Land value capture looks like an idea whose time has come

Originally published on September 13 on my blog for Inside Housing.

How does land worth £21,000 or £482,000 per hectare suddenly become worth £1.95m? And who should get the windfall?

The answer to the first question is, of course, when agricultural or industrial land is granted planning permission for residential use (all three figures are estimates in government statistics).

The answer to the second is much more complicated – getting it right could boost construction of new homes and provide a new source of funds for infrastructure and affordable housing; getting it wrong could destroy incentives for landowners to bring land forward and mean housebuilding dries up.

Now the all-party Housing, Communities and Local Government Committee has published a report on an issue that has a long history dating back to Winston Churchill’s criticism of the ‘unearned increment’ made by landowners following public investment in infrastructure – and even right back to Henry VIII.

Support for reform has grown across the political spectrum and even the last Conservative manifesto promised to ‘work with private and public sector housebuilders’ on the issue.

Supporters note, correctly, that the success of the post-war new towns was based on their ability to buy land at existing use value and use the uplift to fund infrastructure but that all this was stymied by legislation such as the 1961 Land Compensation Act that entitled landowners to the ‘hope value’ after their land is developed.

At the same time history is littered with examples of governments introducing uplift levies and tariffs and supplements that failed to deliver and sceptical landowners and housebuilders argue that reform will be prove much more complicated than supporters make out.

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That was the (housing) week that wasn’t

Originally posted on August 20 on my blog for Inside Housing. 

An open letter to James Brokenshire on Monday puts a lacklustre Housing Week into true perspective.

Organised by the Conservative think tank Onward, the letter calls for a change in the law to allow local authorities to buy land for housing at fair market value rather than a price that includes the ‘hope value’ that includes planning permission.

The call for a change to the 1961 Land Compensation Act is supported by a wide range of organisations including think tanks from across the political spectrum as well as Shelter, Crisis, the Joseph Rowntree Foundation, National Housing Federation, National Landlords Association and Generation Rent and even the Campaign to Protect Rural England.

And it is also signed by former Downing Street insiders Will Tanner and Neil O’Brien MP, now director and an advisory board member at Onward.

Reform to allow councils to buy land at close to existing use value would go much further that tentative government moves on land value capture and open up the possibility of a new generation of new towns or urban extensions with funding for infrastructure and affordable housing.

There are caveats to this. First, any such measure would have to withstand resistance by powerful landed interests inside the Conservative party with pockets deep enough to fund a legal challenge like the one that overturned compulsory purchase powers in the original New Towns Act and led to the 1961 Act.

Second, while few would disagree that up to £9 billion a year in land value gains could be put to better use than lining the pockets of landowners, there might be less agreement about what to do next: a report by Onwardin June argued for a programme of discounted rent homes for young people to buy and appeared to argue for less, rather than more, social housing.

However, the contrast between this week’s call for reform and last week’s highlights is still a striking one.

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Will Letwin be worth the wait?

Originally published on March 13 on my blog for Inside Housing.

So, with unintentional irony, the inquiry into why it takes so long to get new homes built is itself taking longer than expected.

For all the advance speculation and ministerial statements in the last few days, the Letwin Review of build-out rates was not published alongside today’s Spring Statement.

Instead the former Conservative Cabinet minister published a four-page letter offering housing secretary Sajid Javid an interim update on the work of the inquiry focusing on what is happening on large sites operated by large housebuilders.

A ‘draft analysis’ will follow by the end of June offering a description of the problem and its causes but final recommendations will only be made in time for the Budget in November.

In truth, expectations that Letwin would be able to offer instant solutions within a few months were always likely to be dashed – not that this stopped ministers from pre-empting it with warnings to housebuilders to ‘do their duty’ in the planning announcements last week.

Perhaps significantly, the draft update has only one mention of the supposedly crucial issue of ‘land banks’, the nefarious practice by which housebuilders allegedly hoard land with planning permission until they can make the most money.

However, Letwin rejects most of their usual excuses too – everything from shortages of labour, materials and capital to problems with transport infrastructure, utility connections and constrained logistics on site.

He argues instead that the ‘fundamental driver of build out rates once detailed planning permission is granted for large sites appears to be the “absorption rate”.’

This is ‘the rate at which newly constructed homes can be sold into (or are believed to be sold successfully into) the local market without materially disturbing the market price’.

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New name, new ministers, new start?

Originally posted on my blog for Inside Housing on January 23.

It’s got a new name and new ministers but how much has really changed at the Ministry for Housing, Communities and Local Government?

Yesterday’s MCHLG questions marked the first time that Sajid Javid and his new team have faced MPs since the reshuffle earlier this month.

Judging from the secretary of state’s first few responses, the answer seemed to be not much.

His exchanges with his Labour shadow John Healey over the painfully slow progress on replacing unsafe tower block cladding have already been widely reported.

On the latest figures, 312 buildings have been tested and 299 have been failed but cladding has been taken down and replaced on just three.

‘How has it come to this?’ asked Healey. ‘Seven months on from Grenfell, only one in four families who are Grenfell survivors has a new permanent home. The Government still cannot confirm how many other tower blocks across the country are unsafe. Ministers still refuse to help to fund essential fire safety work when they know that blocks are dangerous.’

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The real Budget agenda is clear

Philip Hammond’s Budget contains some big numbers and ambitious promises on housing but you don’t have to delve very far to find the real priorities.

Contrast, for example, what’s happening with housing, tax and welfare, two different measures that were heavily predicted and one that was desperately needed.

Stamp duty is being cut, but the chancellor has gone further than the expected holiday by abolishing it completely for first-time buyers of homes worth up to £300,000 or the first £300,000 of homes worth up to £500,000. The cut applies from now and will cost £3bn by the end of 2022/23.

Problems with universal credit are being addressed with measures including the scrapping of the seven-day waiting period, making advances easier to get and allowing continued payment of housing benefit for two weeks after a universal credit claim. The total cost is £1.5bn by 2022/23 and there is another delay to the rollout.

The universal credit changes are welcome but will still leave claimants potentially facing destitution and people in work thousands of pounds a year worse off than they would have been under the previous system.

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A look ahead to the Budget part one: the land question

Originally published as a column for Inside Housing on November 13.

More than ever before, this year’s Budget looks like a watershed moment for housing.

Philip Hammond is under mounting pressure from all sides to do something big and bold and break with the failed policies of the past.

The calls for something radical are coming from more than just the usual suspects and are for more than just a cheque with lots of zeros.

Conservative MPs know that they cling to power (just) thanks to the votes of elderly home owners. Brexit may dominate everything but many of them realise that beneath the surface housing is one of the key issues poisoning their relationship with the under-45s.

They understand that cynical policies like Help to Buy are no longer enough, that the party is running out of time and that it has to look at policies that were previously unthinkable.

Yet conventional wisdom says that we’ve heard all this before, that Hammond’s caution and the Treasury’s orthodoxy will turn thinking that was big and bold into outcomes that are tame and timid on November 22.

After the announcements in the last few weeks of an extra £10bn for Help to Buy, another £2bn for social housing and the u-turn on the LHA cap for social and supported housing, how much is left for the chancellor to say (or spend)?

However, another view says that the housing question has such serious social, economic and political implications that the answers cannot be put off any longer. See this blog by Toby Lloyd for a good round-up of some possibilities.

In a series of columns ahead of the Budget, I’ll be looking at some of the crucial questions concerning investment, tax and welfare and, to kick things off, land. Will the Budget be big and bold – or tame and timid?

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Theresa May and Old Joe

Originally published on June 1 on my blog for Inside Housing.

Ever since the advance reports of what would be in the Conservative manifesto, I’ve been wondering where the party’s new housing agenda comes from.

As I blogged at the time, the manifesto programme seems to go well beyond the Housing White Paper. It involves not just ‘a new generation of social housing’ but also enhanced compulsory purchase powers for councils and land value capture.

The obvious answer – one that all governing parties do in their manifesto – is to take what is already on the stocks in the relevant department and spin it into a more visionary-sounding idea.

That seems to be what happened with the discussions already underway between the DCLG and three councils – Stoke, Sheffield and Newark and Sheffield – about a package of measures that would enable them to build more homes.

As Inside Housing reported last month, the deals with those pilot authorities involve not just flexibility on borrowing caps but potentially new deals on rents and land assembly too.

That is important because councils have identified a range of barriers to them building new homes, including the caps, the way Right to Buy receipts are treated and (especially) the rent cut. Funding would come from the £1.4 bn allocated in the Autumn Statement

But the manifesto seems to be about more than just a few pilots and some existing money.

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