Press Release: How reforming the land market can help deliver the government target of 300,000 new homes per year

CPP calls for reform to allow local authorities to capture the uplift in land values instead of the landowner.

A new analysis from the Centre for Progressive Policy shows that the government can reach its target of 300,000 additional homes by reforming the land market. The research estimates that reforms to the land market, which would bring down the cost of land, could deliver:

  • An additional 96,500 homes a year, a quarter of which would be across England’s core cities
  • Of which 36% (35,000) would be affordable
  • This would bring the number of new homes built in the UK up from around 184,000 to 280,00

Potential land value uplift and new housebuilding by Core Cities:

Source: DCLG, National Infrastructure Commission, Centre for Progressive Capitalism

However, a major challenge to reach this target are the UK’s land compensations rules which require that landowners be compensated at values including the assumption of planning permission in the event that land is acquired by the state for new housing rather than the value of the land related to its current use.

This is in stark contrast to many countries in Continental Europe and Asia. In countries with significantly higher housebuilding rates, most of the value of rising land flows to the community rather than landowners. This reduces the speculative nature of the land market thereby creating a far more efficient system as seen in countries such as France, The Netherlands and Germany.

By enabling local authorities to capture the uplift in land values instead of the landowner, there would be a dramatic change in the level of infrastructure investment across England. Prior analysis estimated that this could increase investment by as much as £9.3bn per year which could pay for the necessary infrastructure for an additional 96,500 units per annum, a quarter of which would be in the Core Cities.

Quote from Thomas Aubrey, author of the report:

Until the government stops guaranteeing the flow of monopoly profits to land investors, the high price of land will continue to act as the major barrier to accelerate housebuilding across England. Tweaking the land compensation rules would not only fund large scale infrastructure investment to open up new areas for housing, but it would also level the playing field for small housebuilders and self-build projects increasing capacity across the sector.