"Labour is planning to give local officials sweeping new powers to buy land cheaply and develop on it, as part of the party’s new “pro-building” agenda. Party sources say that if elected next year, they will pass a law to allow local development authorities in England the power to buy up land at a fraction of its potential cost if they want to build on it. The new law will allow officials to buy land under compulsory purchase orders without having to factor in the “hope value” – a massive price premium granted to any land on which developers hope to secure planning permission.”
There are major implications from this policy approach but the main objection is that it’s a non-solution to a non-problem. Its a non-problem as it is based on the assertion that we do not build enough houses, despite evidence that we actually produce a surplus each year, which has resulted in 1.5 million more dwellings in England than households. Boosting supply is therefore not required. It also assumes that with more houses built, more people will be able to afford to become home owners, again falling home ownership reflects changes in mortgage policy not supply.
Its a non-solution as it does not provide the policies to ensure houses are affordable, particularly the root cause of house value inflation - namely the recent long run of low interest rates which have boosted house values. [See future blogs for a more detailed analysis of this].
1) The view that land should be cheap misses the point that land is a scarce resource and should be priced accordingly.
2) It is implied that the ‘hope value’ the difference between agricultural value and value with planning permission for housing would accrue to the local community/authority. This presumably means that houses would still be sold at ‘market value’, hence housing would not be cheaper.
3) If houses were sold at a lower price of course, the market would result in the new owner being able to obtain the difference in value.
4) Local authorities would have an incentive to develop regardless of actual local need and environmental impact.
5) In areas like Cornwall, the demand for holiday homes and holiday lets would continue to boost house prices, while with more properties being built, a large proportion of dwellings could end up in these categories.
If we want to make it easier for people to buy or rent, we need policies that deal with the actual causes of high prices/rents. This policy fails to do that.
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