Fresh call for land value capture changes to tackle 'broken land market'

Councils should be allowed to buy land 'at a fair value' that does not include its value once planning consent is granted while national guidelines should set out the minimum acceptable proportion of 'genuinely affordable' homes in new developments, a report by a think-tank has recommended.

Development: fresh call for land value capture changes
Development: fresh call for land value capture changes

The report by the Institute for Public Policy Research (IPPR) think-tank says that the "broken land market is the driving force behind England's broken housing market".

It says that, when agricultural land is granted planning permission for housing, "the typical increase in its value is up to 100 times".

For instance, it says, "a hectare of agricultural land in Oxfordshire is typically worth £25,000 but with residential planning permission the value is typically £5.6 million (South Oxfordshire) - an increase of 224 times".

To help address this, the report says that compulsory purchase laws "should be reformed to allow local authorities and public bodies in England to buy land at a fair value that enables the delivery of high quality development".

In practice, the report says, "the expectation would be that compulsory purchase would be used sparingly (though it must be a credible threat), but this change would reduce price expectations and allow the cost of land to fall. The landowner could still expect to receive a return on their investment which provides them with an incentive to bring forward their land."

The report also says that planning authorities "should be given the powers to ‘zone’ areas of land for development and freeze its price close to its current use value, as happens in Germany".

"Landowners would still get a fair return, but any windfall would accrue to the state to pay for infrastructure and affordable housing to benefit the local community", it adds.

Elsewhere, the report says that government should set "new guidelines in England for the minimum proportion of new housing developments which must be genuinely affordable".

"Local authorities would be able to set their own targets in local plans based on what is viable at a local level, taking into consideration local land values. In the absence of a local target, the national measure would set the ratio - a reasonable split for the national minimum in the absence of a local target could be one-third of all new housing as social housing for rent, one-third genuinely affordable (in perpetuity) for sale, and one-third for sale at market prices", the report recommends.

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 speculative land market is the hidden force driving the UK's unequal economy and broken housing market."

Last week, the IPPR was a signatory to a letter to the housing secretary which called on the the government should "think radically" about reforming the way that uplifts in land value arising from planning consent can better captured.

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