Another simplistic idea!

Patrick Collinson in the Guardian revisits the idea of making housing cheaper by taking out the cost of buying land for housing from house prices. Namely local authorities buy land cheap and use the profits to subsidise social housing.

When Britain’s post-war housebuilding boom began, it was based on cheap land. As a timely new book, The Land Question by Daniel Bentley of thinktank Civitas, sets out, the 1947 Town and Country Planning Act under Clement Attlee’s government allowed local authorities to acquire land for development at “existing use value”. There was no premium because it was earmarked for development. The New Towns Act 1946 was similar, giving public corporation powers to compulsorily purchase land at current-use value. The unserviced land cost component for homes in Harlow and Milton Keynes was just 1% of housing costs at the time. Today, the price of land can easily be half the cost of buying a home: £439,999 is the cost of land with planning permission for one terraced home in a less salubrious part of London such as Peckham.

Think of it. Councils take all the financial uplift from planning permission, using potentially huge profits from land sales to build social housing almost at no cost to the public purse. Developers focus on making profits from building high-quality homes, not from hoarding plots. Land speculation is killed off almost overnight.

Doubtless there are those who would support this approach, but…

The article misses the point – land prices reflect the relative scarcity of land. High land prices are a result of high demand with limited land available.

If land is regarded a free asset then the danger is that there will be no incentive to regard it as an important asset, there will be a presumption in favour of development which is not exactly sustainable.

Taking all of the financial uplift from planning permission means that house prices would not actually fall, simply that the value of housebuilding would be kept by local authorities. One danger is that local authorities would see house building as a means of gaining revenue – more houses more revenue.

This would result in areas like Cornwall having a greater incentive to encourage people to move to Cornwall – more people more houses more profit! Not a sustainable solution.

To work effectively all land would have to be nationalised. If not existing house and other land owners – Tescos for example would still gain. Patrick Collinson seems to be unaware of the problem that the value derived from demand would not go away. Houses in nice areas would see values increase reflecting demand for houses in that area. The new owners would gain from the uplift. Quite why they would be more deserving than the previous landowners is anyones guess! [Potential second home owners would be laughing all the way to the bank!]

If we are serious about making housing affordable we have to address the demand side.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.