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Report: Planning approval means a multibillion-pound profit for landowners

Words: Laura Edgar
Land sold / Shutterstock_13365145

Landowners in England profited more than the global profits of Amazon, McDonald’s and Coca-Cola combined – more than £13 billion in 2016/17,  according to the Centre for Progressive Policy and the National Housing Federation (NHF).

In 2014/15, landowners made a profit of £9 billion.

Research by the Centre for Progressive Policy suggested the combined profits of the UK’s biggest energy suppliers was £913 million in 2017, while the NHF said private developers are increasingly outbidding organisations trying to build social housing.

Furthermore, the report shows that agricultural land becomes 275 times more expensive once it receives planning permission. Two years ago, it increased that value by 100 times.

If more of the uplift in land value was captured, the organisations contend that the government could use it to build up to 100,000 affordable homes a year, as well as the accompanying infrastructure.

Today (19 September), the Centre for Progressive Policy and the NHF have called for a “radical overhaul” in land sales so that this profit is captured and used for “much-needed” new affordable housing and infrastructure. The organisations maintain that delivering more affordable housing could help the government bring down its £25 billion housing benefit bill, which helps people on low incomes afford more expensive rental accommodation in the private market.

Housing associations are being priced out of the land market, with private developers often building fewer affordable homes, meaning that more homes are sold for a higher price, allowing them to pay higher prices for land.
The report calls on ministers to change the Land Compensation Act 1961 to allow public bodies to capture the increase in the value of land once planning permission has been granted.

This would bring the UK into line with most of Europe and Asia.

Similarly, last week (13 September), the Housing, Communities and Local Government (HCLG) Committee said the government must reform the Land Compensation Act 1961 to fund the infrastructure and local services required to meet its housing targets.

The committee’s report states that there is scope for central and local government to “claim a greater proportion of land value increase through reforms to existing taxes and charges, improvements to compulsory purchase powers, or through new mechanisms of land value capture”.

David Orr, chief executive at the NHF, said: “This research shows the astronomical sums that landowners have been able to pocket before they even build a single new home. At the same time, the numbers of people in desperate need of social housing is sky-rocketing – we have to build 90,000 new homes for social rent every year to meet this need.”

He said the key cause of the housing crisis and the broken market is the way land is bought and sold.

“Our proposal would be a significant step, which would show that the government is truly determined to tackle the housing crisis. There are also other steps that that the government can take straight away, such as ensuring that at least 50 per cent of homes built on disused public land are affordable to people on the lowest incomes.”

Thomas Aubrey, adviser at the Centre for Progressive Policy, said: “This report provides further evidence how city and county regions can use the uplift in land values to help fund the infrastructure and affordable housing that the country urgently needs. People need to be connected to jobs and close to schools and hospitals. By reverting to how the country built the garden cities and the new towns, the government could create economic opportunities for everyone and enable a far more inclusive form of economic growth.”

Image credit | Shutterstock