Fix the UK’s broken land laws to solve the housing crisis
Tony Murrell is the author of the e-book ‘How to Solve the UK Housing Crisis’, all the proceeds of which are being donated to Shelter – the housing and homelessness charity. He was a housing professional for 30 years, spending the last 15 of them as a local authority director of housing.
For far too long the country’s housing policies have been a race toward the bottom. The only way to turn that around is to reform its antiquated land laws
The UK’s housing market is now so deeply dysfunctional it’s creating widespread social damage. It’s estimated one child every eight minutes loses their home every day, a statistic so shameful it’s a national scandal in its own right.
The country’s housing market has become comprehensively broken as a result of public policy failure over many years. What we are experiencing is the catastrophic long-term effects of the government’s ‘right to buy’ legislation, its deregulation of the private rented sector, its deliberate underfunding both of the maintenance of Council housing and the building of homes for social rent, and its failed stewardship of the country’s land and planning system. This last failing is starkly exemplified by the cynical marketing con trick that is so-called ‘affordable’ housing.
Right at the heart of the problem is a dusty old piece of planning legislation dating back six decades. It’s now chronically unfit for purpose, a continuing open invitation to excessive corporate greed, and urgently needs to be reformed.
The Land Compensation Act 1961 sets a floor on the price of land based on the most profitable uses imaginable. That means a landowner whose land might be suitable for genuinely affordable housing for those on low incomes can always choose to hold it back from development in the sure knowledge of receiving a better price tomorrow for a standard new-housing-for-sale scheme.
There’s growing political support to dismantle this Act and replace it with a law requiring landowners and developers to share the windfall profits of new housing developments with local authorities.
Only by mending its broken land laws in such a way can the UK solve the housing crisis that’s created the continuing insecurity and lack of affordability being endured by ‘Generation Rent’ and caused such severe problems for those at the sharp end: low earners and otherwise vulnerable households.
The housing crisis deepens
The situation is dire. Overcrowding, homelessness and rough sleeping have reached epidemic proportions. There are currently about 320,000 homeless people around the country, the highest level in a decade. Councils spent £1bn on temporary accommodation in 2018, up a massive 70% from five years before. The number of households in temporary homeless accommodation went up by more than 20% in the last 3 months of 2018 alone.
Hundreds of families in urgent need of homes are being given temporary accommodation in converted shipping containers by councils struggling desperately to cope with the ever growing homelessness problem. Some of the temporary accommodation provided even has no windows as rules on minimum space for dwellings are being circumvented thanks to seriously flawed laws about converting offices to residential use.
There’s been a sharp rise in the amount of illegal renting of outbuildings in London, with tens of thousands of people occupying such dangerously substandard accommodation. The majority of so-called ‘affordable’ housing provided on new developments isn’t affordable at all because it’s provided at 80% of open-market prices – and these are colossal.
Major drive needed to build rented homes for people on limited incomes.
While there’s an urgent need for more homes built for social rent there’s no sign of it being provided in anything remotely close to a sufficient quantity. The small number of such homes built in 2018 provided accommodation for a mere 0.5% of the 1.2 million households on Council Waiting Lists.
A cross-party Commission spearheaded by the respected charity Shelter has called for 150,000 homes for social rent to be built a year for the next twenty years. However, crucially, Shelter also say that while obviously more direct public investment will be needed to fund such a new wave of housing for social rent this should only take place after land reform has happened. They point out that the problems of financing such housing are inextricably bound up with the problems of accessing the land on which to build it and argue ‘It’s not enough to pour more money into a broken system. The government must also act to reform the broken market for land.’
Urgent need for land reform
If they don’t do this the additional demand for land generated by a new social housing programme would instantly be factored into land prices, bidding them up and making land even more expensive. And land prices have already risen to astronomically high levels. Between 1995 and 2018 the value of land across the country went up 550%. In some areas planning permission for residential development can create ‘planning uplift’ gains that make what was formerly agricultural land up to 300 times more valuable.
Developers currently compete in a land market that’s incredibly competitive, designing schemes to maximize the profitability of each individual plot of land so they can offer the highest bid to landowners. As things stand the sky-high cost of land makes it virtually impossible to build good quality developments with enough homes at social rents.
Under the present deeply flawed system councils and housing associations would have to pay grossly inflated prices for land to be used for such housing in the volume called for by Shelter and it would therefore need colossal government subsidies. Unless another way can be found this would be a huge waste of public funds.
‘Help to Buy’
A startling example of just such a waste of taxpayer’s money is the government’s disastrously ill-conceived ‘Help to Buy’ (HTB) scheme – or ‘Help to Sell’ as it’s caustically been dubbed. It’s involved pumping a massive £20bn-plus of public funds into the new build market, causing new build house prices to surge an eye-watering 25% ahead of second-hand homes. It’s also meant those so-called ‘affordable’ new build homes that aren’t actually anything of the sort have become even less affordable.
HTB resulted in a major boost to the profits of the developers (The profits of the UK’s five largest house builders increased by 400% between 2012 and 2016) while making affordability that much worse for the majority of those most in need of help.
The way ahead
Not only Shelter but a broad range of think-tanks across the political spectrum believe the way forward now is for the government to introduce primary legislation requiring landowners and developers to share the planning uplift windfall they get fifty-fifty with councils. It’s estimated this could slash around 40% off the total development costs of the new scaled-up programme of social house building that’s required to meet the desperate need for this accommodation.
Such a reform represents the only real solution to the housing emergency the UK faces and importantly would also provide funding for much needed communal infrastructure such as schools, parks, medical centres, transport and other service. Such infrastructure is essential to create successful communities and has been noticeable by its absence in most recent housing developments.
Sajid Javid, the Chancellor of the Exchequer, has been quoted as saying, ‘It’s vital we now take radical steps because of the impact of the housing crisis on ordinary families, ordinary working men and women’ and that land reform of the kind proposed would be ‘an efficient and morally justifiable tax.’ Tony Pidgely, boss of Berkeley Homes, strongly supports such reform too. He calls for landowners and developers to be forced to share profits of new housing developments with communities in this way, arguing ‘the whole of society should capture that value. It’s about decency.’
But when it comes to the crunch will the government be prepared to take such radical action? After all, this was a party that only 3 short years ago was hell-bent on the virtual annihilation of new build housing for social rent. What’s crystal clear is that if they don’t carry out this radical reform and give it the urgent priority it merits the present deplorable situation will get much worse. What next then: each day one child losing their home every six minutes, every five, every four…? The race to the bottom has got to be turned around. And fast. The human misery it’s causing is unspeakable and its adverse effects on society profound.