Public land: it's the price not the seller that counts

There were two big announcements the other day on the hoary issue of releasing public land for house building: one encouraging, one deeply depressing.

First the good news: the London Land Commission has launched its register of all the land and property owned by public bodies in the capital. Digging out and collating all this data from multiple agencies across the public sector is a massive undertaking, and the Commission deserves kudos for getting it all into a publicly available, searchable (and very nicely presented) online map. As with any big data exercise like this, there are bound to be issues about consistency and accuracy, but it’s a definitely a great improvement on what was there before. Which was nothing.

We’ve long argued that improving the transparency of the land market – enabling everyone to see who owns what and how much they paid for it – is a vital step towards a better functioning development system.

But just identifying publicly owned land is only a first step. The next is to actually use it effectively – and this is where the bad news comes in. On the same day as the Commission’s launch, the Public Accounts Committee heard that on 100 of the 942 sites recently sold by the government, a grand total of 200 homes had so far been built. That’s some way short of the 100,000 promised by then Secretary of State Eric Pickles in March 2015.

To be fair, making extravagant promises about the amounts of public land that will be released and the number of homes that it will build is a favourite of politicians of all stripes: the Mayor of London has similarly claimed to have released 98% of the land in his ownership to support new home building, and Gordon Brown used his first Queen’s Speech as PM to promise 100,000 homes on public land to enable more families to get on the housing ladder….

It’s easy to see why politicians love public land: building more homes doesn’t have to cost the state much if it’s done on cheap greenfield land, but that’s invariably controversial. Conversely, building on brownfield sites is less unpopular but more expensive, as the price of the land is so much higher. So the idea that there’s plenty of ‘free’ publicly owned brownfield land out there is politically very attractive.

We’ll be publishing some new research on how much brownfield land there really is in London soon – but the real problem with the emphasis on public land is the belief that selling it will automatically lead to more homes. The logic is that if public land is put up for sale, developers will buy it and more homes will be built, so the price will come down and more people will be able to afford a home. But this argument misunderstands the problem – and so misses a real opportunity for a solution.

The critical issue here is the way that this land is released. If public land is simply sold to the highest bidder on the open market, it behaves no differently from the much larger amounts of privately owned land. The price of land is what matters to the economics of development – not who the seller happens to be – and the government has consistently opted to sell land at the highest price possible.

The higher the cost of land, the more expensive and risky development is, and the higher house prices have to be for the developer to turn a decent profit. That means developers have to trickle out supply to keep local prices up – and more fundamentally means that the market simply cannot build enough homes to significantly lower house prices.

To break this vicious cycle of high land prices, high house prices, and low house building, we urgently need to get land into the system at much lower costs – and homes built on it at much lower cost. This doesn’t have to mean giving away valuable assets, but rather investing them to get a longer term return. This is where public land could and should be helpful: the public sector should be capable of investing its assets for the long term and taking a real stake in quality development for the benefit of the country. Instead, governments have tended to demand the highest upfront cash price possible, and then walked away – leaving the market to trickle out supply.

We urgently need all parts of the public sector to revive the lost art of land investment – which after all is the model that successful built the garden cities, the new towns and the London Docklands. This will require politicians to take a longer term view of public assets, and to stop promising that flogging off public land will magically build homes.

 

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3 Comments
  1. They should be looking at limited-equity ownership at pre-selected family income levels for whatever housing is built on the land, ensuring future affordability for future generations. They should also require a mix of income levels for families in all developments: low, medium and higher incomes, with all units split into thirds or better, quintiles. The state/city should also act to manage the actual housing construction, using private developers to carry out the building, while ensuring limited-equity, affordable housing controlled over a 99-year period.

    Habitat for Humanity has some of the best housing development models that the governments should be using. Give people of all income ranges some equity AND affordability!

    1. “pre-selected family income levels for whatever housing is built on the land”

      That creates an false incentive.

      After the war people were moved out of London to commuters down. It was not called Social cleansing…. People should be given the option. Perhaps an extra bedroom or some other incentive.

  2. “It’s easy to see why politicians love public land: building more homes doesn’t have to cost the state much if it’s done on cheap greenfield land, but that’s invariably controversial. ”

    This is how we end up with 2-3 tier housing market. Landlords are getting beaten up over high rents and are supposed to compete with subsidised council housing from the 1960s.

    Why should the house be affordable? It should be the person who pays an affordable price, with the rest topped up by the state. We have seen cases where high earning MPs are living in council houses and paying cheap rents.

    It makes more sense to control house prices, which will control land prices in turn.

    Frankly, the housing market needs a crash.

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