Social housing commission recommends land value capture rule changes to boost delivery

The government should change land compensation rules so that landowners are paid 'a fair market price for their land, rather than the price it might achieve with planning permission that it does not actually have', a commission on social housing has recommended.

Social housing: report recommends 3.1 million new social rented units over 20 years
Social housing: report recommends 3.1 million new social rented units over 20 years

The commission was put together by housing charity Shelter to examine the future of social housing in the wake of the Grenfell Tower disaster.

Commissioners included baroness Sayeeda Warsi, former co-chair of the Conservative Party; lord Jim O’Neill vice chair at the Northern Powerhouse Partnership; former commercial secretary to HM Treasury; former Labour leader Ed Miliband MP; and architect and television presenter, George Clarke.

The commission’s final report, published today, recommends that the government embarks on a 20-year programme to deliver 3.1 million new social homes.

But it warns that currently, the cost of land "represents a major barrier to social housing delivery, which did not exist in the heyday of social housebuilding".

It says that the Land Compensation Act 1961 "has played a role in inflating land values by giving landowners an entitlement to ‘hope value’".

The report says that "levels of direct investment which would be needed to purchase land at today’s market prices and then use it to build social homes at affordable prices would be considerable.

"If government increased grant for social housing without also reforming the land market, this additional demand for land would be factored into its cost – making it even more expensive. Because of this, the problems of financing social housing are bound up with the problems of accessing the land on which to build it. It is not enough to pour more money into a broken system."

The report recommends that the government amends the 1961 act "so that landowners are paid a fair market price for their land, rather than the price it might achieve with planning permission that it does not actually have".

Elsewhere, the report says that section 106 planning gain "remains an important way of delivering some social housing and will continue to play an important role in delivering new social homes, at least until land reforms have been made to provide an alternative supply of affordable land".

But it calls for the closure of "many gaps" within the section 106 system to "remove the exemptions that mean section 106 rules do not always apply to new developments and conversions".

The report also notes concern about the "effect that excluding social renters from shared parts of new developments can have on community mix". These have included examples of so-called "poor doors", the report says, where social renters are given a separate entrance within a joint block or are unable to access from other common spaces.

The document says that "attempts to minimise the service charges that social renters must pay are understandable", but adds that "designs that create a sense that social renters are excluded from shared facilities within a single building risks undermining the principles of mixed communities at the outset".

It says that government could act to promote approaches to avoid such separation "for example, through the planning system or conditions on grants".

The report recommends that "anyone involved in delivering social housing should ensure that new social homes are delivered as part of tenure-blind, mixed-community developments. This includes avoiding design that will contribute to a sense of exclusion, e.g. avoiding separate entrances to the same building, which divide households based on tenure".

The report also recommends that:

  • Government should "set a standard to ensure investment in maintaining and improving homes and neighbourhoods over their full lifetime".
  • Residents should "have a voice where major works are being considered for their homes and/ or neighbourhoods, such as estate regeneration and neighbourhood redesign". It says that current government guidance "does not go far enough" and recommends changes along the line of the London mayor’s Good Practice Guide to Estate Regeneration which "recommends that when developing estate regeneration proposals, local authorities and housing associations should always engage openly and meaningfully with those affected by the project from the outset".

In response to the report, housing secretary James Brokenshire said: "Providing quality and fair social housing is a priority for this government and our social housing green paper seeks to ensure it can both support social mobility and be a stable base that supports people when they need it.

"Our ambitious £9 billion affordable homes programme will deliver 250,000 homes by 2022, including homes for social rent. A further £2 billion of long term funding has already been committed beyond that as part of a ten year home building programme through to 2028. We’re also giving councils extra freedom to build the social homes their communities need and expect."

The government’s social housing green paper, published for consultation last summer, said it would "strengthen" planning guidance to encourage new affordable homes "to be designed to the same high quality as other tenures and well integrated within developments". Consultation on the document closed in November. 

Late last year, the government rejected calls for major changes to the system of capturing a proportion of the uplift in land values when planning permission is granted, saying it prefers to focus on reforming the current system of developer contributions.

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