Tuesday, 7 July 2020

Sorry Network Homes, land seizure is not the solution to the lack of land supply

Well I guess it's a start that some people involved in housing are talking about land.
Land is becoming an ever-bigger barrier to new supply. Land makes up over 70% of the value of existing homes (up from 50% in 1995) and is a high input cost when building a new home.9 As the cost of construction varies relatively little across the country, when we talk about unaffordable market homes, in many ways we are discussing the high cost of land in some areas. This is at the heart of the housing crisis.
So we find asserted at the start of a report by Reuben Young and Kayleigh Pearse for Netwrok Homes. It really shouldn't come as a surprise to make this discovery or to see, as the authors do, that the operation of our land market is central to resolving the problems within our housing markets. The authors also recognise that land value is not evenly distributed because there are "...fewer homes in high demand areas than there are households who want to live in high demand areas..."

The demand for housing land is still determined largely by the market - land in Bradford city centre has low, even negative, value whereas land in suburban London and exurban Surrey is eye-wateringly expensive. Supply of the land, however, is not determined by the market but by the planning system. So it's curious that the authors, while acknowledging the impact of planning ("...large swathes of greenfield land around cities are politically determined undevelopable, and planning permissions everywhere are rationed by a political approval process...") then choose a solution that ignores supply constraints.
Allow local councils, Homes England, and the Greater London Authority to compulsorily purchase land at existing use value. This would be instead of the much higher ‘hope value’. This will let public bodies cheaply assemble land for housing which would be challenging for the private sector to do because of fragmented ownership or other difficulties. It would also deter speculation on land, because landowners would know that their land could be bought without consideration for making a future profit. The result would be more homes, and cheaper land for everyone.
It all sounds lovely doesn't it? The greedy landowner doesn't make huge gains from that "hope value" and benign local councils reap the benefit. Of course those public bodies would have to seize the land (let's describe compulsory purchase properly) in order to build the homes. Now, leaving aside the potential for all sorts of essentially corrupt political shenanigans, the whole process still requires that same local council to make housing land allocations through its local plan. Our authors glibly state that all this will give a "...greater incentive for landowners to bring forward land at lower values..." - essentially local councils wave a big stick at landowners with threats of seizure. Again the potential for political games and even corruption is legion but the fundamental problem - policy constraints on land supply - remains in place.

There is no need for these land seizure proposals. If you want to reduce the value of housing development land then the way to do it is to make more of it available, to resolve the problem with those "..large swathes of greenfield land..." in places where demand for housing is high. The proposal here simply dodges this problem - there's still the political issue of where housing goes regardless of whether or not you give the local council powers to seize the land. We are back to cramming more (affordable) houses onto land that doesn't have much value because its not where people want to live but is where it's politically possible to allow the houses to be built.

The resolution of the land price problem doesn't come by artificially making the land expensive then artificially making it cheap again, the resolution lies in taking from politicians the power to decide which land is or isn't available for development. And that power sits with the planning system not the market for land.


1 comment:

Sobers said...

The main thing stopping land being brought forward for development is the local authorities who grant the permissions. They take so long to grant them, even on land that is already in their own local plan it can take years to go even from a planning application deposition to a granted outline planning, especially for larger schemes.

I am involved (as a landowner) in a large urban extension - my option was signed with a developer in late 2015. It took them 2 years to get the planning application drawn up (the amount of various studies and surveys that has to be done is phenomenal, and some can only be done at certain times of year) and the application was lodged with the local authority in late 2017. Since then it has sat with the council as they have prevaricated over every issue they can find with it (note this is land allocated for housing development in their own Local Plan) and it may finally just about be about to get outline consent this month. Thats nearly 5 years from the landowner 'bringing forward' the land to it getting permission. And once the outline permission is granted there will still be a detailed permission to be lodged and passed before a single digger will enter the site. And prior to that 5 years was probably another decade as the proposed site wended its way through the local authority Local Plan system.

Basically if you said as a landowner to the council 'I'd like to build houses on this land' it could easily take 15 years to get permission. Not because you are so called 'landbanking' or such like, but because that how long it takes for the planning system to process land from open farmland to a building site. Landowners and developers alike would be delighted if it took less time, they could all be making money sooner, instead of spending it out on planning consultants. The massive fly in the ointment is the State, in the form of the Local Authority, who seem to put as many hurdles in the way of new development as possible.