The land market in the UK is dysfunctional and needs to be reformed to create a housing market that works in the way it needs to in order to cope with demand for more homes, it is claimed.
Land is an essential factor in all economic activity but, if it is not properly managed and regulated, it can play a destabilising role in the housing market and the wider economy, according to a new report from think tank the IPPR.
It says that soaring land values have helped drive growing wealth inequality, creating the conditions for a broken housing market and change is needed to allow more affordable and better quality homes to be built.
The report suggests that reform of the land market should be focused on reducing the financial speculation that occurs in land and sharing the benefits of increases in land values for the benefit of the public good.
‘Conventional wisdom suggests that the UK has a problem with house prices but the reality is that we have a problem with land,’ the report says and suggests that the Government should reform compulsory purchase laws to allow local authorities to and public bodies to buy land a fair value that enables the delivery of high quality development.
It also calls on the cap on local authority borrowing for house building to be scrapped and for new guidelines to be set by the Government for a minimum proportion of all new housing developments that must be genuinely affordable.
The report suggest that there should be a new tax system with both council tax and stamp duty being abolished and that planning authorities should be given the power to create zones of land for development where the price is frozen, as happens in Germany.
‘Reforming the land market will help bring down the cost of building homes and help more young people to own their own home while enabling others to rent at affordable rates,’ the report says.
It concludes that land regulation and a more progressive tax system focused on land will lead to a better functioning housing market ‘capable of delivering the number of homes we need to meet demand, particularly genuinely affordable homes’.
