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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