Shelter have released another report, er Policy Briefing, on the ‘housing crisis’ and how to increase the quantity and quality of contemporary residential development. It’s written by Toby Lloyd and Peter Jefferys promoting an alternative to the so-called speculative model of housebuilding. The alternative is New Civic Housebuilding.
The briefing is beefy, has got a lot of interesting analysis, takes a long term historical view of the housing and land questions and displays a lot of practical knowledge of housing development processes. I haven’t read the book yet but I think a lot of the analysis comes from Toby Lloyd, Laurie Macfarlane and Josh Ryan-Collins’ book – Economics of Land and Housing – published last month. I’m told by someone who has actually read it that it is very good.
Whilst the diagnosis looks reasonable, I’m not really convinced by the remedies proposed in the latest report, er, policy briefing. I hate myself for criticising on the basis of idealism and I know that these guys have been thinking about this stuff a lot more than I have but the proposals do sound a bit idealistic.
I think that they correctly identify land and more fundamentally, its price as the central issue in enabling an increase in housing supply. Should land owners obtain most of the financial uplifts released by permission to build or should (and how much should) the community gain in the form of affordable housing etc? While diagnosing the problem fairly well, the cure is not as convincing. It starts to become particularly vague when discussing the land price that land owners should get…
Acquiring land at a fair value and contracting builders to deliver high quality schemes made possible by the lower land cost. Public spirited landowners can donate land for development, but this is rare: it is more realistic to expect landowners to accept a fair price, instead of a speculative one. A fair purchase value might be the existing market value of the land (it’s agricultural or industrial value), plus a degree of compensation. This can be achieved by agreement with landowners (as typically happens on rural exception sites), or by acquiring land in the open market without revealing the intention to develop it. This was how Hamburg city council built the Hafen City urban extension, and how the first garden cities were built by the Edwardian philanthropists. In the modern land market such subterfuge is difficult, so this would probably need to be done via equity investment deals with landowners, backed by the fall-back of compulsory purchase. For compulsory purchase to deliver land at lower prices, the compensation code will need to be amended via legislation
In viability language, they’re basically arguing for a return to the land owner that Existing Use Value plus a premium. When the price of land goes from £20,000 per hectare for agricultural to £2,000,000 per hectare for residential use, what is ‘the degree of compensation’ or a ‘fair price’? There really needs to be a clear political decision about the appropriate distribution between the community and land owners of the (often huge) land value uplifts that are triggered by obtaining planning permission. There is a clearly a lot at stake for land owners and the community and a clear, unambiguous, transparent, practical, just and robust procedure for estimating the ‘fair price’ for land is needed. It’s the word ‘just’ that, I suspect, will be the key variable.