
Reduces the economic
cost of time allocated to
mobility**
Is associated with
concentration of
knowledge and innovation
activity in urban cores*
from the benefits of mixed
use and other factors**
Can contribute to social
cohesion**
Tends to promote health
through encouraging
greater physical activity**
Can be associated with
lower crime and greater
safety*
Enhances vitality*
preservation if linked into
clustered form***
Reduces run-off from
vehicles to water***
Reduces emissions to air
and atmosphere**
May conflict with micro/
local green space needs**
11 | Highly Valued, Hard To Value

Mixed Use Enhances value for those
preferring a mixed use
neighbourhood***
Utilises parking and
transport infrastructure
more efficiently***
Increases viability of
local service shops and
facilities**
Significantly lowers
household expenditure on
transportation**
Improves access to Reduces car use for local
essential facilities and trips (but minor impact on
activities*** commuting) and hence
Provides convenience** emissions***
Encourages walking and
cycling leading to health
benefits**
Reduces the need to own
a car**
Increases personal
safety**
Can enhance social
equity*

Adaptability Contributes ro economic Increases civersity and Supports conservation of

success over time** duration of use for public non-renewable resources*
Extends useful economic space***
life by delaying the loss of Gives ability to resist
vitality and functionality* functional obsolescence**

High Quality Attracts people and Higher participation in

Public Realm activity leading to
enhanced economic
performance***
Public art contributes
to enhanced economic
activity**
community and cultural
activities***
Increased use of public
space***
Gives greater sense of
personal safety**
Attracts social
engagement, price and
commitment to further
achievements**
Public art contributes
to greater community
engagement with public
space**

Integrated Co-ordinates physical Encourages people

Decision- design and policy in
making related areas to ensure
benefits of good urban
design are realized or
enhanced**
to take advantage of
opportunities presented
for good urban design**
Provides equity of
opportunity for a range
of people to benefit from
good urban design*

User Makes more effective use Improves fit between

Participation of resources***
Offers process cost
savings by encouraging
user support for positive
change**
Source: New Zealand Government, Ministry of the Environment (2005, p. 20).
design and user needs***
Develops user ownership
of positive change**
Enhances sense of
community**
Enhances sense of well-
being*
Legitimises user interests*
Enhances democracy*

2.3.  Measuring urban design values

Identifying potential indicators for each urban design value is not difficult. Much of the literature agrees on
key indicators, although some of these seem to be somewhat anecdotal, based on what might be described
as sensible, well-thought-out argument and observation, rather than accurately empirically tested. Measuring,
quantifying, counting and setting targets against each indicator is slightly more difficult, but much literature
exists that provides quantifiable measures – an initial set of this literature is given in table 2.2. The relational
weighting, or trade off, between each value and therefore each indicator is more difficult to achieve.

Table 2.2 presents indicators against each value where known and selected sources of standards and targets.

Table 2.2 Urban design values and indicators.
Value
1. Character – to promote
character in townscape and
landscape by responding to and
reinforcing locally distinctive
patterns of development and
culture.
2. Continuity and Enclosure
– to promote the continuity
of street frontages and
the enclosure of space by
development, which clearly
defines private and public areas.
3. Quality of the Public
Realm – to promote public
spaces and routes that are
attractive, safe, uncluttered and
work effectively for all in society,
including disabled and elderly
people.
4. Ease of Movement – to
promote accessibility and local
permeability by making places
that connect with each other
and are easy to move through,
putting people before traffic
and integrating land uses and
transport.
5. Legibility – to promote
legibility through development
that provides recognisable
routes, intersections and
landmarks to help people find
their way around.
6. Adaptability – to
promote adaptability through
development that can respond
to changing social, technological
and economic conditions.
Indicators
Density.
Architectural Style.
Height to width ratios.
Floor area ratios.
Vegetation type and number.
Variation of openness and
enclosures.
Fluctuations of building line.
Materials.
Building dimensions.
Block and plot sizes.
Distributions of land uses.
Patterns relating to culture
can only be identified by a)
morphological survey of the
above and b) agreement on
what makes a good place in the
specific location in question.
Density.
Height to width ratios.
Floor area ratios.
Variation of openness and
enclosures.
Fluctuations and deflections of
building line.
Building dimensions.
Block and plot sizes.
Ensure all public spaces are
overlooked.
The Urban Design Compendium
suggests optimum numbers of
doors and windows that should
access a space.
Clear definitions of public and
private space.
Uses that encourage people to
dwell.
Gehl provides 12 indicators to
test the quality of public space.
Count the density of street
junctions.
Measure the size of urban
blocks.
Use space syntax analysis to
evaluate the connectivity of
spaces.
Produce a legibility analysis.
Plot the positions and frequency
of landmarks buildings, spaces
and features.
Provide each of the above in
new developments.
This value needs further
review but much useful data is
contained in Building for Life.
NTHP (2014) provides a set of
indicators relating to plot and
building sizes.
Full Report | 12
Publications that provide
standards and targets.
Bentley I, Alcock A, Murrain P,
McGlynn S & Smith G (1985)
Cullen G (1961)
MIT (2015)
National Trust for Historic
Preservation (2014)
Vrolijks L, Feenstra S, Gladys H,
(2003)
Bentley I, Alcock A, Murrain P,
McGlynn S & Smith G (1985)
Cullen G (1961)
MIT (2015)
National Trust for Historic
Preservation (2014)
Vrolijks L, Feenstra S, Gladys H,
(2003)
Carmona M, Tiesdall S, Heath T
and Oc T (2003)
Dept for Transport (2007)
Design Council (2015)
Friedrich E, Hillier B and
Chiaradia A, (2009)
Gehl, J (1987)
Llewelyn-Davies (2000)
Secured by Design (2015)
Urban Design Skills (2015)
Whyte, W. H. (1980).
Dept for Transport (2007)
National Trust for Historic
Preservation (2014)
Law S, Stonor T and Lingawi S
(2013).
Bentley I, Alcock A, Murrain P,
McGlynn S and Smith G (1985)
Llewelyn-Davies (2000)
Lynch K (1960).
Birkbeck, D and Kruczkowski S,
(2012)
National Trust for Historic
Preservation ( 2014).
13 | Highly Valued, Hard To Value

7. Diversity – to promote Count the locations, type and Barton et al (2003)

diversity and choice through a
mix of compatible developments
and uses that work together
to create viable places that
respond to local needs.
numbers of different uses. Carmona M, Tiesdall S, Heath T
Plot the above in relation to and Oc T (2003)
population density and walking
Llewelyn-Davies (2000)
distance from homes. Aim for a
maximum 10-minute walk from Law S, Stonor T and Lingawi S
home to key facilities. (2013).
Use space syntax analysis to
ensure non-residential uses are
located accurately in relation to
maximum accessibility.

8. Cleanliness – to promote There are a host of indicators Barton et al (2003)

high levels of energy
efficiency, minimise waste,
minimise pollution and protect
and enhance the natural
environment.
that can be used to evaluate BREEAM (2015)
this value, eg, providing
sufficient density to support Pelsmakers S (2014)
facilities within walking distance, LEED ND (2014).
orientation of streets, plots and
buildings to maximise solar gain;
plotting of over-shadowing;
control of air/wind flow; use of
sustainable urban drainage;
provision of space to grow food
locally; number, position and
type of vegetation etc.

9. Healthiness – to promote There is anecdotal evidence that This is a newly developing

high levels of mental and
physical well-being.
the provision of the items listed approach to urban design and
above will support this value. needs further literature review
In terms of psychology, the to identify specific relevant
provision of trees is thought to publications and indicators.
be positive.
The reduction of fossil fuel use
will improve air quality. The
encouragement of walkable
neighbourhoods will support
physical health.
This value needs further review.

10. Participation – engages
with those affected by
development so that they may
be active participants in the
decision-making process.
Evidence of a participation Building for Life 12; BREEAM
strategy. An audit trail of Communities.
community involvement and
input into design decisions.

A number of urban design documents shown in table 2.2 provide checklists against which new development
can be assessed. Two of the most widely known are:

• UDS (2015) Place Check http://www.urbandesignskills.com/ourServices/place-check; and

• Building For Life http://www.designcouncil.org.uk/resources/guide/building-life-12-third-edition.

In terms of gauging the difficulty of measuring the delivery of the values of urban design, most are relatively
easy to gauge as their indicators are mainly physical – numbers of dwellings, degree of connectivity, size of
street etc, and the vast majority of these values and indicators are agreed widely across the field of urban
design as maximising the potential for good places to be created.

The areas that are the most difficult to gauge are those associated with cultural issues. But if urban design
is about creating good places, then identifying a cultural response via the participation and engagement of
local people in a specific location must always be the starting point. Hence the value of always asking the
key question, ‘What makes a good place?’

2.4.  The costs of quality

When it comes to costs of development there is evidence that good design is not more expensive than poor
design. The Homes and Communities Agency (2014) looked at 100 different layouts and compared them
in terms of legibility and permeability, active frontages, street design, parking, and building form. The best
third scored three times higher on quality than the bottom third. Good urban design was found not to cost
more than less well-considered designs.
 Full Report | 14

“A strong focus on design can lead to good urban design quality with short and long term benefits and
ensure that expensive architectural features with limited benefit to the user are restricted. The need to
focus on cost and achieve financial viability need not be an impediment to delivering better quality urban
design” (Homes and Communities Agency, 2014, p4).

In three out of four case studies, schemes with higher design scores reported higher revenues, with greater
density of development being a factor, as well as efficiency savings from better arrangement of circulation
and outdoor spaces. Where there is a cost penalty, any additional costs may well be offset by higher
revenues resulting from better-quality urban designs, particularly from the greater density of development
that can result. There is some evidence of a premium being associated with developments that incorporate
the valued features of urban design through the potential for greater densities of development (Prince’s
Foundation, 2007). Developments that contain the features that the practice literature identifies as good can
often involve greater intensity of development, which implies that they can produce higher financial rewards
than ones lacking in these features (Savills, 2016).

2.5.  Conclusions
The practice literature and discussions by urban design professionals indicates a high degree of consensus
about the qualities to be found in well-designed developments and regeneration projects. These are that
developments should promote character in townscape by reinforcing locally distinctive patterns, promote
the continuity of street frontages, promote safe and attractive public spaces that work effectively for all in
society, have ease of movement, particularly for people, have legible developments with recognisable routes
and landmarks that help people find their way around, be adaptable to changing social, technological and
economic conditions, promote diversity and choice through a mix of compatible developments and uses,
promote high levels of energy efficiency, minimise pollution and waste and enhance the natural environment,
and promote high levels of mental and physical well-being. Developments are for people to live and work
in. They are not paper exercises in design. There should be participation in the design and development
process by those the development is for, and steps should be taken to engage the local community in the
process. Such developments must be economically sustainable. If an area is to be brought back to life by
regeneration, it must become a place where businesses seek to locate and people want to live and work.
This means that developments must create economic and employment opportunities, and not just in the
short-term construction phase, but also on an on-going basis. They must also provide a sustainable means
of funding for local public services and therefore generate the local tax incomes through council tax and
business rates that local authorities will need to finance them.

With an appreciation of economic sustainability in mind, the following comprehensive listing presents a full
set of urban design values that are required to produce a good place:, character, continuity and enclosure,
quality of public realm, ease of movement, legibility, adaptability, diversity, cleanliness, healthiness,
participation, economic prosperity, and revenue generation.

One can argue that unless the characteristics of good design are met, there is little likelihood of the
development being economically viable. There is some evidence to indicate that good design is not
necessarily more costly to achieve. Good-quality design can result in higher densities of development with
resulting financial benefits as well as the potential to achieve premium prices and faster take-up rates by
households and businesses.
15 | Highly Valued, Hard To Value

3.  What is valued in developments?

Summary
As part of the research, the opinions of two groups about what they value in developments were
sought. A survey was carried out by YouGov on behalf of Trowers and Hamlins in February 2016 that
resulted in 2,068 responses. Respondents were asked to rate a series of characteristics in terms of
their importance in determining their decision to occupy their current property. Their responses were
analysed according to various socio-demographic groupings, including housing tenure, age, social
class, working status and household composition. While affordability was the key characteristic
looked for in a home, respondents valued highly the reputation of the neighbourhood and the design
and attractiveness of the property. Other important characteristics highly valued by approximately
half the respondents were proximity to education, healthcare and other public services, access
to public transport, in a neighbourhood that was well provided with shops, restaurants and other
services, proximity to work, and proximity to family or friends.

Additionally, a Breakfast Forum was held on 27 January 2016, attended by leading property developers,
property professionals and representatives of property industry bodies. They were surveyed on how
highly they valued particular features of urban design derived from the BREEAM Communities and LEED
ND assessment systems. Access to good public transport, community participation and engagement,
affordable and diverse housing, and environmental sustainability were the features ranked mostly highly.

3.1.  The public’s views

YouGov PLC1 carried out a survey for Trowers and Hamlins in February 2016 to identify the characteristics
that people value in a property. There were 2,068 respondents from England, Wales and Scotland.
Respondents were asked to rate a series of characteristics in terms of their importance in determining
their decision to occupy their current property on a five-point scale ranging from 1 (not at all important)
to 5 (very important). The questions asked about the affordability of the property, the reputation of the
neighbourhood and whether it was attractive and safe, if there was a strong sense of local community, the
proximity of the property to the place of work, family or friends, spiritual/religious community, education
facilities, healthcare and other public services, if the property was well designed and attractive, if the
property met high environmental standards, and if there was access to public transport. Respondents were
also asked how long they had lived in the property, and a variety of socio-demographic data was collected
about the respondents, including their gender, age, social class, marital status, working status, the region
they lived in, housing tenure and household composition. The questions are reproduced in Annex 1.

The percentage of respondents who either own or rent their home scored the following characteristics as
important or very important:

• that the property was affordable: 90%

• that the neighbourhood had a good reputation, was attractive and safe: 76%
• that the property was well designed and attractive: 65%
• that the property was in proximity to education facilities, healthcare and other public services: 52%
• that there should be access to public transport: 51%
• that the neighbourhood was well provided with shops, restaurants and other services: 48%
• that the property was in proximity to their place of work: 48%
-- that the property was in proximity to family or friends: 47%
-- that there was a strong sense of local community: 35%
-- that the property met high environmental standards: 29%
-- that the property was in proximity to the respondent’s spiritual/ religious community (eg, church,
mosque, etc): 15%.
Affordability was, unsurprisingly, the principal criterion that determined whether a property was chosen.
The reputation of the area and the design of the property were also rated as being important. Proximity to
education, healthcare and public services, place of work and friends or family, access to public transport,

1
Total sample size was 2,068 adults. Fieldwork was undertaken between 12-15 February 2016. The survey was carried out
online. The figures have been weighted and are representative of all GB adults (aged 18+).
 Full Report | 16

and the neighbourhood being well provided with shops, restaurants and other services, were rated highly
by approximately half of respondents, with a strong sense of local community and the property meeting
high environmental standards rated highly by a minority. Proximity to the respondent’s spiritual/religious
community was not regarded as important by many of the respondents.

These summary totals mask wide variations in the answers given by different groups of respondents.

3.2.  The professionals’ views

Trowers and Hamlins held a Breakfast Forum on 27 January 2016 attended by a number of leading property
developers, property professionals and representatives of bodies concerned with the property industry.
Those attending were requested to complete a questionnaire, and 13 were returned. The questionnaire is
reproduced in Annex II. While the sample size is small, the diverse nature of those attending the roundtable
gives us confidence of a consensus across different professions within the real estate industry. The attendees
were asked to rank 20 characteristics of a development according to how important they regarded it, from
1 (not at all important) to 5 (very important). The characteristics were derived from BREEAM Communities,
LEED ND and various urban design sources. The table below ranks the aspects in terms of their mean score.

Table 3.1 Characteristics in rank order

Mean score

Access to good public transport 4.77

Community participation and engagement 4.62

Affordable and diverse housing 4.62

Environmental sustainability 4.54

Creation of jobs for local people 4.46

Contains safe and appealing streets 4.46

Safe streets for pedestrians 4.38

Attractive public spaces 4.33

Quality of design 4.31

Protects and preserves historical buildings and cultural monuments 4.31

Promotes high levels of physical and mental well-being 4.31

Safe streets for cyclists 4.23

Links in well with existing streets and buildings 4.23

Accessibility and ease of movement within the development 4.23

Adaptable to changing social, technological and economic conditions 4.23

Contains or enables access to recreational facilities 4.08

Enhances public services in the area 4.00

Protects ecosystems, wetlands and agricultural land 3.92

The design reflects the area’s vernacular style and distinctive features 3.77

Provides for local parking 3.15

Access to good public transport, community participation and engagement, affordable and diverse housing
and environmental sustainability were ranked mostly highly. Five characteristics were ranked distinctly
below the others, namely provision for local parking, that the design reflects the area’s vernacular style
and distinctive features, protection of ecosystems, wetlands and agricultural land, enhancement of public
services, and access to recreational facilities.

Attendees were asked to identify the three characteristics that they regarded as being most important.
Those with the greatest number of mentions are listed in the table below. The ones most highly rated were
access to public transport, community participation and engagement, affordable and diverse housing, and
adaptability to changing social, technological and economic conditions.
17 | Highly Valued, Hard To Value

Table 3.2 Most important characteristics.

Number of mentions

Access to good public transport 7

Community participation and engagement 6

Affordable and diverse housing 6

Adaptable to changing social, technological and economic conditions 5

Environmental sustainability 3

Quality of design 2

Creation of jobs for local people 1

Attractive public spaces 1

Links in well with existing streets and buildings 1

Protects and preserves historical buildings and cultural monuments 1

Enhances public services in the area 1

Contains safe and appealing streets 1

Attendees were asked to suggest three other characteristics of developments they regarded as important.
There was no significant consensus, but the characteristics identified are shown below, in no particular order.

Table 3.3 Additional characteristics

Cultural institutions

Diverse mix of uses

Economic sustainability

Engagement with art, culture, entertainment and events

Good-quality management

Green infrastructure

Healthy buildings

Local amenities

Outdoor space/access

Provide demonstrable social return to local community

Quality of public realm

Resale value

Sensible mix of uses

Unique local characteristics

It is interesting to note that “access to good public transport” comes out as the most important and most
frequently mentioned characteristic. It has several major implications on the location, layout and density of
a development. For a public transport system to function in a way that allows it to be considered good, it
would have to be reliable and frequent, and possibly, in terms of monetary value, self-financing. In order to
meet these requirements it will need a certain quantum of customers within easy walking distance. Meeting
these requirements affects the physical character, layout and form of development, as well as density
of development, in order to produce a viable catchment area for the transport system. This feature is an
important component in the delivery of sustainable development. This is a clear example of how a qualitative
value, linked to a monetary value, will influence and be influenced by the physical characteristics of place.
 Full Report | 18

3.3.  Conclusions
It would have been desirable had the questions asked in the YouGov survey been the same as those asked
of the professionals in the Breakfast Forum as this would have identified whether there were discrepancies
between the views of the two groups. The public valued safe and attractive neighbourhoods and well-
designed and attractive properties, but what they meant by this was not explored. Affordability, safety, and
quality of design were characteristics that both the public and professionals rated highly, and both groups
also regarded access to public transport as being important. The YouGov survey indicates what attracts
people to an area: safety and reputation, access to public services, availability of public transport, access to
shops and restaurants, and conveniently placed for employment. The professional group were more specific
about the design features that made an area function well, including employment prospects, attractive
public spaces, environmental sustainability, protection of historic buildings and cultural monuments, and
high level of physical and mental well-being. Perhaps the most important conclusion is that there are no
obvious differences between what the public and the professionals seek from a place.

Damian Wild, the editor of Estates Gazette, introduced the Breakfast Forum by observing that in the 1985
film Back to the Future, when the adapted DeLorean transports Marty McFly to 2015, he encounters various
innovations such as the famous hoverboard, but nowhere does the film predict that developers will come
to be seen as “bad people” and that fighting development would be seen as a good thing. He posed the
question, ‘What makes for a good development partner?’ and, by implication, how to challenge the notion
that development is bad by providing developments that people want. What the two surveys indicate is
that those who promote and support development in many cases do not seek different things from the
future residents of them or local communities. As the professionals recognise, community participation and
engagement is a vital aspect of development and regeneration, so that its rationale can be explained and
development can reflect the aspirations of the population as a whole. Why this does not always happen and
what can be done to improve the situation needs to be understood.
19 | Highly Valued, Hard To Value

4.  Research into what people and

businesses are prepared to pay for or to
avoid
Summary
Households and businesses can demonstrate the value of features of new development and
regenerations through the prices they are willing to pay to achieve them or, in some cases, the prices
they are willing to pay to avoid them. The main method used for this is known as the hedonic model
in which the prices paid and the characteristics of properties are analysed statistically to identify
what is revealed about the willingness to pay to secure them. The method has been widely used in
the analysis of stigma that adversely affects property values, including the impact of environmental
effects, noise pollution, air pollution, proximity to high-voltage overhead lines, mobile phone masts,
landfill sites and wind farms, and high levels of crime. The method can also be used to identify what
people are willing to pay to be close to a good school, have a water frontage, have a view over forests
or vegetation, or to be close to public transport.

Most of the research has examined residential property with fewer studies of what determines the
choice of businesses. For businesses, location and how well connected a property is are strong
influences, but there is also evidence that they are willing to pay for specific design features and to
pay a premium for properties that satisfy high environmental standards. There is some evidence that
areas that have undergone regeneration provide good investment returns for retail properties and
offices. Regeneration offers good value for money, particularly investment in business start-ups,
general business support, industrial and commercial property, property betterment from acquisition,
demolition and newbuild housing and neighbourhood renewal, but less so when funds are spent on
environmental improvements, tackling worklessness, skills and training, housing improvement, and
investing in community organisations.

This type of analysis is better suited towards gaining an understanding of the value placed on more
easily specified characteristics, such as proximity to public transport or whether rural locations are
preferred by households to urban ones rather than attributes which it is more difficult to specify such
as strong local community and the character of an area.

It is one thing to say that one values something – it is quite another to be willing to pay for it. As one of the
participants at the Breakfast Forum said:

“I am a fan of measuring real money. I also, however, like to measure quality. It’s difficult but not impossible
to quantify” (Graeme Craig, Director of Commercial Development, Transport for London).

There is evidence that many of the attributes that are identified in the practice literature on urban design as
desirable features of new developments and regeneration projects do influence property prices, the rents
tenants are willing to pay and the level of voids and speed of take-up in a development. The implication is
that some aspects of quality can be measured in terms of money by looking at what people and businesses
are prepared to pay to achieve them or, in some cases, to avoid them. The research tends to make use of
hedonic price models. The approach was first developed to understand the pricing of cars and consumer
durable goods in the 1960s. The problem encountered was why, in spite of production efficiencies, the
prices of these goods continued to increase. The answer was that if one corrected for the improvements
made to the products each year, then on a like-for-like basis, prices were actually falling. Economists such
as Lancaster (1966) and Rosen (1966) argued that consumers were willing to pay for attributes that gave
them utility. It would therefore be possible to treat goods as bundles of attributes and thereby identify the
value of each attribute by examining what consumers were willing to pay to acquire it.

This idea has been applied to the housing market, reflecting the belief that purchasers cannot buy the goods
they want directly, but can do so indirectly by purchasing or renting housing in an area that incorporates
them. For instance, one cannot buy safety but one can choose to pay a higher price or rent for a property
in an area with a low crime rate, or save time spent devoted to working by acquiring a property close to a
transport hub such as a railway station. It is possible statistically to isolate the value placed on an attribute,
either through analysing the prices paid or by interrogating people and businesses as to what they are
 Full Report | 20

willing to pay to achieve them or willing to accept to give them up. Some caution is needed in interpreting
the results as this is a complex exercise and the results probably depend on their context and the questions
posed in each piece of research. There can also be distortions resulting from how the data is collected,
and it is often difficult to isolate the impact of individual attributes. These issues are discussed further in
Section 7.

Unfortunately most of the research in this area has been undertaken on residential properties, with much
less done on what influences the choice between commercial properties other than location, though in
principle the same type of model is applicable. When businesses choose to rent or buy a property, they
are purchasing the bundle of attributes that the property possesses. There is a limited amount of research
into what businesses value in terms of the design of buildings and about whether they are willing to pay
for environmental features, but researchers have generally not undertaken the same types of analysis of
commercial property prices that has been carried out for residential ones. One reason is probably that it is
much more difficult to put together a set of price data for commercial properties than for residential ones.
Residential properties are often acquired by purchasing them and the transfer in ownership together with
the price paid is registered. For commercial properties, access to premises is typically through renting
them. Short leases are not normally registered and, in any case, there needs to be careful analysis of
the lease terms to ensure that comparison is being made on a like-for-like basis so that differences in
rents reflect attributes of properties rather than, say, whether the tenant is responsible for all repairs and
maintenance or just internal ones.

Property values and marketability are driven by many diverse factors, including Government policy, the
economy, supply and demand, current social trends and location. Bell (1999) states that “…all the factors
that have an influence on a property’s desirability, and therefore its value, are traced back to the market’s
perceptions” and therefore property desirability and worth will reflect both buyers’ and sellers’ “needs,
tastes, fears, sensitivities, desires and anticipations”. Factors such as good schools, waterfront locations
and green space can increase desirability and value, whereas flood risk, crime rates and environmental
features considered to be undesirable have been shown to have a detrimental impact on value of residential
property. There is a growing body of literature devoted to this issue; in particular, the difficult task of placing
a value on the effect of perception.

What follows is a summary of the research into how a number of key variables influence the value of property.

4.1.  Impacts of environmental features on value

Research carried out in the past – by McClelland (1990), Chalmers and Roehr (1993), Edelstein (1988),
Fischhoff (1985), Mundy (1992), Slovic et al (1991; 1991), Syms (1996), Gallimore and Jayne (1999), Jayne
(2000), Bell (1999), Bond et al (2013), Hoen et al (2013) and Gibbons (2015) – has established that public
perception of non-physical contamination such as visual disamenity, noise and odour pollution can be
strong enough to influence the value and marketability of residential buildings, especially when there is
an association with a possible health risk (eg, the perception that living near high-voltage overhead lines
causes cancer). However, establishing the impact of structures such as high-voltage overhead lines, wind
turbines or cell-phone towers is somewhat more complex due to the publicised (but still unproven) link
between living close to such structures and a number of adverse health effects. The publicity generated
by the more widely publicised health studies has already influenced the property market to some extent
(Gallimore and Jayne, 1999; Jayne, 2000; Sims et al, 2009).

Although property ‘stigma’ was traditionally associated with contaminated land, other environmental
features have also caused a reduction in value due to property stigma. For example, proximity to electricity
equipment, mobile phone base stations, landfill sites, water and sewage treatment plants, etc. Bell (1999)
explains the function of stigma in relation to a number of detrimental conditions (see Table 4.1) classified
according to the severity of the condition. By means of a case study approach, he demonstrates the effects
of stigma associated with each of the 10 classes of detrimental condition. This includes stigma not related
to, or caused by, any form of environmental contamination. In fact, as Bell points out, buildings can be
structurally sound, in a well-placed locality and yet be totally unmarketable. Factors such as cultural beliefs,
horrific events and disasters can all have an impact, to varying degrees, on the value and desirability of
property that may be associated or perceived to be associated with a detrimental condition. Stigma often
reflects negative news and images and, according to Fischhoff (1985), “people tend to ignore evidence
that contradicts their current beliefs and to base their perceptions of relative risk on what they see in the
news media”. This has led to claims for stigma damage from circumstances as varied as haunted houses,
exposure to electromagnetic fields from overhead powerlines and mobile phone base stations, noise and
possible health impacts from wind farms, environmental pollution and living close to sex offenders.
21 | Highly Valued, Hard To Value

Table 4.1 Detrimental conditions

Detrimental conditions are categorised.

Class I ‘no detrimental condition’ - Class X ‘severe/incurable detrimental condition’

CLASS EXAMPLE

I No Detrimental Condition or Benign Condition Could include any Detrimental Condition

where there is ‘no impact’

II Non-market Premium Special buyer motivation, Feng Shui

III Market Condition Economy, supply & demand, recession

IV Temporary Condition High vacancy, tragedy (crime scene), distress

(bankruptcy)

V Imposed Condition Eminent domain (overhead lines, water),

historical listing

VI Building Construction Condition Construction defect, functional depreciation

VII Soil or Geotechnical Construction Condition Soil construction, drainage, retaining wall

VIII Environmental Condition Soil/building contamination

VIIII Natural Condition Flood, earthquake

X Incurable Condition Complete loss due to severity

Source: Adapted from Bell, 1999

Levels of perceived risk also vary by stakeholder. For example, in the UK in the past, some lending
institutions have shown reluctance towards lending on residential units which are either under, or in close
proximity to, high-voltage overhead lines (Dent and Sims, 1999). Kinnard and Worzala (1999) also identified
the same reluctance on the part of some lending institutions in the US. Both studies concluded that this
was due to the fact that, unlike most other contaminants where health risks can be quantified and safe
public exposure levels set, the potential health risks from exposure to residential electromagnetic fields are
still unknown. The degree of stigma associated with environmental detriments is dynamic. Neustein and
Bell (1998) investigated the effect of ‘diminishing diminution’ with respect to environmental stigma that is
particularly evidenced in relation to property recently affected by flooding. Time and media attention also
have an impact on the degree of negativity expressed towards affected property. Negative perceptions
can increase due to a growth in media attention, or lessen as time passes (Bell, 1999; Fischhoff, 1985;
Jaconetty, 1996).

In general, there has been some research on how environmental features influence property prices,
particularly of commercial properties. Fuerst and McAllister (2009) have found that for US commercial
office buildings there was a rental 6% premium for LEED and Energy Star certification, and also a sales
price premium. These are similar conclusions to those reached by Eichholz et al (2009) in a study of 10,000
commercial buildings in the US. They found that a building with Energy Star certification commanded a rent
premium of 3% and a sales premium as high as 16%.

4.2.  High-voltage overhead transmission lines

We have conducted significant research on the presence of high-voltage overhead transmission lines
(HVOTLs) and values or perceived values in relation to nearby real estate. We feel this example clearly
outlines the relevance of detrimental conditions and the value of a property.

In cities and residential areas, electricity lines are generally sited underground. However, the UK’s current
housing policy, which requires developers to use inner-city brownfield land or ‘add on’ to existing residential
estates to provide at least 60% of new housing, has encouraged the continued use of land crossed by
overhead electricity lines for residential development, despite reported links between a number of adverse
health effects, most notably cancer, and exposure to the electromagnetic fields (EMFs) produced by
electricity lines. Currently, although there is no research to establish a biological causal link between living
near HVOTLs and developing cancer,2 there has been concern that public attitudes may have translated into
lower values for homes sited near HVOTLs.

2
Concerns first raised in a 1979 study which associated an increased risk of childhood leukaemia with residential proximity
to power lines. 2005 research in the UK (Draper et al, 2005) found there was a significant increased incidence of leukaemia
in children who lived within 200m of a line, with no straightforward explanation of why.
 Full Report | 22

Early studies often used basic attitude surveys to determine the degree of compensation to award when
power lines were constructed. These surveys found that the public were concerned with overt effects, such as
visual unsightliness, noise and loss of amenity due to land-use restriction. Despite some general criticism of
the methodology used in these early studies and the problems of perceived bias associated with electricity-
utility-funded research, the results indicated that professional and public opinion was generally negative
towards the presence of HVOTLs, despite the fact that pre-1979, there was no publicised association with
living near HVOTLs and developing cancer. Agents and occupiers suggested a similar reduction of around
10%. It was noted that developers had a tendency to build low-cost housing nearest the HVOTL, suggesting
a perception of value diminution that appears to have been “based on a belief on the part of the developers
for which no empirical evidence is known to exist” (Kinnard, 1967; Sims and Dent, 2005).

In an alternative approach, digitally altered images were given to valuers who were asked to give an opinion
of the impact of HVOTLs on market value. The results suggested that the presence of an overhead line
could reduce value by between 5% and 11%, and that a pylon had an even greater impact, reducing value
by as much as 50% (Dent and Sims, 1999).

Where transaction data is scarce, the asking price is sometimes used to provide an indication of potential
impacts on value. However, the true impact of a HVOTL on value is in some cases much greater and,
therefore, while giving some indication of diminution relative to proximity, asking price does not give a clear
picture of the real impact of a HVOTL. For example, using an hedonic approach, the difference between
the asking price of a detached house at 400m (1,312ft), compared with the same house type at 0-49m (0-
160ft), from a pylon was shown to be 23.6%. Using the same approach to model transaction data to analyse
the effect on the selling price from a proximate electricity line and pylon suggested that the impact on value
within 50m of a pylon can be up to 30% in the UK (Bond et al, 2013). A New Zealand study (Callanan, 2014)
found house values reduced by 27% near a pylon, but any impact was negligible at 100m. Once the HVOTL
was removed, the population became more stable, with fewer property transactions and a higher proportion
of owner-occupied dwellings than before. The stigma caused reduced values for about three years after
the line was removed.

Currently claims for loss of value compensation are rare and will generally only be considered if property is
touched or crossed by electricity distribution equipment (see Figure 4.1). This is in the form of a wayleave
payment3 (Electricity Act 1989, Schedule 4) and makes no provision for the effect of stigma on value. Courts
within the UK do not consider ‘public perception of potential health risks’ a valid reason to accept a claim
for value diminution.

Figure 4.1 Compensation for HVOTLs

The owner of this house is not

entitled to claim compensation
for loss of value (injurious
affection) as it is neither touched
nor crossed by the HVOTL.

The owner of this house can

claim loss of value compensation
as the electricity lines cross over
the house.

4.3.  Landfill and derelict industrial sites

The impact on house prices from a proximate landfill site (in use and inactive) has been established using
hedonic modelling to analyse house values near landfill sites in Birmingham, UK. Researchers from the

3
“A wayleave grants the electricity company the right to hold their apparatus on the land in return for compensation” and
rent, which is paid annually to the landowner or occupier (NFU document 12C ‘Electricity’ , May 1996). The granting of
a wayleave is, in theory, voluntary. However, if the landowner refuses access to his land, then the utility will apply to the
Secretary of State for a necessary wayleave. Although compensation is the same, the rights of the landowner are usually
more restricted. The rates of compensation can be obtained from the Energy Network Associate. (Retrieved from http://
www.energynetworks.org/info/faqs/who-is-my-wayleaves-contact.html Accessed 13 March 2016).
23 | Highly Valued, Hard To Value

University of Birmingham found that the value of homes situated within 1.8 miles of an active site were
reduced by approximately 2.6% (Ham et al 2013). The assumption is that once the landfill site is closed,
house values will return to normal, but they also observed a diminution in value of between 2.4% and 3.4%
for homes sited within 0.6 miles of an inactive/closed landfill site. According to Maddison (2012), (co-author
of the Ham et al report) suggests that the stigma attached to this type of home could “last for decades”.

4.4.  Wind farms

For studies focusing on wind farms, research findings are varied and largely show no impact on value (Hoen
et al, 2013; Sims et al, 2008) for property near wind farms. Some studies have been limited by the number
of homes near turbines, or turbine size is small compared with those typically sited in the UK. However, the
latest published findings for the UK (Gibbons, 2015), based on an analysis of postcode-level data (82,000
transactions), shows that there is, on average, a price reduction of “5-6% for housing with a visible wind
farm of average size (11 turbines) within 2km, falling to 3% within 4km, and to 1% or less by 14km which is
at the limit of likely visibility”. They tested for differences in value based on size of the wind farm and height
of the turbines, with results indicating that larger wind farms (20-plus turbines) reduced house prices by
up to 12% for those within 2km of the turbines; at a distance 14km, a reduction of 1.5% was observed.
Gibbons suggests that, based on the theories of Rosen (1974), these price effects can be interpreted as
marginal willingness to pay to avoid the disamenity associated with wind farm proximity and visibility, net of
any benefits provided by the wind farms in terms of economic opportunities, community payments or other
financial compensation (Gibbons, 2015).

4.5.  Air quality

Hedonic modelling has been used to try to calculate the value of air quality by using the housing market
to “infer the implicit price function for this non-market amenity” (Chay and Greenstone, 2004). However,
according to Chay and Greenstone, studies have found that either the participants did not place a high value
on air quality or that hedonic modelling was unable to accurately calculate the willingness to pay for this type
of amenity. They adopted a different methodology to establish willingness to pay. Their 2004 study used
measurements of the air pollution reductions following the Clean Air Act Amendments to provide the data
they needed to accurately calculate the effect on house prices. They used a random coefficients econometric
model to calculate robust estimates of the average ‘marginal willingness to pay’ for clean air. Their results
suggest that a “1-µg/m3 reduction in TSPs4 results in a 0.2-0.4% increase in mean housing values”.

4.6.  Neighbourhood crime rates

Evidence from the US-based on hedonic models to analyse the relationship between house prices and
crime rates (Hellman and Naroff, 1979; Thaler, 1978; Lynch and Rasmussen, 2001) suggests that crime
rates do affect property values. Vandalism, graffiti and other forms of visible criminal damage tend to
motivate fear of crime in the local community and may be taken as signals or symptoms of community
instability and neighbourhood deterioration in general. Lynch and Rasmussen (2001) found that a 1%
increase in violent crime rates reduced prices by 0.05%. Gibbons’ 2004 research in London found evidence
of value diminution in areas affected by criminal damage from graffiti and vandalism but, interestingly, not
in areas affected by a significant number of burglaries. This suggested that the more visible the crime, the
more likely it is to blight a neighbourhood and reduce house prices.

Linden and Rockoff (2008) measured the impact of living in close proximity to a convicted sex offender
in North Carolina. They combined data from the housing market with data from the North Carolina Sex
Offender Registry and discovered that when a sex offender moves into a neighbourhood, the value of
houses located within one tenth of a mile of the sex offender’s home fell by around 4%, which equated
to about $5,500 at the time of the research. Those situated further away showed no decline in value. The
authors conclude that “these results suggest that individuals have a significant distaste for living in close
proximity to a known sex offender”.

A study in Baltimore by Troy and Grove (2008) focused on crime rates in parks within residential
neighbourhoods. Their results showed that crime is a critical factor in determining the degree to which a

4
Total Suspended Particulate (TSP) is a measurement used to quantify the standard of air quality. This measurement has
been replaced by PM-10. Particulate matter (PM) is the term for solid or liquid particles found in the air. Some particles
are large or dark enough to be seen as soot or smoke. Others are so small they can be detected only with an electron
microscope. Because particles originate from a variety of mobile and stationary sources (diesel trucks, woodstoves, power
plants, etc), their chemical and physical compositions vary widely. Particulate matter can be directly emitted or can be
formed in the atmosphere when gaseous pollutants such as SO2 and NOx react to form fine particles. Major concerns
for human health from exposure to PM-10 include: effects on breathing and respiratory systems, damage to lung tissue,
cancer and premature death. AIRTrends 1997 Summary retrieved from http://www3.epa.gov/airtrends/aqtrnd95/pm10.html
on 2 February 2016
 Full Report | 24

public park is valued by local residents. Low crime rates, as expected, had a positive impact on local house
values; and when crime rates rose, values fell. Their research also considered the effect of community
involvement, and found that neighbourhood engagement in park-based community groups could be
expected to yield many benefits for a neighbourhood, including discouraging crime, improving social
interaction and utility of urban green spaces. For example, “community involvement in parks serves to
boost ‘eyes on the street’” (Jacobs, 1961, cited in Troy and Grove) both within the park and surrounding
neighbourhood. Brown and Bentley (1993) found that parks create territorial boundaries. Troy and Grove
explain that by increasing the desirability of parks and reducing levels of crime self-reinforce each other,
creating a “virtuous green cycle”, and that the role of parks cannot be discounted in making neighbourhoods
more desirable, which in turn keeps property prices up. They established that a 10% rise in violent crime
rates in a neighbourhood would reduce house prices by an average of 6% (Ihlanfeldt and Mayock, 2010).

The degree of value diminution caused by crime is explored in a 2012 report prepared for the Center for
American Progress by Shapiro and Hassett (2012). They found that the impact of violent crime on property
values was substantial. Their results indicated that a 10% reduction in crimes such as homicides would
increase house values by 0.8% the following year.

4.7.  Proximity to water

Prime waterfront properties in the UK are worth an average of 60% more than their inland counterparts,
according to Knight Frank’s Prime Waterfront Index (June 2014). Premiums in the UK vary according to
location, the type of waterfront and whether the amenities attached to a property include access to a
beach or private mooring. The results indicate that, on average, having a coastal view increases house
prices by 56%. A harbour or estuary view could increase value by 85%, depending on the amenities
included (harbour = 83%; estuary = 85%; river = 57%; lake = 37%). Although the average increase for prime
waterfront properties in the UK is around 60%, location has a huge effect. For example, in the South West,
the waterfront premium is 75%, compared with only 27% in Wales (Knight Frank, 2014).

A review of the literature undertaken by Christou (2012) found that a full ocean view increased the value
of a house by 59%, compared with no view, a lake frontage by 127% and a lake view by 18% (Benson,
1998, p64). Plots with 1,000-1,500m of lakeside were the most expensive (Luther and Gruehn, 2001, p24)
and distance to a beach was strongly related to the price (Rush et al, 2000). Properties in Emmen in the
Netherlands with gardens bordering water were 11% more valuable (Luttik et al, 2000, p163).

A Polish study to determine the added value from being located on a hill or close to a forest, greenery or
lake was carried out in Warmia and Masuria in 2012 (Cellmer et al, 2012).

Warmia and Masuria is a province in northern Poland with many wetlands and lakes. Based on an analysis of
127 transactions over a five-year period, the researchers showed that being situated close to bodies of water
(lakes) had a greater impact on value than the other environmental features tested. They identified that potential
buyers showed a preference for property directly adjacent to the shoreline and that the value of a shoreline
property could be as much as three times higher than similar property without that direct access to the lake.

By contrast, the values of homes damaged by flooding fluctuate depending on the frequency and severity of
the event and the time since the last flood damage occurred. The Environment Agency calculated the cost
of the floods that occurred in the summer of 2007. More than 48,000 homes were damaged and the average
repair cost was between £20,000 and £30,000 per house (Gibbs, 2014). However, the true financial cost to a
householder may have been nearer £40,000 once furnishings and appliances have been replaced. Brignall
and Jones (2016) reported that, following the recent floods in Carlisle, some of the larger damaged homes
were being offered for sale at 60% less than their market value of two months previously. There has also been
a report of a purchaser suing a vendor for fraudulent misrepresentation because they failed to disclose that
the garden, which backed onto the River Thames, frequently flooded (Roberts and Hough, 2010).

Research to establish the impact of flooding based on transaction data has been carried out in Bewdley,
UK, where many homes are located next to the River Severn or on a floodplain. Lamond et al (2007) used
repeat sale analysis to determine the effect of flooding on house prices. Initial findings suggested that the
growth of house values is depressed by around 6% if the home is situated on a floodplain compared with
other property in Bewdley. Despite the small sample size, Lamond found that the results were consistent,
irrespective of the type of statistical model they used to analyse the data. The pattern of diminution generally
conformed to what was expected in that the greatest impact on value was within the year following the flood
and that property at most risk suffered the greatest value diminution. The reduction in value observed in
the study ranged from 12-15% for a property flooded more than once and up to 40% for a property flooded
three or more times. Although negative impacts on value gradually diminished with time, they still observed
some impact on the growth of house prices after five years; although the authors suggest that this result
may have been caused by the small flood that occurred in 2004, during the data collection period.
25 | Highly Valued, Hard To Value

4.8.  Forest/tree cover

The presence of greenery and forests can also increase value, and these impacts have been measured
by Des Rosiers et al (2002) and Cellmer et al (2012). In Quebec City, Des Rosiers et al (2002) found a
positive correlation between house values and the number of trees visible from a property. As the number
of trees increased, so did the value, especially in neighbourhoods with a high proportion of retired people.
Flower beds and lawns were also valued as desirable and increased the value of bungalows and cottages.
However, the presence of highly dense vegetation was found to have a negative impact on value. As
discussed, features such as bodies of water or access to a waterfront, trees, forests and greenery will
individually impact value. CABE Space (2004, p78) found that property overlooking a park raised house
prices by 34% compared with those not overlooking one and that rentals on properties facing on to Post
Office Square, Boston, MA had a 10% premium compared with those with no park view. Savills (Prince’s
Trust, 2007, p92) found an uplift in value in properties situated one or two blocks from a park, depending
on lines of sight and street landscaping.

Although the different environmental features discussed above affect the value and desirability of property
in different ways, Cellmer et al (2012) found that it is the arrangement and interaction of these spatial
features that directly affects buyer attitudes and thus the price they are willing to pay for a specific property.
Using multiple regression and geostatistical techniques, they modelled spatial correlations to analyse the
impact of various environmental factors on property value. The results suggest that the presence of a
body of water and forests has a significant impact on value. Elevation is also an important determinant of
environmental attractiveness, although the low impact on land prices observed in their research may be
explained by the fact that high differences in elevation are not a desirable feature in housing construction
in Poland. The fact that the study area was characterised by an abundance of lakes and few hills will
have undoubtedly influenced the results. The presence of water courses and forests were identified as
significant determinants of value and although elevation also had an impact, its effect in this particular
location was minimal (no percentage impacts on value were stated).

Research by mortgage lenders in the UK suggests that rural areas enjoy premiums in house prices.
Research by Nationwide Building Society suggests there is a 21% premium on houses within a national
park and 8% on houses within three miles of one. The premiums are highest for the South Downs, the New
Forest National Park and the Lake District (Nationwide Building Society, 2014e). Lloyds Banking Group
(2014c) found that prices for rural properties in Great Britain were on average 26% higher than those in
urban areas, though the rural premium varied significantly between regions, from 57% in the West Midlands
to 13% in the North East.

4.9.  Microgeneration
Microgeneration is defined as any technology that produces “heat and/or electricity on a small-scale from a
low carbon source” which does not exceed “50 kilowatts” for electricity generation and “45 kilowatts thermal”
in relation to the production of heat (The Climate Change and Sustainable Energy Act 2006) and includes
technologies using wind, solar, water, geothermal sources and biofuels. The most popular technology in the
UK has been solar power, possibly due to the previous incentives offered by the Government’s Green Deal
initiatives and feed-in tariffs. There are relatively few homes with micro wind turbines installed.

There have been a number of recent studies that have tried to determine whether solar panels, for example,
translate into a value premium. Scarpa and Willis (2010) analysed the willingness of 1241 participants to
pay for microgeneration in their homes. The results established an additional ‘willingness to pay’ (WTP) of
£2,831 (+/- £244) for solar photovoltaics (PV) and an extra £2,903 (+/- £255) for solar thermal. However,
participants were only willing to pay an extra £1,288 (+/- £241) for a wind turbine. Longo et all (2008)
investigated the WTP by households in Bath, UK, for a hypothetical initiative promoting the production of
green energy. The results suggested that households were generally willing to pay more for their electricity to
reduce greenhouse gas emissions. They also found that occupiers with a university degree seemed willing
to pay the most, which suggests that the level of household income is likely to influence behaviour. Borchers
et al (2007) estimated the premium households were willing to pay on their electricity bills for ‘green energy’
purchased from specific sources – wind, biomass, solar, and farm methane. They found there was a general
WTP slightly more for renewable energy and that most individuals have a preference for solar, with biomass
and farm methane the least preferred. Dastrupa et al (2012) found that in California, the presence of solar
panels on a house adds an average premium of 3.5% to its value. This premium was observed to be larger
in areas where a greater proportion of the residents had a college (university) degree.

The results from research indicates that occupiers are willing to pay a premium for homes where solar
panels are fitted and, most importantly, owned by the occupier rather than by an energy provider (ie, the
utility company rents the roof). More recent reports suggest solar panels can have a negative impact on
value where the roof is leased by an energy provider (typically on a 25-year contract). Lambert (2012)
 Full Report | 26

reported that house-buyers had been “warned by surveyors against making offers to buy properties fitted
with free solar panels, over fears their mortgages will be turned down”. He suggests that this may result
in vendors having to pay significant sums of money to buy their way out of contracts with solar energy
companies so that they can sell their homes. This is usually the cost of the solar panels and an extra
premium. The RICS is also advising caution to members valuing property for lenders or buyers.

4.10.  Proximity to transport

A major strand in the research into house prices has been the application of bid rent theory. This was
developed by economists such as Alonso (1964) to explain the location of businesses. City centre premises
are in relatively short supply but the number of substitutes increases as transport links radiate from the centre.
Businesses vary in terms of their need for a central location in order to attract customers and their ability to
pay higher rents for them. The result is a series of bid rent curves of equal profitability in which there is a trade-
off between central location and higher rents, and lower rents with lower revenue-generating potential. Firms
achieve an equilibrium location where their willingness to trade off potential revenue earnings against higher
rents equals the trade-off between distance from the centre and rent in the available premises.

Households are faced with two main constraints as they seek to maximise their utility or satisfaction. One
is an income constraint that limits how much money they have available to spend on housing, transport to
work and other living costs. Bid rent theory predicts that housing close to the centre of a city will be more
expensive than that available towards the periphery as there are relatively few residences available centrally
compared with the number as one radiates out from the centre along the main transport routes. However,
transport costs increase with distance from the centre and the main location of employment. Households
also have a time constraint. Their time has to be spent on work, journeys to work, and non-work activities.
Living closer to one’s employment reduces travel time and frees up time that can be spent on employment
or non-work activities. Households choose their place of residence by trading off housing costs against
transport to work costs and time spent travelling to work.

This model predicts that housing that is located close to good transport links to the major employment centres
will be highly valued by households, who will be willing to offer a higher price for it. Such housing brings about
savings in journey times and the potential to generate a higher income by substituting working time for travel
time or to devote more time to non-work activities. Different households will reach different decisions about the
value of the trade-offs and their ability to substitute higher housing costs for time savings.

The impact of transport on house prices can be complex. The construction of the Sheffield Supertram seems
to have resulted in an initial uplift in prices along the proposed route, followed by a slump during the actual
construction period, and then a recovery that showed a limited attraction for properties along the route (Antwi
and Henneberry, 1995). Recent research by the Nationwide Building Society (2014b, 2014c, 2014d) suggests
that in London there is a 10.5% premium for properties within a 500m radius of a Tube or railway station
compared with being 1,500m or more away. In Glasgow, the premium is 6%, and in Manchester 4.6%.

4.11.  School quality

There are many econometric studies to consistently show that parents are willing to pay for school
quality through the housing market (Black, 1999; Gibbons and Machin, 2003; Leech and Campos, 2003;
Rosenthal, 2003). However, house prices in the areas immediately adjacent to a school are depressed by
the externalities schools generate, such as noise and additional traffic. By analysing house transactions
within school catchment areas, Black established that, on average, families are willing to pay an additional
2.5% to be in the catchment area of a good primary school. Cheshire and Shepherd (2004) used a hedonic
model to measure a wide range of local neighbourhood characteristics, including the socio-economic
composition of the neighbourhood, schools and other local services and amenities in Reading, UK. Using
a data set of 490 house transactions, they found that there was a difference of £42,000 between house
prices near a good primary school and those near one of the worst-performing primary schools. They also
found strong evidence to suggest that “the capitalised value of a given level of school quality is a positive
function of how good a family nest a particular house provides. School quality commands a higher price
in houses better adapted for children (houses with more bedrooms)”. Nationwide Building Society (2009)
found evidence that a 10% improvement in 11-year-olds achieving a Level 4 or above in their Key Stage 2
Standard Assessment Tests resulted in an average premium of 3.3% compared with the regional average,
and those houses close to a primary school with a 100% pass rate were, on average, 11% more expensive
than similar houses close to a primary school in the bottom quartile.
27 | Highly Valued, Hard To Value

The relationship between school quality and house price is not as strong for secondary schools. Allen et
al (2010) suggests that this difference is largely due to the fact that there is much more variation in the
performance of primary schools. Their study suggests that if an average house were moved from the
catchment area of the worst to the best secondary school, its value would increase by nearly 19% (equating
to £23,750 at the time of the study). In the case of an average house near a primary school, moving its
location from the worst to the best primary school area would add nearly 34% (£42,550) to its value.

4.12.  Additional characteristics that add to or detract from the value

of residential property
Mortgage banks such as the Nationwide Building Society and Lloyds Banking Group (Halifax) have
identified a number of features that appear to enhance the value of residential property. The sizes of
their mortgage databases enable them to hold constant many of the other factors that influence property
prices so that individual features can be identified. These reports indicates that that a loft conversion or
extension adds 21%, an extra bedroom 11%, an extra bathroom 5%, and a 10% increase in floorspace 5%
(Nationwide Building Society, 2014a).

Being within easy reach of a supermarket adds on average 7% to prices, though this does depend
on the supermarket group, with Waitrose producing a premium of 12% but Asda, Aldi and Lidl having
a negative effect (Lloyds Banking Group, 2014). Areas with the best employment growth and, perhaps
more surprisingly, proximity to a Premiership football ground experienced faster increases in price than
surrounding postcodes (Lloyds Banking Group, 2014a, 2014b).

A study of the George Street Quarter in St Helens, UK, suggested that improvements to the public realm
could increase rental values by up to 10% (Amion Consulting and Taylor Young, 2007, pp18-19 and 64).
Regeneration improvements to the public realm seem to have a positive impact on property prices and
rental values (Juvara, 2008, p23). Street trees seem to have the effect of enhancing land values (Luther and
Gruehn, 2001, p24; CABE, 2004). A high density of listed buildings increases land prices (Prince’s Trust
2007, p92). Cobbled streets can increase values relative to ones that are not cobbled, and streets with gas
lamps can be 10% more expensive than those without (Luther and Gruehn, 2001, p24).

Higher-quality design in residential schemes can increase residential values per hectare by up to 15%
(FPD Savills in Amion Consulting and Taylor Young, 2007, p64). This suggests that there is a value placed
on good master-planning. In the US, residential schemes adhering to basic urban design principles similar
to those set out in UK planning guidance produced a sales premium on average of 11% (Urban Land
Institute, cited in McIntyre, 2006). Distinctiveness created through good urban design can increase rental
and capital values by 15-20% (Amion Consulting and Taylor Young, 2007, p64).

Some factors depress the values of property. There is evidence that traffic noise can depress values by 5%
and views on to multi-storey apartments by 7% (Luttik et al, 2000, p163).

4.13.  Regeneration
Regeneration appears to offer good value for money, producing on a cautious valuation a benefit-cost ratio of 2.3
(ie, for every £1 of expenditure, the benefit is £2.30) (Tyler et al, 2010). The areas of impact producing the highest
returns were business start-ups and spin-outs, with a benefit-cost ratio of 6.8, general business support (6),
industrial and commercial property (5.8), property betterment from acquisition, demolition and newbuild housing
(3.7), and neighbourhood renewal (3). Poorer return came from environmental improvements in the public realm
(0.9), tackling worklessness (1.06), skills and training (1.6), housing improvement (1.3), and investing in community
organisations (1.3). Each of these is the cautious estimate, the central valuations being higher.

The returns for commercial property investment in areas undergoing regeneration appear to be good.
Adair et al (2003) examined the returns from regeneration projects in eight major UK urban areas and
found regeneration locations had been attractive to retail schemes, including shopping centres, retail parks
and retail warehouses, and these outperformed the more traditional high-street retail investments. This
may reflect the availability of land and subsidy arrangements. The office sector outperformed national
benchmarks but were not appreciably different. This is likely to be because prime office areas are located
close to transport hubs, and major transport infrastructure schemes can be slow to follow regeneration.

As may be expected, proximity to an area in need of regeneration undermines property prices. For example,
the Monkton Coke Works on South Tyneside ceased operations in 1990, leaving a contaminated derelict
site. Over the period 1995-97, houses 1 kilometre from the site were worth 4.7% less than comparable
properties 3 kilometres away. During the period of remediation (1998-2000), the differential disappeared.
The land became a business park and leisure area but, over the period 2001-06, the price differential
increased to 10% for reasons that are not entirely clear (Cambridge Economic Associates, 2010).
 Full Report | 28

4.14.  Conclusions
Most of the studies on the influence on property prices have been of residential property. There are likely
to be two main reasons for this. Firstly, residential property prices are more readily available than those
for commercial property, not least because sales prices have to be registered as part of the transfer of
ownership whereas rentals on leases do not. There are comparatively few sales of commercial properties
as normal access to business premises is by renting them. Moreover, rental terms need to be carefully
analysed in order to derive comparable prices. This means making allowances, for example, for rent-free
periods, fitting out allowances, whether the landlord or tenant is responsible for paying the costs of repairs,
maintenance and insurance, whether rent is due monthly or quarterly, the size of any rent deposit, break
clauses, turnover rents, and so on. Secondly, it is widely assumed that the key determinant of commercial
property prices is location. Connectivity is important and therefore other factors have been assumed to play
a relatively minor role. There is a role played by design features, such as shop frontages in retail and the
distinctiveness of the exterior for offices (Nase et al, 2013a and 2013b).

“If the quality is right, then long term value will come through” (Breakfast Forum – Graeme Craig, director
of commercial development, Transport for London).

The problem is that many of the more complex features of good-quality urban environments, such as strong
local community, the character of an area, participation and engagement, and ease of movement and
connectivity of place, are not ones that the literature seems to have looked at. It is therefore quite difficult
to draw inferences about whether there is any premium from their presence, or a detrimental effect on
property prices from their absence.
29 | Highly Valued, Hard To Value
5.  Examples of good urban development
There are many examples of new schemes and regeneration projects that incorporate the generally
accepted principles of good development we have mentioned, in which design quality results in economic
advantage and monetary gain.
5.1.  King’s Cross, London
Developed by Argent in accordance with the principles set out in
Argent St George’s Principles for a Human City (2001): a robust
urban framework; a lasting new place; promotion of accessibility;
vibrant mix of uses; harness the value of heritage; work for King’s
Cross; work for London; commitment to long-term success; engage
and inspire; secure delivery; and communicate clearly and openly.
This vision added value to the development and aided communication.
These principles converted into a financial return in the form of higher
rents and house prices and the speed with which offices became
tenanted with sought after tenants. One of the promoters, London
and Continental Railways, who bought into this vision, has been able
to convert this into cash through the recent sale of their share in the
development. (Masterplan architects: Allies and Morrison, Porphyrios
Associates; Landscape architects: Townshend)
© James Brittain
5.3.  Kidbrooke Village, London
Kidbrooke Village is a 20-year project which will deliver an entire
new London suburb - over 4,000 homes of different tenures in
squares, around courtyards, in apartment blocks and streets. The
project is a major regeneration scheme for the UK, led by Berkeley
Homes with partner Greenwich Council. Described by CABE as
“an exemplar for sustainable suburbs”, it will cost £1bn to deliver
and transform a deprived area just smaller than Hyde Park into
somewhere people love to live.
The new development consists of 109 hectares of land, with over ten
hectares allocated as Metropolitan Open Land to form a new ‘green
river’ running through the centre of the masterplan. This project
brings together new ideas on the 21st century suburb, in areas such
as housing, landscape, employment, stewardship, community and
financial institutions. (Masterplan: Lifschutz Davidson Sandilands;
Urban Design: Jon Rowland; Landscape Architect: Gillespies)
5.2.  Liverpool One
Developed by Grosvenor using a masterplan by BDP. The retail
element opened in 2009. The decision was made to develop a
shopping centre based on a high street design with good linkages
to other parts of the city rather than a self-contained shopping
mall. The commissioning of more than 25 different architectural
practices to design the main buildings meant that there was
a diversity of styles, thereby enhancing the streetscape into
which the historic buildings in the area and around it have been
absorbed. The development transformed Liverpool’s position in
the retail hierarchy, resulting in new employment and a reduction
of the leakage of consumer expenditure to other towns. Initially
the project experienced asset write-downs, but in 2015 the
Grosvenor Liverpool Fund posted the highest annual return of
any unlisted property fund.
5.4.  Birmingham Municipal Housing Trust
Established in 2009 to build new council houses on council-
owned land for the first time in the city for 30 years, the aim was to
apply good urban design principles to regenerate poor areas of
municipal housing.
The project has been expanded to build market homes for sale.
The layout features such as active frontages, properties backing
on to each other, clear demarcation between public and private
space, well connected permeable road layouts and avoidance
of dead space. Property types and sizes are mixed together and
are tenure blind.
Full Report | 30

© David Barbour/BDP

© BM3
31 | Highly Valued, Hard To Value

6.  The problem

Summary
This section reviews some of the methods that can be used to enhance property valuations. The methods
reviewed take a variety of different approaches and could be used in combination. It has long been
recognised that major projects often involve intangible costs and benefits. These are valued by society
but are not traded and so no market price can be identified. Two approaches to identifying the monetary
value of these are considered: the revealed preference approach and contingent valuation. Revealed
preference is the main method used to identify the values of various attributes in Section 4. The basic idea
is that businesses and persons reveal the value of the characteristics they seek or what they are prepared
to pay to avoid detrimental factors through the prices they pay for properties. By comparing property
prices statistically with the characteristics of properties, the value placed on individual attributes can be
isolated. There are some problems with this method, however, both in terms of the availability of data and
the assumptions made about the behaviour of purchasers. However, this is a powerful technique, though
it has mainly been applied to the characteristics of properties rather than of places.

If an attribute cannot be purchased directly or indirectly through property transactions, alternative

methods have to be used. One of the principal approaches has been contingent valuation. As well as
discovering what respondents are willing to pay for the things or services that they use, contingent
valuation can also examine passive valuations where the existence of items is valued even if they
are never used or where the value is of something to be passed on as an inheritance. This also has
some problems, particularly over how the questions are put and whether people’s behaviour is in
accordance with the assumptions in the model. However, it is a useful technique that can enable a
value to be placed on aspects of a proposed development and as a part of the process of engaging
with the community over a development.

In view of the problems in trying to place monetary values on items which are not directly traded,
attempts have been made to develop techniques that enable a more objective view to be taken of
proposals. Mathematical techniques have been developed that enable the composite visual effect of
all the physical characteristics of a street in combination to be assessed using the same data that
the human eye and brain process in making visual quality judgments of vistas and views. The results
can be then compared with what is valued. BREEAM Communities and LEED ND are attempts to
development measurement and certification systems that enable developments to be benchmarked
objectively. They use a variety of factors which are scored systematically. LEED ND, in particular,
is an attractive system that can be used in a cost effectiveness analysis in which the question is
posed whether additional benefits are worth the additional cost. External assessments of this nature
do require expertise which brings additional costs, though these are small compared to those of
the development as a whole. If introduced at a late stage in the planning process, they can result
in delays. LEED ND was developed for the North American market and is likely to require some
adaptations for UK conditions.

6.1.  Development constraints

We have identified generally accepted principles of urban design and planning and what people and businesses
value highly in urban areas. These are factors that many promoters of development and regeneration aspire
to provide, but why do developments and regeneration schemes go ahead that do not incorporate them?
What are the constraints that work against embodying into developments the characteristics that people and
businesses value? No-one deliberately sets out to produce something that is sub-optimal, yet sometimes this
is the result. We need to understand why this happens so it can be prevented.

No development can go ahead unless the expected returns to the developer exceed the expected costs
of land acquisition, construction, design, finance, community infrastructure levy and planning obligations
– and generate a profit. The only exceptions to this is where there is a value gap between the costs of the
development and its value and a public body is willing to bridge it by means of a grant or other subsidy, or
because the non-monetary value of the development is deemed to be worth any extra cost involved. The
ability of local authorities to do this is extremely limited.

It is important to recognise that at the outset of a development neither the benefits from it nor the costs are
known – they are projections. As the development proceeds, the costs become fixed as land is acquired
and construction takes place, but the benefits often remain uncertain, though are generally received later.
 Full Report | 32

The initial benefit is Gross Development Value, but over time this can increase due to uplift in capital values
and potential spillover effects, for example: the creation of employment, reduction in crime and anti-social
behaviour, improved access and traffic management and improvements in physical and mental well-being.
Some of these benefits may impact on neighbouring areas and so may not be confined to the development
itself. Some potential benefits are difficult, if not impossible, to monetise.

Historically, many developments (such as Saltaire Village in West Yorkshire and the great London estates)
that are admired today were undertaken by a large landowner who also acted as the promoter of the
development (for example, see Dyos, 1966 and Davies, 1981). They were the masterplanners and, in
some cases, were altruistic, seeking to provide good-quality housing for their workforce. Yet, in many other
instances the motivation was commercial. Financially they were rewarded for taking a long-term perspective
of the development and were not obliged to dispose of their interest in the development at the outset.

For residential property, the legal landscape that facilitated this type of development and enabled
landowners to retain long-term control has changed and is now much more complex and less predictable
because of the implications of leasehold enfranchisement law. Leasehold enfranchisement means that
promoters of developments can no longer retain a reversionary interest in residential property. If there
is a lengthy build-out period, it may be worthwhile for the developers to invest in features that produce
capital uplift or a newbuild premium during this time. Otherwise, it may not be rational for landowners and
promoters of residential-led developments to invest in factors that enhance value over the medium to long
term. Many of the benefits are likely to accrue to subsequent owners or even to spill over into neighbouring
areas that benefit from proximity to an area undergoing regeneration. The developer is unable to share in
these unless they are able to retain a long-term interest or sell the value of that interest through inclusion of
built-to-rent properties in a development.

The Right to Buy scheme means that local authorities and soon housing association landlords can no
longer expect to retain ownership of the more desirable social housing. Moreover, local authorities do not
have any means of capturing value uplift of residential properties through local taxes. Once the properties
have been assessed and placed into the relevant council tax band, there is no provision for revaluation as
residential property prices rise. Limited ability to share in the long-term growth resulting from residential-led
developments is likely to encourage local authorities to maximise short-term gain through accepting tenders
that produce the highest initial price and minimise the investment they must make in the development. If the
longer-term gain could be quantified, it may enable local authorities to make different decisions.

These issues apply less to commercial properties, which are generally leased. Here the promoter and
landowner can retain an interest in the property through leases and share in the uplift in values through rent
reviews. Local authorities as ground landlords can share in any uplift in property values and from the impact
that rising rents have on business rates. It may therefore be worthwhile investing in features that produce
long-term growth even though the investment costs will be front-end-loaded.

Having a long-term vision for a development and its surrounding areas should be financially beneficial,
resulting in higher property prices and rents, speedier take-up of tenancies and properties for sale, as well
as being a better place to live and work.

“Components of lesser value may add value to the whole. The free market may not achieve this. There
needs to be vision from the master plans which reflect the marriage value added by lower value elements”
(Breakfast Forum – Jonathan Gooding, Chief Executive, Dolphin Living).

Local authorities can assemble sites in regeneration schemes using their compulsory purchase powers
and are under an obligation to secure best value for their citizens. They should not dispose of public assets
for less than their market value. It is also a key function of local authorities that they create employment
opportunities and generate economic prosperity. Increasingly, in the future, local authorities will be
expected to be self-sufficient and to finance their expenditure from local taxes and revenues. To do this
they must generate tax income through business rates and council tax. Problems do arise where benefits
from development or regeneration do not produce improved financial rewards that are capitalised into
higher land values for the promoter and developer. This can be because they are enjoyed by subsequent
owners, because they spill over into neighbouring areas and benefit the owners of these, or because they
are difficult to monetise.

6.2.  Valuation issues

Developers have to raise the finance to undertake developments so that it is inevitable that schemes will
only go ahead if financiers place a value on completed developments that are higher than the expected
costs. Local authorities are expected to secure the best value for assets they dispose of. These two factors
make the valuations produced key to whether a development can go ahead and what form it will take since
financiers rely on valuations and local authorities must demonstrate that they have secured best value.
33 | Highly Valued, Hard To Value

“What developers are prepared to pay for a site may be similar but their visions can be very different.
Best economic value is not necessarily the same as best value and Local Authorities need to better value
the quality of life resulting from a development” (Breakfast Forum – Adam Challis, Head of Residential
Research, JLL).

A valuation is an opinion about the value, which, according to the International Valuation Standards Council,
can be either “the most probable price to be paid for an asset in an exchange” or the economic benefits of
owning an asset (IVSC, 2013, paragraph 8). The Royal Institution of Chartered Surveyors has adopted the
International Valuation Standards as the basis for its Red Book valuation standards. Valuations are valid for
the date on which they are made. They are not forecasts of future value and prices can go up and down.
The usual basis of value is the market value; that is the price likely to be paid after proper marketing in an
arm’s length transaction between an informed buyer and seller, each party acting prudently in his own
interests. This should be at the highest and best use likely to be permissible. This notion implies that valuers
have the capacity to work out what would be the most profitable design rather than what a typical developer
may be willing to pay for the site.

Typically, valuers estimate the market value by reference to the transaction prices achieved for comparable
properties. An important question is the extent to which valuations reflect what people actually value in
developments. Ideally, valuers need evidence from actual transactions in which they can compare the
differences in price between properties that contain certain features and those that do not. Such evidence
is often difficult to find and may be inconclusive. It can be difficult to isolate the impact any individual
characteristic has on the price paid when the differences between properties may reflect multiple attributes.
The evidence may therefore be inconclusive and its interpretation subjective or intuitive because it is so
difficult to control all the variables that influence the true value of a property (ie, the impact on property
values of many aspects of good urban quality, such as the scale and density of development, the materials
used, ease of movement, diversity of uses, adaptability). What is found in relation to one development may
be context-specific and not of wider applicability. This is not to say that these factors are not valued, but
rather their impact is often difficult to measure and the evidence problematic to interpret.

The problem can be seen diagrammatically in Figure 6.1. Some property attributes are easier to measure
than others. Some are more highly valued than others. Conventional valuations are likely to measure the
impact on value of those attributes that are easier to measure because of the problems of finding evidence
to support the value of attributes that are more difficult to value. These are not necessarily the ones that are
most valued. The challenge for valuers is how to extend valuations into the lower right hand quadrant – the
attributes that are more highly valued but are harder to value.

Figure 6.1 Highly Valued, Hard to Value

Easier to measure Harder to measure

Of lesser value

Highly valued
 Full Report | 34

Valuers value interests in properties so any benefits from development that do not enhance the value of the
interest they are valuing cannot be taken into consideration. For instance, a valuer is asked to assess development
land in the possession of a local authority that is to be used in a residential-led regeneration project which will be
sold to a developer. Suppose that this project is likely to result in a reduction in crime and anti-social behaviour
in the area undergoing regeneration and the benefits of this will spill over into neighbouring areas. The resulting
uplift in prices in these areas will benefit owners in the neighbouring areas but does not increase the value of
the local authority’s land. The development could change the reputation of the area so that property prices
in the regenerated area rise more rapidly in the future than other comparable areas. The beneficiaries will be
subsequent owners but, unless the first buyers are willing to pay a higher price in anticipation of capital growth,
there is no increase in the price the local authority can gain from its land. Normally when the public sector
undertakes investment in a project, the total benefits, including those to third parties and ones which it is difficult
to monetise, should be taken into account in determining whether the investment is cost-effective. The regulatory
environment makes it difficult for local authorities to do this in regeneration projects.

Valuers use evidence from transactions of comparable properties. If these are in the form of development
land that has been bought on the basis that the developer knows that there will be a short build-out period
and he will not benefit from subsequent capital uplift or spillover effects, then the valuations will also
implicitly embody those assumptions. The prices achieved on comparable properties may reflect their
potential for short-term gain and the fact that the developer will minimise expenditure on features that may
result in long-term benefit but do not increase the newbuild premium. There is no reason why a bid that
offers greater long-term value or higher spill-over effects should be accepted unless the bidder is prepared
to offer a higher initial price. Since the realisation of these may involve greater initial investment on the part
of the developer, the probability of this happening is reduced.

Valuers have to operate in a market in which there are considerable uncertainties. Behavioural research has
recently been used to analyse the decision-making behaviour of real estate market participants, in particular
the way in which value is determined. Transaction data is said to be the result of human behaviour, and
real estate behavioural research has focused on the nature of problem-solving and information-processing
(Diaz, 1990; Daly, 2001). Daly (2001) found that valuers used heuristics to reduce the valuation process into
a more cognitively efficient form by “reduce[ing] complex tasks of assessing probabilities and predicting
values to simpler judgement operations”, or rules of thumb. The result is not necessarily the best solution
but is sufficient for the immediate purposes. The problem is that heuristics may result in bias. However, as
Daly (2001) argues, the use of different heuristics to simplify the valuation process may lead to a number of
errors due to potential bias (see Table 6.1).

Table 6.1: Potential Bias Arising from the Use of “Rules of Thumb”

Heuristic Definition Reason for bias

Representativeness Evaluation of an uncertain probability Similarity or representativeness fails

by the degree to which sample to account for characteristics that
characteristics are similar to key should affect judgements concerning
features of the population. probability.

Availability Using ease of recall (of available Availability is affected by factors other
information) of past occurrences than frequency and probability.
or correlation to assess event
probabilities.

Anchoring and Estimates, which originate from an Different starting points yield different
Adjustment initial starting point (value), that are estimates, which are biased toward the
adjusted to yield the final answer. initial value.

Positivity and Humans seek data that are Bias occurs when data that should
Conformation-bias fundamentally consistent with existing be deemed relevant are not because
beliefs, theories and cognition. of a preconscious search for positive
feedback.

Recency Proposes that conclusions may Tendency for valuation figures to be

be distorted by the order in which moderated towards recent valuation
information is received. conclusions.

Dilution Refers to the way in which information Impact of evidence is reduced

is presented and the receiver’s attitude because of the way in which it was
towards the information. presented.
Source: Adapted from Daly (2001)
35 | Highly Valued, Hard To Value

Residential valuers, for instance, may use a price anchor that reflects their knowledge of a particular
segment of the market and the quality of available comparable evidence. Price adjustments will then be
made to yield the final result but will still be based on the initial anchoring value and therefore may not
always produce the most accurate results. Syms (1996) found that “the availability of an adequate volume
of good quality transaction and appraisal data … is likely to be limited, particularly when a property is
affected by a detrimental condition”. Arguably, then, the use of anchoring is likely to produce a greater
degree of error as the number of available comparables is reduced.

Although in theory the valuation process should start with market data and general locational features and
gradually narrow down to property-specific information, Diaz (1990) found that almost the opposite was
true, with valuers quickly focusing on property specifics and only broadening their information search in
response to some ambiguity (Daly, 2001). There was also evidence that valuers may have a tendency to
seek information that conformed to their beliefs, theories and cognition and would adjust less to negative
evidence than to information that supported their views (Gallimore, 1996). Confirmation bias has also been
documented in studies of public response to environmental risk, particularly when there is a publicised
association with a health risk (Jayne, 2000; Sims and Dent, 2005) and ‘facts’ will be interpreted in the light
of pre-existing frames to support a media angle or a pressure group rationale (Owens and Driffill, 2008).

6.3.  Conclusions
When people pose the question as to why developers today do not build developments like Bath’s
Crescents or the great estate developments in London, the answer is that they were a product of a past
legal environment. These developments were created by a landowner who promoted the development
and acted as the masterplanner. The landowner was able to control what the developers who actually
built the properties did through leases and enjoyed the uplift in value through ground rents and the
reversionary interest when the leases expired. This business model is no longer viable because of leasehold
enfranchisement. Rather, developers aim to sell residential developments rather than retaining them as long-
term investments. It makes good business sense to invest in designs and attributes that raise values during
the build-out period but, once this is over, the developer will not benefit from any uplift in property values.
There is pressure to maximise short-term gains. For commercial-led developments this is not the case as
premises are normally leased and the developer benefits from any uplift in value through his reversionary
interest. There is, though, some evidence presented in Section 4 (Homes and Communities Agency, 2014;
Savills, 2016) that suggests investment in good urban development is not necessarily a trade-off between
higher development costs and property price premiums. Rather, good urban development may enable a
higher density of development and generate revenues that can offset any additional costs.

Many regeneration schemes are facilitated by local authorities as landowners or using compulsory purchase
powers to assemble sites to promote the economic, social or environmental well-being of their areas. Where
such developments include social housing, Local Authorities are unlikely to retain a long-term interest in the
more attractive residential properties due to the Right to Buy. They benefit from enhanced local tax revenues
through council tax and business rates on new properties. However, although local authorities can share
in any uplift in commercial property values as a result of the periodic revaluations of business rates, there
is no corresponding provision for council tax to be revalued, so that assessments are made on the basis
of 1991 values with no uplift to reflect rising house prices. Where local authorities promote development or
regeneration, current policy is to treat this more as a disposal of public assets rather than as an investment
in public services. This makes it difficult for them to undertake such projects on the basis of the benefit-cost
ratios achieved rather than the financial benefits. It is difficult for them to use cost-effectiveness analysis
to determine whether extra expenditure (and potential loss of revenue) is justified in terms of the benefits
achieved. This is particularly problematic as some potential benefits are either non-monetary, such as
reductions in crime, or do not benefit local authority budgets, such as reduced unemployment. There can
also be spill-over effects that benefit neighbouring areas rather than being capitalised into higher values of
the local authority’s land. The current regulatory environmental makes it difficult for local authorities to take
a holistic approach to development and could result in sub-optimal schemes being selected where these
offer higher financial benefits.
 Full Report | 36

7.  Metrics for evaluating development

proposal
7.1.  Enhancing valuations
One of the questions that arises with the evaluation of developments and regeneration projects is whether
a more holistic approach could be taken to the valuation of such schemes. The use of the direct sales
or comparative method of valuation requires that appropriate comparables can be found. In reality this
can be difficult and adjustments have to be made to prices obtained from properties that are not exactly
comparable. Such adjustments rely on experience and judgement but invariably include an element of
subjectivity. It would be desirable if more precise information were available about the prices that people
and businesses are willing to pay to achieve desirable features or to avoid undesirable ones.

Much of the evidence in Section 4 made use of a particular approach to this problem, namely the analysis
of revealed preferences. When a household or business either buys or rents a property, it can be argued
that it is not buying a single commodity but a bundle of attributes. Thus, for example, a house could be
argued to comprise a living area, bedrooms, heating systems, a garage, garden, storage spaces, kitchen,
bathrooms, neighbourhood, distance from school, distance from public transport, risk of crime, air quality,
noise level, etc. By buying one house rather than the alternative available, households are making trade-offs
between the attributes. They are also revealing what they are willing to pay to acquire particular attributes
or to avoid others. This is the basis of the revealed preference approach. Its strength is that it relies on
what people and businesses have been willing to use their own money to acquire or avoid and, therefore,
a monetary value is placed on attributes that would otherwise not have a market price as they are not
tradable. This approach has been used in hedonic pricing models in property, which in the UK include the
house price indexes produced by the Nationwide Building Society, Lloyds Banking Group (Halifax) and the
Office for National Statistics. It also underlies the automated valuation methods used by banks and estate
agents and mass valuations used in property taxation.

The statistical methods used in the analysis are generally multiple regression or multivariate analysis. There
are a number of statistical problems when trying to isolate the contribution to the price paid of individual
characteristics of a property. In the UK there is fairly reliable data on the prices paid when purchasing
properties due to the open system of land registration, which includes a declaration of the transaction price.
The enforcement of stamp duty land tax and the use of mortgages for purchase reinforce confidence in price
data. This is certainly not the case in many other countries. Rental data is more problematic as there is no
requirement to register short leases, which may be one of the reasons why most of the studies using revealed
preference have been of residential property. Much more problematic is the identification of the characteristics
of properties that influence value. The hedonic house price indexes all make use of mortgage data and the
reports from valuers. If important variables are omitted – and there is a significant risk of this happening – then
bias will be introduced into the estimates and the model may not explain as much of the variation in prices as
would be desirable. Moreover, many of the supposed independent variables are themselves highly correlated,
which undermines deriving meaningful relationships. For instance, properties built around the same time tend
to have similar features and locations. The assumptions in the economic models behind revealed preferences
that these are based on real choices because market participants are functioning in a perfect market with
full information, low transactions costs and instant price adjustments are not found in the property market.
It has been difficult to find studies that look at the values purchasers put on many of the features of good
placemaking as distinct from location and the attributes of properties themselves.

The fundamental assumption is that differences in prices paid reflect the utility or satisfaction of the
purchasers so that it is possible to identify what attributes of properties give rise to different levels of
satisfaction, in other words what is valued and how valuable different attributes are. There has been some
questioning of the underlying behavioural model behind revealed preference (see, for example, Fujiwara
and Campbell, 2011). This assumes that people seek to maximise their expected utility, subject to a budget
constraint. The preferences expressed may be context-dependent. There is also a question of the extent to
which purchasers predict expected utility accurately, with evidence that purchasers do not do this correctly.
They may be failing to consider the extent to which they adapt to changing circumstances, in particular
how rapidly they can adjust to extrinsic goods, such as money, compared with intrinsic goods, such as
time spent with family and friends (Fujiwara and Campbell, 2011, p16). The challenge from behavioural
economics is that purchasers may employ heuristics (that is, rules of thumb and shortcuts) as a means
of coping with imperfect and uncertain information. This could include the use of anchoring points and
irrelevant cues. The result could be irrational preferences and choices.
37 | Highly Valued, Hard To Value

In spite of the problems with revealed preference models, the approach is one that would be worthwhile
pursuing to try to discover more about the values placed on characteristics of development. It is likely not
a method, however, that will be helpful in determining whether a specific development or regeneration
proposal should go ahead unless the project is of national importance, such as the expansion of one of
London’s airports or a high-speed railway line. With the caveat that the results may be context-specific, it
would be useful to know what values are placed by people and businesses on many of the characteristics
of good urban design identified in Section 3.

The problems of valuation are made even more difficult if one is trying to value something where price data
does not exist because the attributes are not traded. There are likely to be strong preferences for many
things that are not sold through markets, even indirectly through buying properties. Some of the items may
be public services that are provided at no cost rather than at the market price – for instance, libraries. In
some cases it can be because the facility does not yet exist because it has yet to be constructed. In others,
the use may be a passive one – individuals regard it as being of value, that it is there and would feel loss if
it was not, but do not themselves make use of the facility. Sometimes the value is a heritage one, a desire
that the facility should be available to one’s children or grandchildren.

One approach that has been used to measure what is valued and the values placed on items in these cases is
contingent valuation. This seeks to assess the amount of income that would need to be taken away to restore
the level of utility enjoyed to that before the facility existed or the compensation that would be needed to
restore utility to the level previously. The method can examine willingness to pay or willingness to accept. The
choice between these two is important, as it is not clear that the compensation that people require to be paid
is the same as the sum they would be willing to pay to avoid something. In other words, preferences are not
symmetrical. Some studies have found that it is difficult to estimate willingness to accept as respondents find it
difficult to identify with the scenarios involved and regard them as being implausible (Carson et al, 1992). The
technique involves asking respondents a series of questions to elicit the values they place on particular items.
The approach requires skill in the design of the questions, the scenarios in which they are placed and the ways
in which they are asked if bias is to be avoided (Carson and Hanemann, 2005). Preferences and valuations
can depend on how the questions are asked or phrased. One of the issues is whether individuals have
complete preferences in which inconsistencies have been overcome. If this is not the case, then preferences
may not be good indicators of welfare or well-being. If people learn by repetition and experience, then asking
questions about contingent situations that have not been experienced could give misleading results.

In spite of these problems, contingent valuation is likely to have a place in assessing the costs and benefits
of development and regeneration. The method places a value on intangibles that can be lost as a result of
developments, and can identify the relative values placed on alternative designs and facilities. It may have a
particular role to play when promoters have difficulties in making development stack up financially and are
faced with choices as to what needs to be changed or what facilities have to be deleted in order to make a
scheme viable. Removing parts of a scheme that are highly valued can provoke opposition to the scheme
as a whole, whereas removing costly aspects that are not valued may have little impact. Contingent valuation
should, perhaps, be seen as part of the process through which there is public engagement over a proposal
and a consensus reached. Such studies are not cheap but are a relatively small part of the total budget for a
development, perhaps on a par with, say, the archaeological or environmental assessment of a site.

7.2.  The objective measurement of visual character and visual quality

First impressions count: people make very quick judgements on the visual desirability of a place. Therefore
an understanding of visual quality and the ability to design-in high levels of visual quality are imperative
to ensuring high levels of satisfaction with a place and therefore high valuation (in all its senses). A means
of objectively measuring visual character and quality and understanding the composite effect of physical
and designed features is emerging from the work of Cooper (2000), Cooper Watkinson and Oskrochi
(2010), Christou (2012), and Cooper, Su and Oskrochi (2013). These projects found very strong positive
and significant relationships between perceptions of visual quality in images of streetscapes, the physical
make-up of those streets and a simple, objective mathematical assessment of the visual complexity, variety
and intensity of those street images. Osmond (2005) and Mansouri et al (2005) have found similar results
in relation to “urban ambiance” and “streets as pleasant places” respectively. The techniques developed
by Cooper (2000) use mathematical analysis to assess the composite visual effect of all the physical
characteristics of a street in combination. This technique responds to the same data that the human eye
and brain process in making visual quality judgements of vistas and views.

Based on the work of Cooper et al (2010), Christou (2012) found a series of strong and significant
relationships between monetary value, perceptions of expectation of house price, physical character and
a simple, objective mathematical assessment of visual complexity, variety and intensity when investigating
perceptions of value in the UK towns of Leamington Spa, Stratford and Warwick. Christou examined a
series of case study streets representing a variety of street types that incorporated features identified
 Full Report | 38

in the literature as affecting property prices. The case streets were subject to a property value survey, a
photographic survey, mathematical image analysis of the photographs and physical character analysis.
Forty-six people were asked to score each street in terms of their perceived levels of attractiveness,
appeal and visual variety. Additionally they were asked to identify the physical features that influenced their
decisions and the amounts that they would expect to pay for a property in each street. The results were
compared to like-for-like developments in the three towns that lacked the identified features, and a series
of property price uplifts and depressions were recorded: the results are shown on Table 7.1. These results
confirm those found in the literature as shown in Section 4 above. Care must be taken in interpreting these
results in isolation, as the sample size was relatively small.

Table 7.1 Property price impacts in three Midland towns

Features Uplift Depression

1. Views on to water 12%-18%

2. Views on to green areas 13%-21%

3. Tree-lined streets 18%-41%

5. Views containing cobbled streets 64%-96%

6. Views containing listed buildings 19%-43%

4. Views on to multistorey public sector apartments. 39%

Source: Christou (2012)

Three additional results from Christou (2012) are significant in assessing the role of visual quality in relation
to purchasing decisions and therefore value:

• Correlation between house prices and the perceived visual quality of a street (as measured by a
combination of attraction, appeal and variety) is strong, positive and significant, as one value increases
then so does the other.
• Correlation between perceived visual quality and the mathematical assessment of visual complexity,
variety and intensity in a street view is strong, positive and significant, as one variable increases then
so does the other.
• Correlation between expected house prices and the mathematical assessment of visual complexity,
variety and intensity in a street view is strong and significant, as one increases then so does the other.

These results suggest that a simple, objective mathematical assessment of visual complexity, variety and
intensity could be used to quickly produce data sets that can be mapped to evaluate the visual quality
of place and expected price, and test the potential visual quality and therefore the value of different
interventions in the built environment.

Further detail on this work can be found at: http://www.brookes.ac.uk/business-and-employers/new-

technologies/vuq/.

7.3.  Measurement and certification systems

Although widely perceived to be important to local communities and to many property occupiers, factors
such as social and cultural participation and engagement, good-quality public realm, ‘green’ infrastructure
and environmental sustainability are seldom considered an essential part of property valuations or financial
appraisals of proposed development projects. Even if acknowledged in corporate social responsibility
reports presented to shareholders and others, they may not be explicitly part of the evaluation of an
individual scheme. In part this may be due to lack of awareness of the ways in which this can be done.
In trying to find ways to measure the quantity and quality of such features in a particular location and in
the absence of existing suitable, reliable valuation methods or metrics, the team considered the available
systems: the BREEAM Communities (BRE, 2012) and LEED ND (Leadership in Energy Efficiency and
Design – Neighbourhood Development, US Green Building Council, 2014).

A third system, Building For Life 12 (Birkbeck and Kruczkowski, 2015) was also considered and rejected. It
advocates the assessment of developments according to whether developments have good connections,
public transport, facilities and services, meets local housing needs, character, fits in with the surroundings,
has well-defined streets, is easy to find your way around, the streets are suitable for different users, there is
adequate car parking, public and private spaces are clearly defined and attractive, and there is adequate
external storage and amenity space. Its criteria include similar design characteristics to those put forward
39 | Highly Valued, Hard To Value

in this report and can be argued to be a synthesis of best practice in this area. As a tool, it can be used to
demonstrate compliance with the National Planning Policy Framework and Planning Practice Guidance. It
does though have two weaknesses. Firstly it is not a system of metrics so whilst it identifies good practice,
it does not measure the degree of compliance with it or enable development proposals to be benchmarked
against other schemes. It is our opinion that any tool that has to be stood alongside financial appraisals
must contain means of measuring compliance with the criteria used so that they can be part of a cost
effectiveness analysis. The central question in such an analysis is whether it is worth spending additional
resources in order to achieve a given improvement. Any metric used must therefore be able to quantify the
improvement that additional expenditure would produce. This is a different question from whether a scheme
as a whole offers value for money but is implicit in the notion of seeking Best Value in which marginal
benefits are compared with marginal costs. The second problem is that it is just about design and is not
concerned with the range of other issues that affect the community in which the development takes place,
such as the economic and environmental impact. If it were to be used as the basis of a metric, a scoring
system would need to be devised which goes behind the suggested use of a “traffic light” system proposed
in the document and the range of criteria considered would have to be extended.

BREEAM Communities was developed by BRE (Building Research Establishment). BRE Global Ltd is a
certification body accredited by the UK Accreditation Service. BREEAM Communities is seen as a part of a
standards and third-party certification system against which developments can be assessed in a rigorous
and independent manner. It is about the assessment of sustainability at the master-planning stage. The
principal elements are as follows:

• Governance. This is about the promotion of community involvement in decisions affecting the design,
construction, operation and long-term stewardship of the development. Weighting 9.3%.
• Social and economic well-being. This area considers the social and economic factors affecting health
and well-being. The objectives are to create a healthy local economy with employment opportunities
and thriving businesses, to ensure a socially cohesive community, and to minimise the impacts of
environmental impacts on the health and well-being of occupants. Weightings: local economy 14.8%,
social wellbeing 17.1% and environmental conditions 10.8%.
• Resources and energy. This is concerned with the sustainable use of natural resources and the
reduction of CO2 emissions. Weighting 21.6%.
• Land use and ecology. This is designed to encourage sustainable land use and ecological
enhancement. Weighting 12.6%.
• Transport and movement. This addresses the design and provision of transport and movement
infrastructure to encourage the use of sustainable modes of transport. Weighting 13.8%.
• Innovation. This recognises and promotes the adoption of innovative solutions where they are likely to
result in environmental, social or economic benefit, in ways that are not recognised elsewhere in the
scheme. Weighting: an additional 1% to each of the categories above up to 7%.

There are in total 40 assessment areas. Schemes are scored and can be classified as Outstanding,
Excellent, Very Good, Good, Pass or Unclassified (non-compliant) according to the score achieved. The
technical manual sets out how the evidence in each area is to be assessed.

The LEED Building and Scheme Certification system was developed by the non-profit United States Green
Building Council (USGBC) and has been in use since 1994. More than 75,000 schemes in 150 countries have
been assessed and certified in that time (http://www.usgbc.org/articles/green-building-facts). The scores
that generate the overall certification standard are derived from a series of checklists in five categories:

• Smart Location and Linkage. This includes whether the site is an infill, brownfield site or is contaminated,
its connectivity with an existing street pattern, whether it offers easy walking and cycling links, its impact on
ecosystems and agricultural land, and its location in relation to employment opportunities. Weighting 25.4%.
• Neighbourhood Pattern and Design. The includes walkable streets with building frontages, compact
development, the street layout, mixed uses, affordable and diverse housing, parking, transportation,
parks and recreation areas, accessible designs, community participation, access to schools, and
garden and allotment space. Weighting 37.3%.
• Green Infrastructure and Buildings. This considers construction techniques, energy efficiency and
conservation, renewable energy, water efficiency, drainage and wastewater, historic buildings,
recycling, and light pollution. Weighting 28.2%.
• Innovation and Design Process. Developments score for having greatly exceeded the LEED NC (LEED
New Construction) ratings in areas or by exemplary environmental performance in areas not addressed
by LEED NC. Weighting 5.5%.
• Responses to Regional Issues. These could be environmental, social equity or public health priorities.
Weighting 3.6%.
 Full Report | 40

Some of the characteristics within each area are not scored but are requirements to be fulfilled, such as
certified green buildings and walkable streets. Developments are given a points score by an independent
LEED assessor to provide a Platinum, Gold, Silver or Pass (Certified) rating.

Table 7.2 Extract from the LEED ND assessment checklist

0 0 0   Neighbourhood Pattern & Design

Y       Prereq Walkable Streets

Y       Prereq Compact Development

Y       Prereq Connected and Open Community

        Credit Walkable Streets

        Credit Compact Development

        Credit Mixed-Use Neighbourhoods

        Credit Housing Types and Affordability

        Credit Reduced Parking Footprint

        Credit Connected and Open Community

        Credit Transit Facilities

        Credit Transportation Demand Management

        Credit Access to Civic & Public Space

        Credit Access to Recreation Facilities

        Credit Visitability and Universal Design

        Credit Community Outreach and Involvement

        Credit Local Food Production

        Credit Tree-Lined and Shaded Streetscapes

        Credit Neighbourhood Schools

Source: US Green Building Council

The advantage of metrics such as BREEAM Communities and LEED ND is they provide a tool to help
valuers consider wider social and environmental sustainability issues. They could appear alongside the
valuation or financial appraisal statement in the same way that the UK’s Energy Performance Certificate
ratings currently appear on, or are taken into consideration in, property valuations. As already noted, they
can be used in cost-effectiveness analysis as they enable the question to be posed as to whether a given
improvement in quality is worth the extra cost (HM Treasury, 2011).

Figure 7.1 UK Energy Performance Certificates (EPCs) have appeared on most property
details since 2007
41 | Highly Valued, Hard To Value

Both BREEAM Communities and LEED ND are well-thought-out schemes, but developing such a
comprehensive metric is extremely demanding in terms of resources and securing a broad body of support
and is not recommended. Both systems are to enable schemes to be certified and benchmarked against
others. This requires the same criteria to be used in the assessment of schemes, consistent judgements by
trained assessors, and the criteria used to be given standardised weightings. Such an approach is clearly
useful if the objective is to have independent verification of claims made by developers, if developers wish to
benchmark themselves against competitors, and for marketing purposes. It does, however, require schemes
to be evaluated using the criteria and weightings given to them of those who devised the systems. There is
no scope to vary either the criteria or the weightings to reflect the importance of particular characteristics
a community would wish a development to possess. This can be problematic when objectors have one set
of values and the promoters of developments different ones. They do not provide a basis on which the
reconciling of opposing interests can take place. There has been some opposition to the use of scoring
systems on the ground that the values they contain are not those of the communities in which development
is taking place (Boeing et al, 2014).

Of the two, LEED ND offers the better option in the opinion of our team. This is because of its more detailed
breakdown of the issues considered, which makes it more useful in a cost-effectiveness analysis.

The system, however, would need adaptation to meet British circumstances, as implicit in a number of the
assessment criteria is that urban development follows a North American pattern.

Until such times as property valuation methods can be developed in order to more fully integrate social
and environmental sustainability factors, one recommendation is to adapt a version of LEED ND, working
alongside the US Green Building Council; perhaps to be called the LEED NV tool (Neighbourhood Value),
which can be used by property owners and valuers to try to capture these hard-to-value factors. Such
a tool could be used, for example, prior to the purchase, development or regeneration of an existing
neighbourhood, site or individual building to evaluate local social and environmental qualities. Because
of the transparent nature of the LEED checklists, it would be possible to see those aspects of the scheme
that were strong and those that needed improvement. Scores and overall scheme ratings could be used
not only to assist in valuations and financial appraisals but also as a benchmark against which to measure
subsequent improvements made by incoming developers and new property-owners. The suitability of
LEED ND for use in cost-effectiveness analysis is particularly important in view of HM Treasury’s advocacy
of this method of investment appraisal.

The use of the proposed new tool could also provide the basis of an interesting and worthwhile pilot
study, further examining the link between monetary value and social sustainability. The use of both the
LEED and BREEAM rating schemes has become a popular way of marketing the ‘green credentials’ of
property-owners and other stakeholders. Such ‘green badging’ is seen increasingly as an indicator of, and
synonymous with, high-quality design and a progressive, responsible approach to social and environmental
concerns. During the course of the research, the team found evidence that LEED was being used in the
US by promoters of ethical property investment funds as a way of demonstrating compliance with ethical
principles. As the LEED organisation is currently trying to establish itself in the UK, one option would be
to explore, at relatively low cost, the development of a new evaluation tool; tailored specifically to measure
community quality as part of established UK property valuation and scheme appraisal processes. The cost
of employing LEED assessors is far from prohibitive, particularly in the context of large-scale, politically
or socially sensitive schemes, as the tool provides an objective measure, accepted by the property
professionals, of those issues about which local communities across the UK are increasingly aware.

7.4.  Conclusions
The methods reviewed in this section vary in approach. They are not mutually exclusive and could be
used in combination. The measurement and certification systems put forward by BREEAM and LEED are
designed to be objectively scored by expert assessors and enable proposals to be benchmarked. LEED
ND includes a wide variety of indicators and can be used in cost-effectiveness analysis. Best value can be
defined in cost-effectiveness analysis by posing the question as to whether the additional benefits from a
proposal justify any additional cost. This is a different question from whether a scheme as a whole is viable
as it considers the incremental benefits from improvements and whether they are worthwhile. The results
of these metrics are assessments that can be stood alongside a conventional valuation in the way that an
environmental impact statement is, and to be used by decision-makers as part of the array of information
when deciding upon which proposals offer best value.

The other methods seek to place a monetary value on attributes that are normally regarded as being
intangible. The methods for measuring objectively visual character and visual quality use mathematical
analysis to assess the composite visual effect of physical characteristics. These can then be compared with
what is known about value to enable quality judgments about views to be valued. The revealed preference
 Full Report | 42

approach and contingent valuation are techniques that seek to place a monetary value on intangible
preferences. In the case of revealed preference, the approach is to identify the prices implicitly paid to
obtain particular attributes or to avoid particular characteristics. This is done by comparing the prices
paid with the characteristics of properties and isolating the impact of individual attributes. Contingent
valuation is used where items are not traded. This could be because they are provided free by the public
sector, because they do not yet exist, or because their use is a passive one in which they are present,
but never actually used. The values placed on items are revealed through questions about scenarios that
explore willingness to pay or willingness to accept compensation for their loss. There are issues about these
methods in terms of the reliability of the results and whether the assumptions made about behaviour in the
models accord with reality, but they have been widely used in cost-benefit analyses.

Methods exist that can be used to extend the range of factors to be considered beyond those normally
found in a conventional valuation into attributes that are valued but for which there is no direct market
value as they are not themselves traded. The methods enable proxy values to be identified. However,
these methods are only of use if those deciding on developments or regeneration projects are prepared
to accept proposals based on whether they offer best value. These projects are not those that necessarily
offer the highest initial monetary rewards to landowners or development promoters. These methods can be
used in conjunction with cost-effectiveness analysis or cost-benefit analysis. These approaches already are
used by central government in making decisions about development and regeneration. It is important that
they are also used by local authorities.
43 | Highly Valued, Hard To Value

8.  The ways forward

There is no single way to achieve a better holistic understanding of valuation, but our research has led us to
propose four concrete avenues of action, which we believe to be possible and potentially greatly effective:

1. Inform the industry

The above material leads to two linked questions: Do valuers understand the potential value of good urban
design and placemaking? Do developers, promoters and designers understand how a valuation is carried
out and how to enhance value through placemaking? The answer to both is yes, but our research indicates
there are gaps in the information available and as a result there are challenges for the property industry
and government to make the right decisions. Valuers need the tools to provide a broader understanding
of urban quality and development; stakeholders need the tools to better understand the impact of their
decisions on value.

2. Enhance current valuation methods

There are methods that can potentially improve the quality of valuations by seeking to extract people’s
preferences and the value that is placed on particular characteristics.

• Revealed preference methods analyse property prices statistically by examining how the prices
paid correlate with particular characteristics of properties. This is a form of hedonic pricing, based
on the assumption that people will pay a higher price for attributes that give them satisfaction and to
insulate themselves from ones that are disagreeable. These models have been widely used but can
be problematic in their abstractness. They require good data on prices and the characteristics of
properties, and isolating the contribution of an individual attribute can be difficult to achieve.
• Stated preference methods such as contingent valuation rely on questionnaires to elicit what
people are willing to pay or are willing to accept as compensation. They have a particular use where
the attribute is something that has not been traded or is valued by people who have never used it.
There is potential for bias in the way the questions are put, and the answers may be context-specific.

While neither of these approaches are cheap, in the context of developments costing many millions of
pounds, they are similar in cost to, say, an archaeological survey or an environmental impact analysis.

3. Provide policy back-up and influence

In addition to a change in current valuation methods, a refinement to planning policy is also needed. Just as
the imposition of Practice and Policy Guidance Note Three (PPG3) and later Practice and Policy Statement
Three (1992 – 2006) resulted in a dramatic change in the character and the density of housing in the
UK, perhaps a similar effect could be achieved if planning policy were amended in line with the National
Planning Policy Framework (NPPF) presumption in favour of sustainable development, its aim to create
good design, and the notion of achieving ‘best value’, which specifies the metrics expected in order to
achieve the NPPF presumption.

4. Introduce performance metrics

An alternative approach is to develop metrics that measure how developments score against specific
criteria but do not attempt to place a monetary value on them. The desirable features of good urban
quality are inherently capable of objective measurement. Such a measurement could be stood alongside
current valuation reports so that the trade-offs between bid prices and the extent to which highly valued
characteristics are realised is apparent. This approach is currently used for the environmental characteristics
of buildings in the form of the energy-efficiency ratings and environmental impact ratings reports.

Two existing systems have been identified that have the potential to provide the basis for such a metric,
but may prove inadequate without significant development for the purpose of helping local authorities and
private developers to invest in and deliver good quality places. The value of any metric depends on the
validity of the criteria used and the weightings applied. Further work is needed into what criteria should be
used, the weightings applied and the extent to which they correspond to what is valued by stakeholders.
Both BREEAM Communities and LEED ND (Leadership in Energy Efficiency and Design – Neighbourhood
Development) put forward a series of criteria against which schemes can be assessed and benchmarked,
thereby demonstrating which aspects of a scheme could be improved.
 Full Report | 44

There is an emerging trend to use such metrics to influence investors looking to make principled investments
in developments that score highly against ethical measurements, and Trowers and Hamlins are committed
to taking this forward for international markets.

Enough evidence exists to support the notion that doing things differently doesn’t automatically lead to a
loss of value. Perhaps it isn’t necessary to append a specific monetary value to each attribute as it is the
whole that creates value in the short, medium and long term. This attitude would help decision makers to
come to terms with those aspects of developments that are highly valued but hard to value.

© James Brittain
45 | Highly Valued, Hard To Value

Annex I: YouGov Survey Questionnaire,

12-15 February 2016
Questions
Q2. For the following question, if you live at more than one property, please think about the one where you
spend the majority of your time. How long have you lived in your current property?

Up to a year
More than a year, up to 5 years
More than 5 years, up to 10 years
More than 10 years, up to 15 years
More than 15 years, up to 20 years
20 years or more

Q4_1. On a scale of 1 to 5, where 1 is “Not at all important” and 5 is “Very important”, how important, if
at all, were each of the following factors in your decision to rent/own your current main property? (Please
select one option on each row) - Proximity to family/ friends

Q4_2. On a scale of 1 to 5, where 1 is “Not at all important” and 5 is “Very important”, how important, if
at all, were each of the following factors in your decision to rent/own your current main property? (Please
select one option on each row) - Proximity to my spiritual/ religious community (e.g. Mosque, Church, etc.)

Q4_3. On a scale of 1 to 5, where 1 is “Not at all important” and 5 is “Very important”, how important, if
at all, were each of the following factors in your decision to rent/own your current main property? (Please
select one option on each row) - Proximity to my place of work

Q4_4. On a scale of 1 to 5, where 1 is “Not at all important” and 5 is “Very important”, how important, if
at all, were each of the following factors in your decision to rent/own your current main property? (Please
select one option on each row) - Proximity to education facilities, healthcare and other public services

Q4_5. On a scale of 1 to 5, where 1 is “Not at all important” and 5 is “Very important”, how important, if
at all, were each of the following factors in your decision to rent/own your current main property? (Please
select one option on each row) - Access to public transport

Q4_6. On a scale of 1 to 5, where 1 is “Not at all important” and 5 is “Very important”, how important, if
at all, were each of the following factors in your decision to rent/own your current main property? (Please
select one option on each row) - That the neighbourhood had a good reputation, was attractive and safe

Q4_7. On a scale of 1 to 5, where 1 is “Not at all important” and 5 is “Very important”, how important, if
at all, were each of the following factors in your decision to rent/own your current main property? (Please
select one option on each row) - That the property was well designed and attractive

Q4_8. On a scale of 1 to 5, where 1 is “Not at all important” and 5 is “Very important”, how important, if
at all, were each of the following factors in your decision to rent/own your current main property? (Please
select one option on each row) - That the property met high environmental standards

Q4_9. On a scale of 1 to 5, where 1 is “Not at all important” and 5 is “Very important”, how important, if
at all, were each of the following factors in your decision to rent/own your current main property? (Please
select one option on each row) - That the property was affordable

Q4_10. On a scale of 1 to 5, where 1 is “Not at all important” and 5 is “Very important”, how important, if
at all, were each of the following factors in your decision to rent/own your current main property? (Please
select one option on each row) - That the neighbourhood was well provided with shops, restaurants and
other services

Q4_11. On a scale of 1 to 5, where 1 is “Not at all important” and 5 is “Very important”, how important, if
at all, were each of the following factors in your decision to rent/own your current main property? (Please
select one option on each row) - That there was a strong sense of local community
 Full Report | 46

Characteristics of respondents
Gender

Age: 18-24, 25-34, 35-44, 45-54, 55+

Social grade: ABC1, C2DE

Region: North, Midlands, East, London, South, England, Wales, Scotland

Government region: North East, North West, East Midlands, West Midlands, East of England, London,
South East, South West, England, Wales, Scotland, Northern Ireland

Working status: Working full time, Working part time, Full time student, Unemployed, Not working/other

Marital status: Married/ Civil Partnership, Living as married, Separated/Divorced, Widowed, Never
Married

Children in household: 0, 1, 2, 3+, refused

Social media used monthly or more: Facebook, LinedIn, Google+, Twitter

Housing tenure: Own - outright, Own – with a mortgage, Own (part-own) – through shared ownership
scheme (i.e. pay part mortgage, part rent), Rent – from a private landlord, Rent – from my local authority,
Rent – from a housing association, Neither – I live with my parents, family or friends but pay some rent to
them, Neither – I live rent-free with my parents, family or friends, Other.
47 | Highly Valued, Hard To Value

Annex II Breakfast Forum

Questionnaire, 27 January 2016
1. Using a scale of 1 (not at all important) to 5 (very important), how important do you regard the
following characteristics of a development. Please circle the number that best describes your view.

Not at all Neutral Very

important important

1. Environmental sustainability 1 2 3 4 5

2. Community participation and 1 2 3 4 5

engagement

3. Creation of jobs for local people 1 2 3 4 5

4. Attractive public spaces 1 2 3 4 5

5. Quality of design 1 2 3 4 5

6. Affordable and diverse housing 1 2 3 4 5

7. Safe streets for pedestrians 1 2 3 4 5

8. Safe streets for cyclists 1 2 3 4 5

9. Access to good public transport 1 2 3 4 5

10. Provides for local parking 1 2 3 4 5

11. Protects ecosystems, wetlands and 1 2 3 4 5

agricultural land

12. Links in well with existing streets 1 2 3 4 5

and buildings

13. Protects and preserves historical 1 2 3 4 5

buildings and cultural monuments

14. Contains or enables access to 1 2 3 4 5

recreational facilities

15. Enhances public services in the 1 2 3 4 5

area

16. The design reflects the area’s 1 2 3 4 5

vernacular style and distinctive
features

17. Contains safe and appealing streets 1 2 3 4 5

18. Accessibility and ease of movement 1 2 3 4 5

within the development

19. Adaptable to changing social, 1 2 3 4 5

technological and economic
conditions

20. Promotes high levels of physical 1 2 3 4 5

and mental well-being
 Full Report | 48

2. Which of the characteristics in Question 1 do you regard as being most important?

Ranked 1st

Ranked 2nd

Ranked 3rd

3. Are there additional characteristics of developments you regard as being important?

1.

2.

3.

4. And finally a question about you. Which of the following best describes the business you work for?
Please tick the most appropriate category.

Property investment including development of own portfolio

Commercial/ mixed use property development

Residential development

Journalism or academia

Professional services eg valuation, legal, accounting

Government or local government

A body supporting the property industry

Employed by Trowers & Hamlins, ING or Oxford Brookes University

Other: please specify

49 | Highly Valued, Hard To Value

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 Full Report | 56

Consultancy and research reports

Jon Cooper Associates (2014), Developing a vision for Mid-summer Boulevard, Milton Keynes. For Milton
Keynes Council, CMK Town Council, CMK Alliance, Hammerson, Intu Properties and Hermes.

Oxford Brookes University (2012, Unpublished), Sustainable housing design: understanding consumers’
preferences and market provision. A scoping research using a Q-methodology on the relationship between
environmentally sustainable housing design, market expectations and consumers’ preferences in the
contemporary UK context.

Urban Design and Mediation Ltd (2011), Informing development in North Harlow – identifying community
concerns, aspirations and opinion. For Land Securities and Places for People.

Urban Design and Mediation Ltd (2009), Fareham, Hampshire: Developing a vision for a new community.
For Fareham Borough Council.

Urban Design and Mediation Ltd (2008), Identifying community development issues for the Tesco stores site
at Bexleyheath. For Tesco Stores.

Urban Design and Mediation Ltd (2007), Exploring development impact - influencing the future prosperity
of Wymondham, Norfolk. For the Pelham Group.

Urban Design and Mediation Ltd (2007), Identifying urban lifestyle aspirations in 2021. For Gallagher
Estates and the Homes and Communities Agency.

Urban Design and Mediation Ltd (2006), Devising regional spatial strategies for Wellingborough to 2021.
For BB Developments, Bovis Homes and the Borough Council of Wellingborough.

Oxford Brookes University (2005), Influencing development by collaboration: Bodicote, Banbury

Collaborative Design Workshop. For Hallam Land Management, JJ Gallagher and Cherwell District Council.

Oxford Brookes University (2005), Manydown urban design framework – detail design. For Hampshire
County Council & Basingstoke and Dean Borough Council.

Oxford Brookes University (2004), Collaborative design for a new community in East Devon. For Hallam
Land Management, Persimmon Homes, Redrow, TaylorWoodrow, East Devon District Council.

Oxford Brookes University (2004), Formulating an urban design framework for Manydown. For Hampshire
County Council & Basingstoke and Dean Borough Council.

Oxford Brookes University (2003), Identifying urban design coding influences at Biddenham, Bedford. For
Hallam Land Management.

Oxford Brookes University (2003), Developing the Manydown urban design strategy – large scale issues.
For Hampshire County Council & Basingstoke and Dean Borough Council.

Oxford Brookes University (2003), Identifying the boundaries of a new settlement: Northstowe,
Cambridgeshire. For South Cambridgeshire District Council.

Oxford Brookes University (2003), Supporting a collaborative design approach at Longstanton & Oakington,
Cambridgeshire. For Gallagher Estates Ltd & South Cambridgeshire District Council.

Oxford Brookes University (2003), Identifying a vision for the Western Expansion of Milton Keynes. For
Genesis Land Holdings Ltd, Dunlin Ltd, Milton Keynes City Council, English Partnerships.

Oxford Brookes University (2002), Delivering Collaborative Design for Broughton Manor Farm. For JJ
Gallagher, Wilson Connelly Ltd, Milton Keynes City Council, English Partnerships.
 Trowers & Hamlins would like to thank Richard Grover, Dr Jon Cooper, David Shiers and
Dr Sally Sims from the School of the Built Environment at Oxford Brookes University for
their assistance in producing this report. We would also like to thank everyone at ING
Media for their work in developing this project.

—— trowers.com
This report was commissioned by Trowers & Hamlins LLP. The views expressed in it are not necessarily those of Trowers & Hamlins, but the result of research conducted by Oxford Brookes
University. All reasonable precautions have been taken to ensure that the information contained in this document is accurate but the content is not intended to be legally comprehensive. Trowers &
Hamlins recommends that no action is taken on matters covered in this document without taking full legal advice.
Prepared by Richard Grover, Jon Cooper, David Shiers, Sally Sims, 2016
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