Reforming the land market can help deliver 300,000 homes per year

Housing in London. Image: Getty.

The government’s new housebuilding target of 300,000 net additional homes per year for England will require new build completions to rise from around 184,000 to somewhere close to 280,000 units a year. To achieve this, the government needs to tackle three key issues related to the current dysfunctional land market.

Firstly, the requirement to bid for land parcels makes it prohibitively expensive for smaller scale builders and housing associations, as well as cash-strapped local authorities, to acquire land. Second, too many planning permissions are held by non-house builders due to their ability to profit from rising land values. Thirdly, lower levels of infrastructure investment have meant that fewer large scale sites are opened up, and the ability to claw back only a quarter of the uplift in land values means there are insufficient funds to invest in new infrastructure.

The land market is disproportionately impacted by the compensation rules set out by Parliament. When the compensation rules assume that land will be awarded planning permission in the future, then land will trade at levels close to residential value.

But if the rules do not award compensation for prospective planning permission, as in the Netherlands, then market values will trade at levels close to agricultural or industrial land values. This is why the Netherlands has been able to build two thirds more housing units than Britain since the mid-1970s.

One approach to reforming the land market is to amend the 1961 Land Compensation Act and remove “prospective planning permission” from the compensation arrangements. This would have a direct impact on land prices, causing market values to fall much closer to use value: there would no longer be an incentive to hoard and speculate on land. This market-based solution would improve the efficiency of the land market and reduce the need for wasteful government intervention, such as spending nearly 10 times more on housing benefit than Germany as a percentage of GDP.

This reform would enable private sector housebuilders to expand capacity: they would no longer have to manage the risk of the value of land through time. Small housebuilders would no longer be at a disadvantage, and self-build units could dramatically increase as long as local plans allocated sufficient plots.


Such a reform of the land market would also enable the rise in land values to fund large scale investment across the country, increasing investment by as much as £9.3bn per year across England alone. This rise in land values would permit groups of local authorities to borrow from the capital market to invest in new infrastructure, with the revenue streams from the uplift in land values paying back the bond holders.

Data collected and analysed by the Centre for Progressive Policy during its in-depth analysis of the Oxford to Cambridge corridor suggests that the level of housebuilding can be raised by 8,200 units per annum, based on annual investments of £790m excluding land costs. This analysis can be used to help assess how many incremental units might be built given an additional £9.3bn of investment. Although land values differ across the country, the Centre found that the Birmingham and Leeds city regions generate similar levels of land value capture to the Oxford to Cambridge corridor.  

Using this analysis, the Centre estimates that the incremental revenues unlocked through land reform could pay for the necessary infrastructure for an additional 96,500 units per annum, a quarter of which would be in the Core Cities.

This would come very close to meeting the government’s new target of 300,000 units per year. Moreover, 36 per cent of these units would be affordable and fully paid for through this mechanism, which amounts to an additional 35,000 units per year.

Far from being a leap into the unknown, these reforms would actually be a return to how Britain used to build houses. The popular garden cities, new towns and infrastructure projects built in the first half of the 20th century were possible because they used the uplift in land values to fund the projects.

The housing white paper and the Conservative Party’s 2017 general election manifesto recognised the importance of land value capture to boost housebuilding. The government now needs to act and introduce market forces to an opaque and inefficient land market, which remains the major obstacle to building the houses the country so desperately needs.

Thomas Aubrey is the author of a recent report on housing and the land market for the Centre for Progressive Policy.

 
 
 
 

In New Zealand, climate change is driving an eco-nationalist revival

The green and pleasant land of the South Island. Image: Getty.

“Ten years ago I would have called them settler f*****g land squatters,” Mike Smith, Maori-dom’s most tenacious activist, said last November as he reflected on the agriculture industry’s central role in driving climate change. “Now I have to try and get these people on board.”

Smith is infamous for taking a chainsaw to Auckland’s most prominent tree on a damp October night in 1994 in protest of the “Pākehā” – or white European –dominated government’s fiscal envelope restraining treaty settlements. Now he’s turned his hand to another cause close-to-home for the Maori, New Zealand’s indigenous population: the environment.

“We’re super vulnerable, like we are to anything,” Smith says. “When it comes to climate change it’s like the poorest people in the world are going to be hit the hardest first, and that’s a lot of us.”

Prime Minister Jacinda Ardern appears, at least rhetorically, the most sympathetic leader to his cause in a decade. In her campaign launch speech late last year, she made the future government’s position clear: “Climate change is my generation’s nuclear free moment.”

This message should resonate with followers of her Labour party: the NZ left has long nurtured an environment-orientated “culture-of-protest”. So Ardern’s call to arms was bound to gain her loyal support among children of the 1960s and ‘70s, who led the march against nuclear ship visits, spurring on the government of the time to wriggle out from the US nuclear umbrella, and place a ban on foreign nuclear ship visits.

Now, it is to the tycoons of deep sea oil exploration they aim to close NZ’s ports.

In this, Smith is not short of support locally, with marches run by grassroots organisations and international animal welfare funds beginning to gain traction with every day New Zealanders. In this, Ardern’s prediction is correct: the Coal Action Network Aotearoa (CANA), is reminiscent of the Campaign for Nuclear Disarmament (CND), an earlier cluster of left-wing pacifists and nature lovers who drove the creation of the nuclear free zone.  

In December, 15,000 passionate protesters marched through the capital. And with the government’s recent ban of offshore oil exploration projects, Jeanette Fitzsimons, former Green party co-leader and the head of CANA, is optimistic about similar change to the energy and farming sectors.

The Labour-NZ First-Green party coalition seems focused on setting a new global precedent, weaning NZ away from a United States which has jettisoned the Paris Agreement. The move replicates another 20 years ago, when New Zealand’s anti-nuclear movement was central to an upsurge in New Zealand nationalism. Now, the same sense of going it alone on foreign policy is apparent both locally and in Parliament.

Dr. Gradon Diprose, a senior lecturer at Massey University, argues that this echoes an older expression of colonial nationalism, that saw “New Zealand as a land of natural abundance”. This: “eco-nationalism” is centered on “protecting certain visions of picturesque landscapes and unspoiled natural beauty”. The slogan “Clean, green New Zealand” is prevalent in popular culture and tourism marketing. The public seems to have latched onto it too, and ranked keeping NZ’s waterways “clean and green” top of a recent survey of of kiwis’ top concerns.

Three decades ago, it was the 10 July 1985 sinking of the Greenpeace flagship Rainbow Warrior that thrust local activists’ fears into the public eye, resulting in an almost nation-wide expression of climate-protectionism.


The bombing, a French intelligence operation sparked by Greenpeace’s calls for an end to foreign nuclear testing in the Pacific, galvanised a great deal of change to New Zealand’s overseas defence policies. A lack of censure from New Zealand’s Western allies drove Wellington to distance itself from the United States, while the shock of seeing a friendly nation violate NZ’s sovereignty left many at home seething.

Thirty years on, the foreign policy split throughout the Anglosphere, regarding Russian-Western relations, globalism, and the old international rules-based order, is becoming wider. Climate change is just the tip of the iceberg.

Most Kiwis you talk to will shake their heads in disapproval at US president Donald Trump’s scandalous outing last year in Helsinki. But US defiance of internationally brokered climate resolutions is something they can see clearly reflected in rural communities across the country.

The country saw records broken at both ends of the extreme weather spectrum last year. As 2018 kicked off, Kiwis sweltered through the hottest summer on record, while in Golden Bay, a small inlet near the northern tip of the South Island, residents endured the largest flood in 150 years. So, when President Trump tweets “So much for Global Warming”, the majority of New Zealanders look back fondly on NZ’s 1985 decision to boycott the “ANZUS” treaty, putting New Zealand at odds with its war-time ally America on defence legislation.

Public calls to take the same track on environmental regulation have become louder in the wake of Donald Trump’s election. The former US Secretary of State, Rex Tillerson, received a frosty “unwelcome” while on a flyby to the capital in 2017, with the New York Times’ Washington correspondent, Gardiner Harris remarking: “I’ve never seen so many people flip the bird at an American motorcade as I saw today”. Protests against President Trump’s stance on climate change are beginning to gain greater traction further still, with the hundred-strong “march for science” setting the tone for the new government later that year.

New Zealand certainly isn’t afraid of radicalism, and its activists are persistent. It’s already banned single use plastics in supermarkets. Plenty more is to come, Smith says.

And yes, reform is going to inhibit sometimes vital industries: “It doesn’t matter which way you spin the dice on this, whatever’s being done is going to hurt. People who are looking for a painless way of mitigating climate change, [but] I don’t think there is one.”

But among Smith’s troupe of climate agitators, the feeling is that, without drastic change, “the land”, the heart of the Maori ethos, is going to be hurt far more.

Back in Auckland, NZ’s financial hub, an electric scooter craze is gripping the city. This, too, has gained the support of local environmentalists. In New Zealand, a national sense of pride is always coupled with a certain eccentricity. In a country this size, change always starts small.