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.

 
 
 
 

Here are eight thoughts on TfL’s proposed cuts to London’s bus network

A number 12 bus crosses Westminster Bridge. Image: Getty.

In 2016, the urbanism blog City Observatory had a modest proposal for how American cities could sort out their transport systems: “Londonize”.

Its theory, the name of which referenced another popular urbanism blog, Copenhagenize, was that the key plank of Transport for London’s success was something that even transport nerds did not consider very sexy: its buses.

Though the Tube might get more glamorous press, London’s bus service really is impressively massive: It carries roughly 2.3bn passengers per year—much more than the Tube (1.3bn), close to the New York City subway (2.8bn), and nearly half as much as every bus service in America combined (5.1bn), while serving a population roughly 1/35 as large.

How has TfL done this? By making its bus network high frequency, reliable, relatively easy to understand and comprehensive. We rarely talk about this, because the tube map is far more fun – but the reason it’s so difficult to fall off the transport network in Greater London is because you’re never that far from a bus.

Given all that, we should probably talk about TfL’s plans to rethink – and in most cases, cut – as many as 36 different central London bus services over the next few months.

I’m not going to rehash details of the changes on which TfL is consulting from next month: there are just too many of them, and anyway it’s someone else’s scoop. The story was originally broken by Darryl Chamberlain over on 853 London; there’s also some fascinating analysis on Diamond Geezer’s blog. You should read both of those stories, though preferably not before you’ve finished reading this one.

Before offering my own analysis of the proposed changes, though, I should offer a few examples. More than a dozen routes are facing a trim: the 59 from King’s Cross back to Euston, the 113 from Oxford Circle to Marble Arch, the 171 from Holborn all the way down to Elephant & Castle and so on. A couple – the 10, the 48, the C2, and at most times the special routemaster version of the 15 – are being withdrawn altogether.

On, and one new route is planned – the 311, from Fulham Broadway to Oxford Circus. This will help plug some of the cuts to the 11, 19 and 22.

So, what does all this mean? Some thoughts:

1) This might not quite be as awful as it initially sounds

TfL says that demand for buses has fallen by around 10 per cent in London in recent years. It predicts it’ll fall further when Crossrail opens, as passengers switch to the new line, or to the tube routes relieved by the new line. So: the idea of taking some unwanted capacity out of the system is not, in itself, terrible.

Striping out unnecessary buses should also improve air quality in some of London’s worst pollution hot spots, and improve traffic flow, hopefully speeding up journeys on those buses that remain. 

A map from the presentation in which TfL explained its plans, showing the reduction in bus numbers on key arteries. Hilariously, notes Darryl Chamberlain, “It no longer produces its own maps, so has had to use one prepared by a bus enthusiast”.

The plans might even free up buses and staff to increase frequencies in outer London where demand hasn’t fallen – though these plans won’t be unveiled until next year and, for reasons I’ll come to below, I’ll believe it when we see it.

2) For many bus users, a lot of these changes will pass almost unnoticed

By my count, I use nine of the affected routes with any regularity – but only three of the changes are things that I’m likely to be at all inconvenienced by. Most of the changes either affect a part of the route I don’t take, or one where there are easy, and pain free alternatives.

This is anecdotal, obviously – perhaps I’m just lucky. But my suspicion is that a lot of these changes will go unnoticed by most passengers. It’s only the sheer number of them happening at once that makes this look like a big deal.

3) The Hopper fare makes this easier...

Once upon a time, if you had to switch buses, you had to pay a second fare. This isn’t true of journeys on the tube or railways – and since bus passengers have, on average, less money than tube passengers, it amounted to a pretty unfair tax on poorer Londoners.

But in January, in what is probably his most notable policy achievement of his two years in office so far, London’s mayor Sadiq Khan changed the rules. Now you can take as many buses as you want within an hour, for a single fare: that means you can switch buses without paying a penalty.

That will have made it easier for TfL to cut routes back: replacing a direct bus journey with one that requires a change no longer means imposing a financial penalty on passengers.


4) ...but not that easy

That’s about where the good news stops, though – because there are reasons other than cost why people prefer direct bus routes. Needing to change buses will be difficult for anyone with any form of mobility impairment, for example. Even for those of us lucky enough not to fall into that category, it’ll be annoying: it’s just easier to stay in one seat for 40 minutes than to get turfed off and have to fight for a new one halfway through.

More than that, from the passengers’ point of view, excess capacity feels quite good a lot of the time: it means your bus may well be nice and empty. Reducing the number of buses along those key corridors will also make those that remain more crowded.

5) The motive is almost certainly financial

Another of Sadiq Khan’s big policy promises was to freeze fares. He made this promise at a time when central government is massively reducing the financial support it gives TfL (the work, Chamberlain notes, of Evening Standard editor George Osborne, back when he was chancellor). And the Hopper fare, while a great idea in many ways, means a further reduction in income.

So: TfL is scrambling for cash: this is why I remain cynical about those new outer London bus routes. I would be amazed if money wasn’t a motivation here, not least because...

6) TfL thinks no one will notice

Any attempt to reduce tube frequencies, let alone close a station, would result in uproar. Hashtag campaigners! Angry people pointing at things in local newspapers! Damning reports on the front of the Evening Standard from the bloke who made it happen!

Buses, though? Their routes change, slightly, all the time. And do you really notice whether your local route comes every 10 minutes or every 12? That’s not to mention the fact that bus passengers, as previously noted, tend to be poorer – and so, less vocal – than tube passengers.

So cuts, and the savings they bring, are much easier to sneak through. TfL probably would have gotten away with it, too, if it hadn’t been for those meddling bloggers.

Although...

7) Scrapping the C2 might be a mistake

The C2 runs from Parliament Hill, through Kentish Town and Camden to Oxford Circus. In other words, it links north London, where a lot of journalists live, to the offices of the BBC and Buzzfeed.

As occasional New Statesman writer James Ball notes, this is probably not the easiest route to quietly shelve.

8) None of this is set in stone

The consultation doesn’t even begin until next month and then will run for six weeks – so all these plans may yet be forgotten. We shall see.

Anyway – here’s Darryl Chamberlain’s original scoop, and here’s some detailed analysis on Diamond Geezer. Please support your local bloggers by reading them.

Jonn Elledge is the editor of CityMetric. He is on Twitter as @jonnelledge and on Facebook as JonnElledgeWrites.

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