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9 March 2018updated 09 Sep 2021 5:03pm

Land reform is needed sooner rather than later

While long-term reform to the land market is expected, there are changes that can be made in the meantime which could speed up desperately needed housebuilding.  

By Brian Ham

The scale of the housing crisis and the misery it causes means that we have to do things differently. Tonight, over 15,000 people are homeless. A further 80,000 will go to bed in temporary accommodation. Over 13,000 young adults will fall asleep in their parent’s home, perhaps in their childhood bedroom.

One million households in the private sector will be worrying about being able to pay their rent. Over 680,000 people will be sleeping in overcrowded homes. Land, how much it costs and how we can get a hold of it is the crucial factor. Not least because it makes up such a large component of the actual build cost.

Independent think tank Civitas estimate that for every new home built in 2014/15, around £60,000 went to the original landowners. What happens to land matters to everyone; even local authorities with the powers for compulsory purchasing of sites for housing. In truth, by the time they have purchased the land they are struggling to find the money for the roads and schools needed to make a community viable.

In response, a range of parties have called for legislative reforms, including to the 1961 Land Compensation Act. This law enables landowners to receive prospective value from land, not just that of its current use. Private landowners can benefit enormously from housebuilding and there is a growing consensus across the political spectrum that the balance ought to be looked at.

Those battling against change will see it as nothing less than an attack on private property rights. But just look at the cast of those now arguing for change. It is everyone from the Labour Party through to Peter Franklin, former special advisor to Greg Clark at DCLG, and even David Cameron’s former planning minister, Nick Boles MP.

Any reform to the 1961 Land Compensation Act would require primary legislation, and, given the level of controversy it is likely to bring about, could take up to three years to pass. Even with Labour support in the Commons it is difficult to see it passing quickly through the House of Lords. So this won’t be a quick-fix. Indeed, there are many other changes which can bring about quicker wins – changes to the Community Infrastructure Levy and “Section 106” planning gain for a start.

Whilst we shouldn’t shy away from policy change that would be controversial we ought to set one fundamental test. Will it result in more homes, more quickly, for the people who need them? Bringing land forward for development centres on relationships between landowners, local authorities who grant the planning permission and developers. Success depends upon each partner feeling fairly treated and having an incentive.

If reform of the Land Compensation Act prevents land owners from receiving some or any of the prospective use value, this relationship is broken.

In the current system, land brokers act as a convenor between the landowner and the developer. Alone, these organisations unlock one-third of all sites that secure planning permission, with the potential to develop around 264,000 homes.

Any changes risk stalling these homes, many of which are already running through the system, as they may no longer stack up. It’s not to say that reforms to the Land Compensation Act should be ignored, but that we should be having conversations now about making this workable long-term, in a way that accelerates the unlocking of development and that doesn’t damage relationships with landowners. There has to be “wins” for all sides, otherwise the pipeline of new sites will just dry up.

The issue with land value capture is also not just about the amount of money in the pot, it’s about ensuring that the money is used to improve communities, providing developments with the infrastructure needed. Reforming developer contributions, through Section 106 and Community Infrastructure Levy, is a quick way to increase fairness and deliver the community infrastructure needed.

Contributions are agreed as part of the planning approval, and values are normally agreed prior to the start of the development; shortcomings in these agreements are now familiar as many developers negotiate over viability, which in itself slows down the building of homes. Contributions are calculated on expected sales values, which leaves scope for a gap to emerge between expectations and reality.

Changing it so that contributions are taken at the end, based upon achieved values, would mean local authorities receive genuinely fair contributions and the whole process is sped up. Some smart planning authorities are now demanding a second bite of the cherry, but it’s not yet widespread practice.

Such reform wouldn’t need primary legislation and thus could be actioned in much less time. We’d see additional revenue for local authorities immediately, which means additional capacity to build the affordable homes and infrastructure which is needed.

As executive director of development for Home Group, one of the UK’s largest housing associations, my day is preoccupied with how we build more homes. Whilst we ourselves have ambitious targets, in terms of quantity and quality, we want to do more.

However, without some fundamental reforms and a further look at what determines land values our efforts will be limited. Such reforms must equally keep those households at the centre of our efforts. They need homes tonight, and cannot wait years for legislation to be passed to build new homes.

Having bold conversations about how our land market works is important, but we must strive for solutions which builds homes tomorrow, for the people who need them tonight.

Brian Ham is executive director for development at Home Group.

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