Owl says: well, duh! How come it took this long to figure out! And the chances of anything being done while some of the big landowners are MPs and many many are Tory party donors … nil.
“Britain should limit the windfall gains of landowners by freezing the value of plots newly designated for housing, according to a thinktank urging sweeping reforms to tackle a national shortage of affordable homes.
Calling on the government to pursue land market reforms similar to the German model, the Institute for Public Policy Research said planning authorities should be given new powers to zone land for development and freeze its price.
It said speculation by landowners awaiting planning decisions that can trigger vast increases in the value of a plot, had the effect of exacerbating wealth inequality and was a “driving force behind the broken housing market” in Britain.
Luke Murphy, associate director at IPPR, said: “Conventional wisdom suggests that the UK has a problem with house prices, but the reality is that we have a problem with land.”
The sweeping reforms would mean national and local government organisations would benefit from the extra value generated by planning decisions, which could be used for local infrastructure or affordable housing, rather than landowners accruing massive returns from the state approving changes in the use of land.
Using the example of a hectare of agricultural land in Oxfordshire that would typically be worth about £25,000, the IPPR said it could skyrocket in value by more than 200 times on approval for residential development to be worth about £5.6m. While the landowner stands to benefit from approval, the increase drives up the cost of building homes.
Two years ago on average the price of land had risen to more than 70% of the price paid for a house, which the IPPR said could rise to about 83% over the next two decades given current trends in the housing market. Options to remedy the problem could include councils buying land and selling at higher prices to developers, or entering into partnerships with landowners to share the proceeds of the sale.
About half of net wealth in Britain is tied in up in land, having risen by more than 500% in the past two decades to stand at £5tn. Although the value of property built on land across the country has also risen, it has increased at a much slower rate, of around 219%.
According to a 2010 report for Country Life, a third of Britain’s land still belongs to the aristocracy, while some of the oldest families in the country have held on to their land for several centuries. The IPPR said the top 10% own property wealth averaging £420,000 in value, compared with the bottom 30% who own no net property wealth at all.
Murphy said: “Wealth inequality, a poorly functioning housing market, an economy focused on unproductive investment and macroeconomic instability are all negative consequences of our current speculative land market. … ”