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13/10/2017

What do we do about land tenure and property rights?

A housing estate

Housing is becoming exclusive and unaffordable around the world. Reform of tenure is necessary to reverse this harmful trend, argues Geoffrey Payne

For a housing market to work well, it is vital that forms of supply reflect the scale and diversity of demand. Sadly, the British obsession with home ownership, and ‘getting on the property ladder’ has resulted in a dysfunctional system in which housing is seen more as a financial asset than as a place to live. 

The notion of a ‘property-owning democracy’ stems from the time when only those who owned property could vote and this requirement was only removed in 1918 – possibly to avoid large numbers of returning soldiers following Russia by starting a revolution if they could not get their own homes. 

“The solution is to promote a wide range of innovative forms of land tenure”

International experience shows that the nations that suffered most in 2007’s financial crash were those with the highest levels of home ownership. Conversely, Germany, where home ownership was only 41 per cent in 2004 (38 per cent in Switzerland), survived almost unscathed. 

Despite this, property ownership has been promoted globally as the best means of stimulating economic growth, and many rapidly urbanising nations have expanded home ownership programmes.

While the security provided by ownership has certainly increased investment and economic development, the key issue is who benefits and who pays. Those with financial resources can reinforce their economic status and those with land can watch its value increase by withholding it from the market. As prices rise, those in need of a home find the rungs of the ladder are increasingly out of reach. As the sub-prime scandal of 2007 proves, even the sustainability of economic growth is not guaranteed, and putting so many eggs in one basket poses major threats if the bubble bursts. Should this happen in China, it would be far more devastating than in 2007.

The solution is to promote a wide range of innovative forms of land tenure and property rights to meet the needs of a changing world. In parts of Scandinavia, land and buildings can be financed separately to encourage more user control over building design; co-housing enables families to share domestic facilities, while students can live rent-free in care homes if they provide 30 hours of care a month.

In many nations, Community Land Trusts and co-operatives provide affordable housing in areas that would otherwise be unaffordable.

Finally, and critically, the state has a vital and potentially powerful role. Since land uses massively affect land values, and uses are granted or withheld by governments, the state is morally entitled to claim part of the added value through taxes or charges for distribution in the public interest. 

Progress depends upon generating political will to address powerful vested interests and requires sustained public pressure.

Geoffrey Payne is founder of Geoffrey Payne and Associates

Photo | Shutterstock

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