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.
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