Reforming the Land Market, Delivering More Homes

The availability of land (brownfield or green space) vs demand for development vs Planning Law is a very English predicament, bound by laws with historical context and tradition.

In an attempt to break this cycle the second draft of the Greater Manchester Spatial Framework (GMSF) was released in July. It is aiming to maximise the opportunities for town centre and brownfield development.

But can this worthy and ambitious action deliver, given our current, complex planning laws?

The Centre for Progressive Policy, a new think tank focused on inclusive economic growth, released an analysis and working paper in April ‘Reforming the Land Market’.

The report claims that by reforming the UK’s 1961 Land Compensation Act (the mechanism for Local Authority compulsory purchase) we can gain an additional 96,500 homes a year, of which 36% (35,000) would be affordable. This would bring the number of new homes built in the UK up from around 184,000 to 280,000.

This report highlights that the UK’s planning regulations create huge incentives for investors to hold land as an asset rather than build on it.

It argues that the land market works as a function of the compensation rules set out by our legislation, these rules define the levels at which land trades at. The compensation rule assumes that land will be awarded planning permission in the future, so therefore land trades at levels close to residential value. If the rules did not award compensation for prospective planning permission, as in Germany, then land values would trade at levels close to either agricultural or industrial land.

Germany’s housebuilding rate per 1,000 population is 4.7, compared with The Netherlands at 6.0 and the UK’s  being 3.6 between 1975 and 2013. In countries with significantly higher housebuilding rates, most of the value of rising land prices flows to the community rather than landowners and thus buying land is less speculative, more constructive.

So in conclusion such a reform would not be beneficial to landowners but hugely beneficial to the community. The question of statute reform is a very complex and subjective matter but I do urge you to read the Progressive Policy report, it’s only 5 pages, and also the article by Martina Lees in the Sunday Times.