Land value capture may be illusury

Responses to the consultation on DHCLG Select Committee

"The effectiveness of current land value capture methods" must be sent to the select committee by 2 March 2018 at

http://www.parliament.uk/business/committees/committees-a-z/commons-select/communities-and-local-government-committee/inquiries/parliament-2017/land-value-capture-inquiry-17-19/commons-written-submission-form/

Not that I am in a position to tell anybody what to say,  but I think that the following points might be of relevance and helpful to the committee members.

As with any changes to the planning system it would be helpful to simplify matters. The basic principle should be that any introduction of capturing land value supersedes either the existing use of CIL or s106.  

Any belief that there are huge windfalls to be captured from the uplift in land values attributed to the grant of development permissions should be tempered by the fact that this is a classic zero sum game.  Inflated land values are simply a function of inflated house prices. Maintain the former and the latter will follow suit. Reduce house prices and there will be little land value left to be captured
 

The Government has been largely responsible for house price inflation. If the demand side stimuli of funding for landing, Help to Buy and intermediate housing  (allowing the purchase of only part of the equity) were removed the price of new houses prices would fall.  Government should be severely embarrassed by the profits being declared by the major builders that are largely created by Government subsidies (a Persimmon Director taking over £100m in share options). Similarly unacceptable profits are being made my land owners and traders. A number of Tories (including Nick Boles but not Lynn Truss) realise that very few votes would be lost were the value of development land to be decided by the DV (subject to appeal).  The beneficiaries would be all the purchasers of realistically priced homes.  S.106 should be used to secure the provision of necessary infrastructure.  This should be interpreted more loosely (Written Ministerial Statement required) to allow for new development to make a contribution towards existing infrastructure (ie wear and tear and a direct benefit to the developers new customers).  Permitted development rights to convert rural buildings and offices into dwellings without permissions of CIL/s.106 payments should be repealed.

Recommendations

Remove all government demand side stimuli which currently fuel house price inflation and go straight into the profits of developers and landowners. Remove all the CIL regulations.  Allow LPAs to secure the funding of all ‘necessary infrastructure’ by dismissing appeals where developers are seeking permissions to develop ‘on the cheap’ and placing the infrastructure burden on the new and existing residents and businesses.  Remove all permitted development rights which allow dwellings to be created without paying for necessary infrastructure.  Where land with permission is not being developed, CPO powers should be used to secure this for self-custom building, or social housing.  There should be reinstated requirements for self/custom builders and social housing providers to pay for necessary infrastructure (costs that would be reflected in the land price.

 Summary

The need is to reduce housing subsidies rather than introduce any more mechanisms  to capture increases in land value.  In most if not all parts of the country house prices will be high enough to create sufficient value to pay for necessary infrastructure.  It is unlikely that 300,000 would be built (and sold) at the proper values when demand side subsidies have been removed.  The Government should be prepared to bear the electoral costs of any decreases in house prices ie increases in affordability, that should arise from removing the subsidies.

Community Led Housing

A brief post in order to give a little more publicity to the report at

https://www.housinglin.org.uk/_assets/Resources/Housing/OtherOrganisation/Community_Led_housing_Report_2017.pdf

The report is too long and rich in examples to summarise here.  There is a clear message that CLH is popular with users, councils and housing providers but that the efforts being made to produce a few thousand units are disproportional to the gains.  The main stimuli seem to be financial assistance to enable CLH to be provided on difficult sites not attractive to the volume builders.  The potential seems to be greatest where the market cuts these innovative forms of housing some slack but there are some councils in high property price areas (notably Bristol and Brighton) which seem to be managing to promote CLH. Although CLH does come in a range of sorts and sizes it does not yet acknowledge the potential for custom splitting that would benefit from Local Development Orders in areas where the LPA feels subdivisions would help provide opportunities to downsize-in-place by encouraging new households to share in the splitting of existing properties.
However, the main message from the report is that Councils should make it easier for CLH to be realised. It seems perverse that the best forms of housing from economic and social points of view are the hardest to achieve and 150,000 houses of a more individualistic nature slip effortlessly (there are of course some flawed housing schemes that are rejected locally and on appeal) through the system.  A rational planning system would privilege CLH by ensuring all permissions reserve land for that purpose and can only be built out by conventional developers if there is no demand for CLH.