Land values, Property markets and Labour Party politics
Labour Land Campaign Meeting
February 22, 2014
Property and the Crisis
• Property and land speculation were at the heart of the
financial/banking crisis
• After the crash there were expectations of collapses and
restructuring of the property sector; of property re-regulation; of
public intervention in land and planning, and housebuilding; even of
taxation of land values
• But did anything change? – the sector did not collapse; there was
retrenchment ; government stepped in to prop up the sector; the
land ownership/value question went quiet again
• What of the Left response?
• Use example of housing shortage; this is not only land and property
issue by any means but it reveals some of the the main issues for the
Left
The housing shortage
Why the low levels of new build delivery?
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Usual reasons:
(a) Demand factors: supply of credit and lack of affordability of new units
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(b) Supply factors: Prices not rising fast enough for make development viable; lack of
land and planning permissions for housing;
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“The underlying constraint on housing is the supply of land” Barker. Interim Report
p.10, HM Treasury 2003
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BUT these are symptomatic issues not the real causes. The key to understanding low
levels of housing delivery lies in the monopoly character of the HB sector and the
nature of the landowner/housebuilder business model
This model of delivery has achieved almost complete domination of public policy about
land and planning for the past 30 years i.e. Since the New Towns programme came to
an end.
Land banking
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The size and quality of commercial landbanks is a key indicator of future trading prospects for the
sector.
There are two types of land bank (a) Short term “oven ready” land banks with planning permission
(b) Strategic long term land held mainly on options
The main stated reason for landbanks is to maintain a “pipeline” of land to plan and deliver future
development
It is about much more than that; the creation of value (for their shareholders); and the capturing of
land value by HB companies and landowners.
There are two elements to this value creation;
(a) Short term asset appreciation. Value is created first, by development land being included in
local authority plans and, again, when planning permissions are granted and infrastructure is
provided.
(b) Long term asset appreciation. “Land value for housing rises considerably faster than the rate of
growth of the economy as a whole” p137 Calcutt Review.
Therefore, it would be irrational NOT to hold/control land as an investment
Long term trend in house prices
Land and the Housebuilders business model
• “Housebuilders are not in the business to serve the public
interest, except incidentally. Their primary concern is to deliver
profits to their investors” p. 1 Calcutt Review, 2007
• “The perception that land for housing development is in short
supply is a key element in the House builders business model”
p.35 Calcutt Review, 2007
• i.e. The key to it all is inflation in land value and house prices
Concentration of power over land
• After each crash and recovery (1973, 1989, 2008) the large
housebuilders have grown larger and taken a greater share of the
new homes market
• Over the last 20 years the large builders (over 2000 homes pa) have
increased their share of the total new homes market by 20% to
while smaller builders have reduced their share by 20%
• Over the last 20 years their land banks have increased
proportionately, and continue to do so. Locally hope values have
been spread out further around all major towns and conurbations
as more land has been identified
• Our research shows that the top 5 house-builders, who deliver 35%
of total UK supply of new housing, have 12 years of UK total annual
supply (at current rates) in their land banks
Agglomeration
Planning for New housing has been captured by the
landowner/HB sector
• State has become increasingly reliant on HB/landowner sector for
delivery of new housing; neither government or the private sector
provide opportunities in the form of capital, land or capacity to
enable other sectors to enter the field.
• HB model may have failed to meet public policy objectives but it
successfully delivered private asset value
• HBs and landowners have captured the Local Plan Inquiry and the
Appeal system . Objections from the housebuilders dominate Core
Strategy Inquiries arguing that strategies are “unsound” if they do
not include enough housing land (even when HBs have not built on
the land they own)
• They have also captured crucial local plan policies such as on
affordable housing because they argue local authority requirements
make their schemes “unviable”, at which many local authorities
have backed off
The Left Response:
Planners Network UK Manifesto
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Land reform; extend public/community land ownership
Communities to have a long term stake
Fair compensation
Strategic and local planning
Fair and transparent taxation of land
National skills programme for public interest planning
Local authorities more power and money to build
Community power and funding to build themselves
Root and branch reform of the house building industry; break
up of the big six
How does this compare with Labour Party Initiatives on planning
and land
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“Use or Lose it” – refer to Lyons Commission
What will come out of it?
Garden Cities – land value capture/development agencies
Duty to Cooperate
Reinforcing Localism
Limited by economic policy context – the straightjacket
LP Planning Papers published in Nov 2013
What not yet in LP policy announcements
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statement of the economic and social role of town planning
a taxation/funding strategy
a public land strategy
tackling lack of competition in the HB sector
rejection of viability rules
clarification of whether there will be a strategic planning level
re-statement of sustainability principles
• NB Danny Dorling thesis
Conclusions
• Economic revival is property led; the sector has survived and
thrived
• Divided public views on house price inflation
• Labour and intervention: financial straightjacket; resistance to rent
controls or tackling uncompetitive HB sector
• Yet there is some movement on council tax banding/or mansion
tax; on boosting housing supply; perhaps on affordable housing;
scrapping the Bedroom Tax
• How to organise?
- Party lobbying
- Community action – Appeals; Self build
- Municipal housing initiatives e.g to build
council houses; take on developers; campaign collectively