A Land Value Capture approach to Social Housing Provision

Shelter has published the final report of its cross-party commission on  Social Housing setting out the need for 3.1m new social homes over the next 20 years.

The report makes the case that council houses and social housing should be available to more than just the people in greatest need and those saving to buy. As well as the 1.3 million people it estimates are in greatest need because of hazardous homes, overcrowding, homelessness and disabilities, the new homes should be accessible to a further 1.2 million young people and 700,000 older people trapped in private rent. The commission puts the provision of housing on a par with health and education.

The plans have been costed at up to £225bn. But savings to the £21bn annual housing benefit bill and the economic boost created by the programme means it would pay for itself inside 40 years, according to fiscal modelling for the commission by Capital Economics

The analysis suggests that that two-thirds of the annual investment cost of £10.7bn a year would be clawed back through housing benefit savings and extra tax revenue and the programme would pay for itself in full after 39 years.

Delivering 3m+ social homes by 2040 will require half of the 300,000 annual house building target to come from the public sector.

Key to this objective is the cost of Land. Build costs of new developments have increased by more than 40% since the financial crisis almost entirely due to the cost of land.

A key recommendation in the Shelter report is that government should reform the Land Compensation Act 1961 so that Landowners are paid a fair market price for their land, rather than the price it might achieve with planning permission that it does not actually have.

It could do this most simply by amending Section 14 so that no account is taken of any prospective planning permission in land designated by local authorities or city regions for infrastructure including housing; amending Section 17 so that Certificates of appropriate alternative development cease to apply in those areas designated by local authorities or city regions for development.

With the pressures on the private care home model, the issue of building more council-run residential care and nursing homes is critical, as well as the provision of both assisted living (also known as extra-care housing) and sheltered housing that is made available to over 55’s. So too is there a need for supported housing for those who are homeless, people living with mental illness, learning disabilities or recovering from substance misuse, people who have spent their childhood in care, are fleeing domestic violence, or those who are elderly and need extra support to live.

While the lifting of borrowing caps for local authorities was announced last year, this has to be coupled with access to development land at current use value to assist local authorities in the provision of necessary housing. Land Value Capture at source is critical to delivering the public housing needed.

* Joe is a member of Hounslow Liberal Democrats and Chair of ALTER.

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  • Joe, they are not planning on a reduction of the number of private houses being built. If you look at the details of the report it suggests the following social housing numbers:

    2019 40,000
    2020 73,000
    2021 89,000
    2022 99,000
    2023 104,000
    2024 110,000
    2025 115,000
    2026 120,000
    2027 130,000
    2028 141,000
    2029 151,000
    2030 167,000

    Our plan is to get to 300,000 new homes by 2027, which they haven’t reached by 2029.

    Also their increase figures seem odd – 18.3%, 7.5%, 4.3%, 2.1%, 2.05%, 2%, 1.96%, 3.8%, 4.1%, 3.6%, and 5.5%.

    I think it is unlikely that the private number of houses being built will just stay at 140,000 as they suggest. As it has increased by 5,000 or more a year since 2012 we should assume it will continue at this rate reaching 160,000 in 2022 and 185,000 in 2027. We should also assume that the Conservative government doesn’t take any action on building more social housing, with it increasing by 1,000 a year until 2022 up to 32,000. I think it is optimistic to think there could be an increase of 33,000 more social houses in one year. I think it is more likely we could achieve 20,000 more for the first three years falling to 15,000 extra and then 10,000. Therefore social housing numbers could increase to only 117,000 by 2027 and we just make our target.

  • Sue Sutherland 12th Jan '19 - 1:38pm

    I think I’m misunderstanding the point about the reform of the Land Compensation Act because it sounds unfair to me. If a local authority has designated land as suitable for housing surely it should pay the going rate because it’s most unlikely that planning permission won’t be given on that land isn’t it?
    If local authorities designate land for social housing or a specific percentage of social housing then that might affect the cost of land without the LA appearing to be totally unreasonable about its’ value.
    I’m also wondering whether LVT might help in this case?

  • Katharine Pindar 13th Jan '19 - 12:50am

    Agreed, we should surely be backing this well researched and important report from Shelter, Joe, on this urgent issue. I hope we may have the chance to do so at the York Conference in March.

  • Duncan greenland 13th Jan '19 - 2:31pm

    While fully supporting the Shelter analysis,I wonder if more attention needs to be paid also to the long term mix between owner occupied and rented accommodation ; law reform to allow the genuine long term security of tenure in rental accommodation that exists in several other European countries should be looked at closely as part of the solution ?

  • Duncan,

    security of tenure has certainly been a key focus of Libdem housing policy development. Shelter also recognises its importance in its report on Social Housing saying:

    “Social renters are more protected from eviction, but they face stigma and indifference – and too often, their complaints go nowhere. Too many private renters are stuck in insecure, unaffordable tenancies; too frightened to complain about poor conditions or rent increases for fear of eviction.”

    “We need:
    – a new regulator for all renters, to proactively inspect and enforce high standards
    the removal of barriers for social renters seeking a solution to their problems
    – permanent tenancies for private renters
    – a new independent tenants’ organisation to represent the views of social renters to government”

    The German model with a high proportion of private renters versus owner-occupiers appears to provide for quite a stable and more affordale housing environment.

  • Joe, in your post of 12th Jan 3.00 pm you quote lots of the report but don’t address my points. Which were that their estimates for the number of extra houses which can be built every year vary widely and make no sense. Plus it is unrealistic to suggest 33,000 more social houses could be built in one year.

    In 1935 according to Shelter 288,000 private houses were built while only 35,000 social houses, which refutes your assertion, “It has never been possible to build 300,000 homes per year in this country without a large program of social housing development”.

    In 1968 again according to Shelter, 352,000 new homes were built and only 42.3% were social.

  • Michael,

    as I noted above – the Shelter report is an exceptionally high quality and thorough piece of research involving conversations with 31,000 people and a cross-party commission of former senior politicians together with housing and economic experts in the field. I have no reason to believe that the forecast build rates are not quite robust

    Section 2 of the Shelter report provides a graph of Housebuilding In England 1923 – 2018. As you will see since the enactment of the Town and County Planning Act 1947, it has only been possible to reach 300,000 homes per year with a substantial element of social housing development.
    In 1968, the peak year for development in the post-war period, 42.3% of the 352,000 homes built were social housing i.e. 148,000 of the total.

  • Sue Sutherland 13th Jan '19 - 7:15pm

    Thank you Joe for your detailed answer to my query. I have followed the link you provided and realise that a considerable body of opinion is behind changing the law so that land for housing can be bought at current value or current value plus a small increase. I sincerely hope that this is the silver bullet to solve our housing problems.

  • Joe, it is disappointing that you couldn’t just admit that you were mistaken to write, “It has never been possible to build 300,000 homes per year in this country without a large program of social housing development”. And then state that you should have written, “since the enactment of the Town and County Planning Act 1947, it has only been possible to reach 300,000 homes per year with a substantial element of social housing development”. Which would have been correct. It might be possible to reach 300,000 with only 100,000 social homes being built.

  • Peter Hirst 15th Jan '19 - 5:01pm

    It is wrong that land owners reap all the benefit of land achieving planning permission. Some of it should go to the public purse. I’d have thought doubling the value is more than adequate.

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