This blog is the first of our regular posts discussing anything and everything New Civic Housebuilding – check back here every fortnight. We were pleased to the see that the Neighbourhood Planning Act made it through wash-up to receive Royal Assent last Thursday. Here we discuss a little noticed but important amendment tabled during the Lords stages.
The Housing White Paper underscores the government’s notable and laudable change in tone on housebuilding. In particular, it heralds a long overdue shift from intervention on the demand side to a focus on boosting supply.
This is particularly shown by the comments around development corporations and capturing land value. As Gavin Barwell put it during the final stages of the Neighbourhood Planning Bill:
At the moment, when somebody owns a piece of land that is not designated as suitable for housing or any other use and then, through a local plan process, the council changes that designation, the landowner sees a significant uplift in value. If a company or individual then acquires rights over that land and secures planning permission, there is a further uplift, and that planning permission may be traded several times. At the end of the process, several organisations or individuals have made a great deal of money and there is not a great deal of value in the land for providing the infrastructure that all our constituents tell us is vital to go along with housing.
For Shelter, statements like this from the Housing Minister are incredibly encouraging, and reflect something that we have been saying for a long time. These ideas formed the core of our recent New Civic Housebuilding report: that to address the problems in our housing market we have to start with land.
As part of this we need to examine – really examine – how we capture land value uplift, which, as the Minister noted, currently benefits landowners not communities.
This feeds nicely into a specific element of the Neighbourhood Planning Act itself: The Taylor Amendment which deals with the creation of development corporations to create New Towns. And as anyone who has read our major new report, New Civic Housebuilding will know, development corporations could be a mechanism to deliver both more and better housing.
The Taylor Amendment amends the 1981 New Towns Act, the legislation that governs the creation of New Towns. It gives the Secretary of State the power to appoint local authorities to create a development corporation for delivering a New Town. The corporation will be able to assemble land in advance of planning permission and masterplan a new town, overcoming the fractured nature of UK land-holdings and making it less likely that landowner negotiations will delay schemes.
This change delivers on one of the promises set out by the government in the Housing White Paper, but while the amendment is a welcome step forwards, we don’t believe that it will truly address the problems within our land market. The government must go even further and grant stronger powers to development corporations.
Fundamentally we need to address the issue of land, specifically the cost of land.
As the Minister identified in the debate itself: unless we address how land value uplift is captured then we will continue to see development that doesn’t meet the needs of local communities. Building affordable homes will be viewed as ‘unviable’ for developers who have paid top dollar for land, and infrastructure, schools and doctors’ surgeries will continue to fall by the wayside.
The New Towns of the 1950s, which this is modelled on, benefitted from the ability to bring land into the scheme at much closer to its existing use value, be that agricultural or industrial. All the land value created by building homes and infrastructure was then captured and used by the development corporations to fund development and community benefits like more affordable homes.
Sadly, times have changed: our current skewed land market bakes all of the expected land value uplift into the price developers, or local authorities, must pay for the land up-front. The landowner gets a huge cash windfall and the chance to fund much needed homes and infrastructure is lost.
Taylor’s amendment falls short of resolving this problem. The 1961 Land Compensation Act still means development corporations will have to pay hope value if they compulsory purchase land, subsequently there remains no incentive for landowners to voluntarily bring their land into a scheme at anything less than the extortionate prices we currently see. Development corporations do not have the powers to challenge this and such a fundamental issue will continue to prevent them from capturing the full land value uplift generated by the new development.
What we are calling for is a return to the successful development programmes of the past, and our New Civic Housebuilding report outlines this approach further. By amending legislation and resetting the benchmark value of land, we can bring land into a scheme at reasonable values and split the financial windfall between fair market value compensation to the landowner and benefits for the community.
We look forward to working with the next government to take this further, and fully address the barriers to getting more genuinely affordable homes and better infrastructure built.