House prices aren’t the issue – land prices are

[Tony Gosling]

Timely revisit of what will for many be an old cookie


House prices aren’t the issue – land prices are
https://www.theguardian.com/money/blog/2017/nov/18/house-prices-land-prices-cheaper-homes

There’s a simple solution that will give us 
cheaper homes – if only the chancellor would listen
  Winston Churchill in 1910. He promoted the 
‘people’s budget’ and lamented landowners’ profits. Photograph: PA

Patrick Collinson  Saturday 18 November 2017 07.00 GMT

While reporting on the recent court case where 
controversial landlord Fergus Wilson defended 
(but lost) his right to refuse to let to Indians 
and Pakistanis, I learned something about how 
he’s now making money. He is now far from being 
Britain’s biggest buy-to-let landlord. He’s down 
to 350 homes, from a peak of 1,000. And what’s he 
doing with the cash made from sales? Buying 
agricultural land close to Kent’s biggest towns. 
One plot he bought for £45,000 is now worth, he 
boasted, £3m with development permission. And 
therein lies the reason why we have a housing crisis.

As long ago as 1909, Winston Churchill, then 
promoting Lloyd George’s “people’s budget” and 
its controversial measures to tax land, told an 
audience in Edinburgh that the landowner “sits 
still and does nothing” while reaping vast gains 
from land improvements by the municipality, such 
as roads, railways, power from generators and 
water from reservoirs far away. “Every one of 
those improvements is effected by the labour and 
the cost of other people 
 To not one of those 
improvements does the land monopolist contribute, 
and yet by every one of them the value of his 
land is sensibly enhanced 
 he contributes 
nothing even to the process from which his own enrichment is derived.”


Landowners pocketed £9bn in profit from land they 
sold for new housing in 2014-15


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.

What happened? Landowners rebelled and Harold 
Macmillan’s Conservative government introduced 
the 1961 Land Compensation Act. Henceforth, 
landowners were to be paid the value of the land, 
including any “hope value”, when developed. Today 
a hectare of land is worth 100 times more when 
used for housing rather than farming. Yet when a 
bureaucratic pen grants permission, all the value 
goes to the landowner, not the public. Bentley 
says landowners pocketed £9bn in profit from land 
they sold for new housing in 2014-15. For each 
new home built that year, £60,000 went as profit 
to the landowner. Major infrastructure projects 
such as Crossrail 2 and the Bakerloo tube line 
extension are estimated to cost the public purse 
£36bn. Landowners, meanwhile, will pocket £87bn 
from increased land values nearby.

In the Netherlands, the only sizeable country in 
Europe more densely populated than England, the 
Expropriation Act allows local authorities to buy 
land at current-use value. They prepare it for 
development, use part for social housing and sell 
the rest for commercial use, often at a large profit.

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.

Instead, the chancellor will tell us in this 
week’s budget that the solution is billions more 
for help to buy. All that does is raise property 
prices and landowner profits. If only Philip 
Hammond could be more like Churchill.
--
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