Public asset transfer to deliver affordable housing for rent?

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Although the popular misunderstanding of financial markets now surpasses (thanks mostly to convenient political lies) our misunderstanding of the housing market, the latter remains the one most fiddled with by governments. And the result of this intervention - always done for the best of reasons - is a market than has built into it the most enormous distortions. Distortions that, as these things are wont to do, cause the greatest problems for the poorest and least articulate.

At the root of this distortion is our planning system - at its root, the nationalisation of decisions about property rights. However, as is often the case with well-meant interventions, the beneficiaries of our planning system are not those who that system was intended to benefit. Just as agricultural support goes disproportionately to rich farmers and arts subsidy flows does little to help struggling artists, the planning system acts to preserve and promote rising asset prices for folk like you and me - people living in suburbia, in the holy 'green belt'.

As a result of the planning system's control over the use of land that would otherwise have provided housing, we have higher land values and (subject to periodic shocks) steadily rising housing prices. And - even at the time of recession - the fundamentals of that market environment remain. There are too few houses in places where people want to live - applying upwards pressure on price. And, since I live in one of those places - whoopee!!

There is little prospect (for which read 'not a chance', 'zilch') of a government arriving that will reform this situation - a government that will end land use designation as a tool of social control. So to address the problem - how to provide housing for those people who need to be housed - we need to think differently. And remember, that housing need is not primarily housing for poor people - we've plenty of that and fewer poor folk. It's housing for the son's and daughters of us residents of nice suburbs, dormitory villages and barn conversions. Plus of course dealing with our reluctance to turn assets into cash so as to care for ourselves in old age.

Across all these communities there are parcels of publicly-owned land - not the recreation grounds, playing fields and village greens but pieces of land where the state is behaving speculatively. The former school site in Cullingworth fits this bill, for example. What the public body owning the land wants is to maximise land value, realise that value and secure a capital receipt for use funding a wider 'capital programme'. It is unlikely that the local community will see any benefit from this land disposal.

My suggestion is to require public bodies to transfer such land to housing trusts or associations - for the specific purpose of building affordable housing for rent. By removing land value from the equation, such development becomes affordable even for a small village land trust. If it costs £50,000 to build a house and there are borrowing costs of £5,000 pa a return on capital of 10% can be achieved with rents at well below market levels. Such an approach presents other problems - around allocations, for example, where I would favour breaking the mould and having a stricter local lettings policy - but would provide a stock of affordable housing that remained so because it is unaffected by rising land values.

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