All Party Parliamentary Group on Land Value Capture calls for urgent action on housing crisis

Tacking the housing crisis requires a concerted cross-party effort at all levels of government from Downing Street to the parish council.

The All Party Parliamentary Group (APPG) report Capturing Land Value for the Public Benefit to be published on 31st October 2018 says:

There needs to be greater devolution of Land Value Capture mechanisms to mayoral and local authorities. Following the announcement by the Prime Minister of the government’s intention to remove the cap on local authority borrowing, consideration should be given to a netting of land assets from existing prudential borrowing limits; reform of the 1961 Land Compensation Act, to provide for public acquisition of land at close to existing use values; replacement of business rates with site value rating; and making council tax more proportional to land rental values.

The report calls for:

• The enacting of legislation with a view to devolving powers, enabling Mayoral and local authorities to deliver necessary infrastructure and housing.
• Coupled with the announced removal of the cap on local authority borrowing, netting off of land assets against overall public sector borrowing limits.
• Reform of the Land Compensation Act of 1961 in order to make it possible to meet the goal of building at least 300,000 new homes each year.
• Collaboration between central and local government to facilitate the public acquisition of land, at prices as close as possible to existing use values.
• The assembly of land for affordable residential development.
• Local authority access to finance for new home construction.
• A rapid increase in the supply of truly affordable housing.
• An increased focus on collection of land rents for the public purse.
• The reform of current property taxes – Council Tax and Business Rates.

The APPG was officially inaugurated in February 2018 to create a forum for Parliamentarians and interested stakeholders to discuss and develop innovative proposals to capture increases in land value, for the public benefit.

The first report of the APPG on Land Value Capture will be presented by the Chair of the group, Sir Vince Cable MP; Vice-Chairs Ruth Cadbury MP, Caroline Lucas MP; and David Drew MP.

Sir Vince Cable MP said;

Evidence submitted to the inquiry has demonstrated that Land Value Capture and collection of annual ground rents has the potential to deliver a far-reaching impact on enabling housing development; on recovering the cost of public works; on stabilising house prices, incentivising downsizing for (mostly older) property owners; and importantly, reducing income and wealth disparities.

Vice-Chair, Kevin Hollinrake MP said:

3.6 million people in the UK live in poverty after housing costs and young people were spending three times more of their income on housing compared to their counterparts in the 1960s. Gains should be shared more fairly between landowners and communities. This is the principle behind land value capture.

Liberal Democrats have already adopted site value rating for business rates at the 2018 autumn conference. Next year it is hoped that progress can be made across all parties with the reforms highlighted in this report.

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

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8 Comments

  • Peter Martin 29th Oct '18 - 12:09pm

    This is just another general expression of a desire to make housing more affordable without house prices actually having to fall. In other words we in the UK want affordable high-priced housing for our young people.

    I’m not sure how this is going to be possible. If house prices stay high then young people are priced out of the market. If house prices fall then millions will be trapped in negative equity and the economy will collapse too. I suppose we could stoke up a general inflation so that wages and prices (except house prices) rise quickly but that’s probably not going to go down too well with the older generation.

    There are no easy options. The problem has been, of course, that Govts have relied on the creation of cheap credit to keep the economy moving. Cheap credit has created a asset price bubble in the housing market.

    Land Value Capture or Land Value Taxation may well have its place in a sensible mix of taxes but it won’t do anything at all to solve this particular problem.

  • Presumably, if land value taxation proceeds go to local authorities, there will me more incentive for them to improve infrastructure as they will reclaim some of the investment from the tax. However, it does seem a tad regressive with better infrastructure causing more businesses and so more tax receipts. Some ratio of the proceeds going to central and local government might work.

  • Peter Martin,

    this article gives a succinct summary of LVT http://thefultumpost.com/conservative-case-land-value-tax/ from a Conservative perspective:

    “Those with education in macroeconomics may worry about the efficiencies of a Land Value Tax, and its effect on the economy. However, LVT is favoured by even the most free market of economists, with Milton Friedman describing it as the ‘least bad tax’, and this is for good reason.

    In theory, there is no inefficiency at all which comes from the implementation of LVT, making it unique as taxes go. To understand why, we must consider the market for land. Usually, the implementation of a tax in a market results in a reduction in the supply for the marketed item. Land, though, cannot have its supply altered – supply is fixed. This means that any tax on land cannot be passed onto the buyer through a reduction in supply, so land prices remain constant.

    There is a stark contrast here with Britain’s current stamp duty tax on housing – the supply of housing can easily be restricted, meaning plenty of the tax is paid by buyers.

    By implementing a Land Value Tax, and imposing a tax on landowners which they cannot easily pass onto buyers, we would be seeing a truly fair and progressive tax in action. LVT is almost impossible to avoid as land, unlike income or wealth, cannot be transferred abroad to a tax haven. Further, landowners are primarily the most well off in our society, and benefit the most from infrastructure and other public investment spending projects. It is only fair that the funding for these projects comes from a tax on the value that they create.

    Conservatives must support taxation on the value of land to modernise the UK economy. If they do not, it will become even more difficult to tackle issues like land banking and the housing shortage, while its implementation could allow for scrapping outdated taxes such as corporation tax and help to bring about a surge in productivity and growth. The economic case is clear – but putting it to the electorate will be significantly less so.”

    Having just seen a conservative budget committing £100 billion of additional spending and deliberately increasing the deficit, is it not possible that we will see a Conservative Chancellor agreeing with Vince Cable and John McDonald and the Green Party on the efficacy of Land Value Tax?

  • Benjamin,

    “Regarding the report, it is based on ignorance and expediency regarding UK housing supply.Data is unequivocal there is no shortage and only 160,000 new homes need to be supplied in order to keep up with household formation.”

    The report is based on the evidence of those with responsibility for delivery of housing (Mayor’s and local authority leaders) and researchers with longstanding experience and expertise in the housing sector. The last page of the report includes a list of contributors.

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