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Tuesday 28 August 2018

A solution to our housing problems: tax land values and give councils powers to benefit from planning approval windfalls

Earlier this month, a call was made by a coalition of fourteen groups for local authorities to be given the power to buy agricultural land at a fair market rate - to be able to then build social housing:
Futures Forum: A solution to our housing problems: build social housing

From the Times: 

Let councils buy up land more cheaply, says May’s former aide

Henry Zeffman, Political Correspondent
August 20 2018, 12:01am, 

The Times

Councils are forced to pay a premium when they compulsorily purchase agricultural land
SIMON DAWSON/BLOOMBERG/GETTY IMAGES

Councils should be allowed to buy agricultural land at lower prices to solve Britain’s housing crisis, an unlikely coalition of campaigners has urged.

Fourteen groups including the homelessness charity Shelter and the Campaign to Protect Rural England said the government should tear up old laws on land compensation and give local authorities the power to buy agricultural land at a fair market rate. Under the current rules, they can only compulsorily purchase agricultural land at speculative “hope” values, as if the land had planning permission.

Agricultural land can become as much as 100 times more valuable with planning permission, so the campaigners argue the current rules prevent local authorities from identifying sites for new housing and then using the surge in value to fund better…


Let councils buy up land more cheaply, says May’s former aide | News | The Times

A parallel call has been made to give planning authorities new powers to zone land for development and freeze its price - as covered in the Guardian: 

Call to stop UK landowners making huge profits from speculation

Thinktank identifies issue as the driving force behind the UK’s broken housing market

Richard Partington Economics correspondent
Tue 28 Aug 2018


The IPPR calculates that land worth £25,000 could be valued at £5.6m after approval for residential development. Photograph: Photofusion/Rex Shutterstock

Britain should limit the windfall gains of landowners by freezing the value of plots newly designated for housing, according to a thinktank urging sweeping reforms to tackle a national shortage of affordable homes.

Calling on the government to pursue land market reforms similar to the German model, the Institute for Public Policy Research said planning authorities should be given new powers to zone land for development and freeze its price.

It said speculation by landowners awaiting planning decisions that can trigger vast increases in the value of a plot, had the effect of exacerbating wealth inequality and was a “driving force behind the broken housing market” in Britain.

Luke Murphy, associate director at IPPR, said: “Conventional wisdom suggests that the UK has a problem with house prices, but the reality is that we have a problem with land.”

The sweeping reforms would mean national and local government organisations would benefit from the extra value generated by planning decisions, which could be used for local infrastructure or affordable housing, rather than landowners accruing massive returns from the state approving changes in the use of land.

Using the example of a hectare of agricultural land in Oxfordshire that would typically be worth about £25,000, the IPPR said it could skyrocket in value by more than 200 times on approval for residential development to be worth about £5.6m. While the landowner stands to benefit from approval, the increase drives up the cost of building homes.

Two years ago on average the price of land had risen to more than 70% of the price paid for a house, which the IPPR said could rise to about 83% over the next two decades given current trends in the housing market. Options to remedy the problem could include councils buying land and selling at higher prices to developers, or entering into partnerships with landowners to share the proceeds of the sale.

About half of net wealth in Britain is tied in up in land, having risen by more than 500% in the past two decades to stand at £5tn. Although the value of property built on land across the country has also risen, it has increased at a much slower rate, of around 219%.

According to a 2010 report for Country Life, a third of Britain’s land still belongs to the aristocracy, while some of the oldest families in the country have held on to their land for several centuries. The IPPR said the top 10% own property wealth averaging £420,000 in value, compared with the bottom 30% who own no net property wealth at all.

Murphy said: “Wealth inequality, a poorly functioning housing market, an economy focused on unproductive investment and macroeconomic instability are all negative consequences of our current speculative land market.

The idea of taxing land values or giving councils other powers to benefit from planning approval windfalls has gathered increasing favour in recent years. Adopting the German model for freezing the gains of landowners was put forward three years ago by the Policy Network thinktank headed by Peter Mandelson.

While market intervention has often been associated with the left, increasingly radical ideas are also finding favour among Conservatives concerned that falling numbers of homeowners will subtract from their voter base.

Boris Johnson, the former foreign secretary, used a newspaper column earlier this month to attack construction companies reducing the supply of new homes by “land-banking,” where firms sit on land without building anything to protect new housing supply flooding the market all at once, thereby maintaining higher prices.


Call to stop UK landowners making huge profits from speculation | Business | The Guardian

These calls for a 'land tax' have indeed been growing:
Futures Forum: A solution to our housing problems: fix the broken land system
Futures Forum: A solution to our housing problems: land value capture
Futures Forum: A solution to our housing problems: create an in-perpetuity '100 per cent affordable' development
Futures Forum: A solution to our housing problems: limit landowners capturing enormous windfall financial benefits
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