The odds on ending our housing emergency improved this weekend after the Daily Telegraph revealed that Tony Pidgley, founder and chairman of Berkeley Group, has joined the ranks of the country’s growing coalition for land reform. Speaking to journalist Liam Halligan for the new book Home Truths: The UK’s chronic housing shortage, Pidgley describes a housebuilding system ‘in dire need of reform’, and calls for landowners and developers to be forced to share profits of new housing developments with communities, saying: ‘The whole of society should capture that value – it’s about decency.’
But that’s not all – in Monday’s Telegraph, Chancellor Sajid Javid publicly threw his weight behind the call to fix the country’s broken land laws, too.
Javid describes his frustration at having tried and ultimately failed to convince then-Prime Minister Theresa May to include land reform in the 2017 Housing White Paper – something Shelter were loud and clear in calling for at the time. Since new homes must come with investment in schools, transport, parks and other essential services to create successful communities, Javid argues that it seems reasonable to use some of the profits from building homes to pay for these necessary improvements. This would be, in the Chancellor’s words, ‘an efficient and morally justifiable tax’ – and we couldn’t agree more.
Why land reform?
As it stands, the astronomical cost of land makes it virtually impossible to build locally affordable, high-quality housing developments with enough homes at social rents. House builders currently compete in a highly competitive land market, designing schemes to maximise the profitability of each individual plot of land so they can offer the highest bid to landowners.
But once developers have paid more for land by planning to maximise market sale housing, minimise social housing, and limit their contributions to local infrastructure and services, it becomes impossible to build a more ambitious scheme. After all, the developer needs to make back the money on their initial land purchase to stay in business.
If all this means the developer must build homes at a snail’s pace, waiting for buyers to come forward with the money to buy homes at the prices they assumed when bidding for land, then so be it. If it means communities across the country have to put up with soulless identikit housing estates with no social housing and little investment in local transport and services, then so be it. If it means developers using viability assessments and other tools to argue down social housing and infrastructure contributions, leaving the taxpayer to pick up the tab, then so be it. As Will Tanner of centre-right think tank Onward reflected in a recent guest blog, can we really be surprised when people oppose new homes being built in their area?
At the root of the trouble is the Land Compensation Act 1961. As we have written about in more detail in another post, the 1961 Act sets a floor on the price of land based on the most profitable uses imaginable. That means a landowner whose land might be suitable for social housing (or other uses poorly served by the market) can always choose to hold their land back from development in the hope of receiving a better price tomorrow for a standard scheme. And it means that councils, housing associations and community groups must pay inflated prices for land, which then require huge subsidies if it’s to be used for social housing.
Many other countries – the Netherlands, Germany and France to name a few – have wised up to the impossibility of meeting their peoples’ housing needs when land trades in this way. In England, too, things were not always as they are now: the years immediately following the Second World War saw a new generation of ambitious social housing built on land purchased at affordable prices. The current situation is not ‘normal’ by any meaningful standard.
Just as in the past this country has confronted a housing emergency with a major programme of ambitious social housing, we can and must do the same again. Standing in our way is the out-dated Land Compensation Act 1961. The coalition for amending that law is now bursting at the seams: Shelter, CPRE, centre-right think tanks, centre-left think tanks, MPs from every major party, housing associations, councils, private landlords, the Housing, Communities and Local Government Select Committee – and now a major house builder and the Chancellor of the Exchequer too.
Whoever forms the next government must take advantage of the cross-party, cross-sector support that now exists for reforming the 1961 Act. Doing this will pave the way for the only real solution to our housing emergency: a new generation of genuinely affordable social homes.
Read Shelter’s Grounds for Change, a collection of essays calling for land reform.
Join 85,000 other supporters. Ask the next government to build a new generation of social housing by signing our petition.