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.