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.

 
 
 
 

There isn’t a war on the motorist. We should start one

These bloody people. Image: Getty.

When should you use the horn on a car? It’s not, and anyone who has been on a road in the UK in living memory will be surprised to hear this, when you are inconvenienced by traffic flow. Nor is it when you are annoyed that you have been very slightly inconvenienced by another driver refusing to break the law in a manner that is objectively dangerous, but which you perceive to be to your advantage.

According to the Highway Code:

“A horn should only be used when warning someone of any danger due to another vehicle or any other kind of danger.”

Let’s be frank: neither you nor I nor anyone we have ever met has ever heard a horn used in such a manner. Even those of us who live in or near places where horns perpetually ring out due to the entitled sociopathy of most drivers. Especially those of us who live in or near such places.

Several roads I frequently find myself pushing a pram up and down in north London are two way traffic, but allow parking on both sides. This being London that means that, in practice, they’re single track road which cars can enter from both ends.

And this being London that means, in practice, that on multiple occasions every day, men – it is literally always men – glower at each other from behind the steering wheels of needlessly big cars, banging their horns in fury that circumstances have, usually through the fault of neither of them, meant they are facing each other on a de facto single track road and now one of them is going to have to reverse for a metre or so.

This, of course, is an unacceptable surrender as far as the drivers’ ego is concerned, and a stalemate seemingly as protracted as the cold war and certainly nosier usually emerges. Occasionally someone will climb out of their beloved vehicle and shout and their opponent in person, which at least has the advantages of being quieter.

I mentioned all this to a friend recently, who suggested that maybe use of car horns should be formally restricted in certain circumstances.

Ha ha ha. Hah.

The Highway Code goes on to say -

“It is illegal to use a horn on a moving vehicle on a restricted road, a road that has street lights and a 30 mph limit, between the times of 11:30 p.m. and 07:00 a.m.”

Is there any UK legal provision more absolutely and comprehensively ignored by those to whom it applies? It might as well not be there. And you can bet that every single person who flouts it considers themselves law abiding. Rather than the perpetual criminal that they in point of fact are.


In the 25 years since I learned to drive I have used a car horn exactly no times, despite having lived in London for more than 20 of them. This is because I have never had occasion to use it appropriately. Neither has anyone else, of course, they’ve just used it inappropriately. Repeatedly.

So here’s my proposal for massively improving all UK  suburban and urban environments at a stroke: ban horns in all new cars and introduce massive, punitive, crippling, life-destroying fines for people caught using them on their old one.

There has never been a war on motorists, despite the persecution fantasies of the kind of middle aged man who thinks owning a book by Jeremy Clarkson is a substitute for a personality. There should be. Let’s start one. Now.

Phase 2 will be mandatory life sentences for people who don’t understand that a green traffic light doesn’t automatically mean you have right of way just because you’re in a car.

Do write in with your suggestions for Phase 3.