“Landowners Pocket £13bn Profit In One Year Just For Getting Planning Permission”

Is there an election in the air? Tories talking about removing the “stigma” of social housing! You know, the housing they don’t build because, as George Osborne said – why would you when Labour supporters live in them!

https://www.independent.co.uk/news/uk/politics/tories-refused-to-build-social-housing-because-it-would-create-labour-voters-nick-clegg-says-a7223796.html

“Landowners pocketed a staggering £13bn in profit last year simply for securing planning permission while a housing crisis continues to grip the nation.

Research by the Centre for Progressive Policy and the National Housing Federation has unmasked how land-holders are raising massive sums simply for being a proprietor.

Agricultural land now becomes 275 times more expensive once it receives planning permission, even before a single home is built. This is a huge uplift from just two years ago when planning permission increased the value of farmland by around 100 times.

It means proprietors are effectively sitting on a goldmine once planners green-light development on a site they own.

The CPP and NHF report found landowners’ combined profits were more than the global profits of Amazon, McDonald’s and Coca Cola combined and has increased by £4bn over the course of two years to reach £13bn.

Theresa May is due to announce that £2bn of Government funds will be directed towards housing associations to give them long-term certainty they need to build homes.

But the NHF and CPP say a radical overhaul is needed so some land sales profits can be captured and ploughed into the public purse for new affordable housing and infrastructure, such as roads.

David Orr, chief executive of the NHS, said: “This research shows the astronomical sums that landowners have been able to pocket, before they even build a single new home. At the same time, the numbers of people in desperate need of social housing is sky rocketing – we have to build 90,000 new homes for social rent every year to meet this need.

“In the face of a disastrous housing crisis, it is clear that the the broken housing market is simply not delivering. What’s more, the way we buy and sell land is the key cause. Now, we need a fundamental rethink to tackle this fundamental problem.”

It comes as house prices and demand for social homes soar, with housing associations trying to build council housing for poorer families increasingly outbid on land by private developers.

May, who will address the National Housing Federation Summit in London on Wednesday, said the £2bn will be separate to the £9bn of public funding put toward the existing affordable homes programme until 2022.

She will also focus on ending what she calls the “stigma” attached to social housing, claiming some view tenants are “not second-rate citizens”.

The PM will say: “Some residents feel marginalised and overlooked, and are ashamed to share the fact that their home belongs to a housing association or local authority.

“On the outside, many people in society – including too many politicians – continue to look down on social housing and, by extension, the people who call it their home.”

Gavin Smart, deputy chief executive of the Chartered Institute of Housing, said recognition of the social housing sector from the PM was welcome, and added: “But, as the Prime Minister recognises in her speech, it’s crucial that government investment helps housing associations to build the right kind of homes at the right prices.

“In practice this means building more homes at the lowest social rents – which is often the only truly affordable option for people on lower incomes.”

Labour also hit out at the Government plans.

John Healey, Shadow Housing Secretary, said: “Theresa May’s promises fall far short of what’s needed.

“The reality is spending on new affordable homes has been slashed so the number of new social rented homes built last year fell to the lowest level since records began.”

The English housing survey 2016/17 reported that 3.9 million households, approximately nine million people, lived in the social rented sector – which was 17% of households in the country.

The survey added 10% rented from housing associations and 7% from local authorities.

By contrast, 20% of households were private rented and 63% owner-occupied.”

https://www.huffingtonpost.co.uk/entry/landowners-pocket-ps13bn-profit-in-one-year-just-for-getting-planning-permission_uk_5ba12638e4b046313fbfe3ee

“Ireland sets up land agency as anger grows at housing shortage”

“… Despite being left with a surplus of houses after a 2008 property crash cut values in half, Ireland has been falling far short of the 35,000 new builds analysts say are needed annually just to keep up with demand from an economy and population growing faster than any other in the European Union.

Modelled on similar bodies in Germany and the Netherlands, the Land Development Agency (LDA) will be tasked with opening up land owned by local authorities, state departments, semi state bodies or in some cases the private sector to build 150,000 new homes over the next 20 years.

“We are acknowledging the reality that some of the sites that are causing this issue are in the ownership of public bodies,” Finance Minister Paschal Donohoe told a news conference.

“The adoption of a more pro-active land management role by the state is critical to solving the current housing crisis and creating downward pressure on land prices.”

Land for 3,000 units has already been secured from state bodies by the LDA, the government said, including, for example, by moving the country’s central mental health facility out of a Dublin suburb more suited to the construction of houses.

“Ireland has a poor history of managing its land in a sustainable way. This has resulted in inefficient use, sprawl and volatile price cycles,” Dermot O’Leary, chief economist at Goodbody Stockbrokers wrote in a note.

“While the impact from such an agency will not be felt immediately, it will be a welcome addition to the housing policy toolkit to aid in preventing some of the mistakes of the past.”

https://uk.reuters.com/article/uk-ireland-housing/ireland-sets-up-land-agency-as-anger-grows-at-housing-shortage-idUKKCN1LT2GM

“Land now 51% of UK’s net worth – a huge transfer of wealth to landowners, say campaigners”

“A dramatic rise in land values pushed Britain’s wealth to a fresh high of more than £10tn last year, highlighting the huge gains made by developers in property hotspots across the UK.

From London and the home counties to Cambridge and popular parts of Devon and Cornwall, land values have become the single largest element of wealth, dwarfing household wealth locked up in property and financial savings.

Official figures showed that the UK’s net worth rose by £492bn between 2016 and 2017 to £10.2tn, with the lion’s share of the increase accounted for by a £450bn jump in the value of land.

The rise continues a trend since 2012 that has pushed the average assets held by each Briton to £155,000, up £6,000 from 2016.

The Office for National Statistics said consistent increases in the value of land meant it accounted for 51% of the UK’s net worth in 2016, higher than any other G7 country that produces similar statistics.

In France, which has a land mass twice the size of the UK, land values account for 41% of wealth while in Germany they account for only 26%.

This week several landowners have outlined plans for developments, including the Duke of Westminster’s Grosvenor Group, which said it was taking a growing interest in residential property outside central London.

It said it would build thousands of homes on greenfield sites around Oxford and Cambridge, which are to benefit from Treasury plans to connect the two university towns with a cross-country rail link.

Analysts said much of the increase in land values was in response to Britain’s rising population, which has put pressure on the government to back house builders seeking to develop green field sites and farmland in south-east England and other development hotspots around the country.

The price of farmland can increase by 100 times when developers succeed in persuading ministers to re-designate it for housing. Areas of London that were previously derelict, especially in the east of the capital, have seen huge rises in values as regeneration efforts and improved transport links have fed into property prices.

Commercial property has also enjoyed an upswing in value since Britain’s recovery following the 2008 banking crash, more than offsetting recent declines in much of the retail sector.

The ONS figures go beyond a study last year by Lloyds bank that showed that Britain’s net worth had climbed above £10tn for the first time, but did not single out the value of land.

The steady increase in land values is expected to trigger further calls for a land value tax or new rules allowing local authorities to reap the rise in values by allowing them buy land earmarked for development.

A growing number of thinktanks and politicians support imposing a tax that would take a slice of rising land values.

The Institute for Fiscal Studies has urged the Treasury to develop a scheme, while the Green party co-leader, Caroline Lucas, has tabled a private member’s bill proposing a land value tax. Labour said in its 2017 election manifesto that it would consider a similar tax.

Mark Wadsworth, the head of the Campaign for Land Value Taxation, said: “The minority with a vested interest in high land values will no doubt celebrate higher values, saying that is shows the importance of land to the UK economy.

“In truth, land values are not a net addition to national wealth, they merely represent the benefits that accrue to landowners because of government spending on public services funded out of general taxation; land values are actually just a measure of ongoing transfers of wealth from taxpayers to landowners and a zero-sum game.”

https://www.theguardian.com/business/2018/aug/29/uks-wealth-rises-as-land-values-soar-by-450bn-in-a-year

“Call to stop landowners making huge profits from speculation”

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. … ”

https://www.theguardian.com/business/2018/aug/28/call-to-stop-landowners-making-huge-profits-from-speculation?

“For every home built 2014/5 £60,000 went to landowner”

Thomas Aubrey of the Centre for Progressive Policy:

“Our system favours landlords over communities. The PM must side with the many, not the few.

Theresa May is right. Britain’s housing market is broken and needs fixing. Homelessness and rough sleeping are rising and owner-occupation levels for the young have collapsed because homes have become unaffordable.

The average private rent in London accounts for more than a third of household income. The bill for housing benefit has risen eight-fold since the early 1980s after inflation is taken into account. House building has risen since the lows reached during the financial crisis of a decade ago but needs to almost double to hit the government’s target of 300,000 new homes a year by the middle of the next decade.

Yes, the housing market is broken all right and for the Conservatives, a party that sees itself as the party of the homeowner, it is a serious political headache.

A crisis has been brewing for decades – and left unattended the problem can only get worse. Britain has a rising population and the trend is for smaller households, both of which mean demand for housing will keep on rising. The weak growth figures for the first three months of 2018 will keep borrowing costs on hold for now but sooner or later the Bank of England will raise interest rates. That will make it still harder for people in their 20s to get a foot on the housing ladder.

Yet sketching out the problem is one thing. Coming up with solutions is trickier.

Replace a regressive council tax with a land value tax? Labour is thinking about a LVT but there is no chance the Conservatives will introduce what they have dubbed a “garden tax” that would hit millions.

How about giving some of the anonymous farmland in the green belt over to housing development? The thin end of a wedge that will result in the south-east being turned into one big urban sprawl.

Make prime residences eligible for capital gains tax? Are you kidding? Politicians know that Britain’s housing market is broken but mess with it at their peril.

The problem is so big, however, that changes have to come. London’s mayor, Sadiq Khan, wants to increase the supply of lower-cost homes in the capital, so under City Hall guidelines private development proposals where affordable units make up at least 35% of the total will be fast-tracked through the planning process. Under 35%, and developers can expect a much tougher time.
But as Daniel Bentley argues in a new pamphlet for the thinktank Civitas, the problem goes deeper than the planning system. Forcing councils to grant more planning permissions in high-demand areas doesn’t guarantee that the supply of new homes will markedly increase.

The reason for that, Bentley says, goes back to the 1961 Land Compensation Act passed by Harold Macmillan’s government. This enshrined in law the right of landowners, in the event of compulsory purchase, to be reimbursed not only for the value of their land as it stood but for its potential value if it were used for something else in the future.

A system so heavily weighted in favour of landowners had two consequences. First, it provided them with an incentive to wait, often for years, before selling their land for development because they would get a higher price. Second, house-builders had to recoup the costs of buying the land and did so by building more expensive properties that were drip-fed into the market to keep selling prices high.

If the aim is to build more affordable homes, this makes no sense. A site with planning permission for housing is worth more than a brownfield industrial site and 100 times more than agricultural land. Research by Thomas Aubrey of the Centre for Progressive Policy found that landowners made windfall profits of more than £9bn in 2014-15 on the sale of land. That meant for every home built that year, an average of £60,000 went to the landowner.

Bentley says the entitlement of landowners to this “hope value”, the prospect that it will be worth a lot more if used for something else, means public authorities are powerless to enforce development priorities that are in the interests of the community.

“This was not always the case. The new towns that were initiated before the 1961 act, and much of the local-authority output of the late 1940s and 1950s, was underpinned by a land values policy that meant landowners were compensated at values reflecting the existing use of the site,” he said.
“This meant land for new homes could be acquired at or close to its much lower agricultural or industrial use values. It also doused speculation and prevented the withholding of land.”

Reforming the 1961 act so that public-sector bodies can purchase land at less than its prospective residential use value makes sense because it would enable developers to get hold of land more cheaply and so build more affordable homes. Nor would it be an especially controversial move politically.

Judging by their 2017 manifestos, Labour and the Conservatives think the current system is weighted too heavily in favour of landowners, who see the value of their holdings increase not through their own efforts but through those of others.

Adam Smith and David Ricardo, darlings of the free-market right were critical of the “unearned increment” that landowners enjoyed. So was Henry George, who the left laud for coming up with the LVT.

May should seek bipartisan support for a rethink of the 1961 act. Sure, Conservative-supporting landowners would object but if the prime minister is to make good on her pledge to fix the housing market she has to side with the many not the few.”

https://www.theguardian.com/business/2018/apr/29/want-to-resolve-the-uks-housing-crisis-heres-how

Case law will impact on developers who say they can’t (now) afford affordable housing

Parkhurst Road Limited v Secretary of State for Housing Communities and Local Government & London Borough of Islington. Case No: CO/3528/2017, in the High Court of Justice, Queen’s Bench Division, Planning Court, 27 April 2018.

“A High Court judge has backed Islington Council in a long-standing battle between the council and developer First Base (Parkhurst Road Limited), who refused to provide affordable homes on a former Territorial Army site in line with the council’s planning rules.

The developer bought the site on Parkhurst Road in 2013 and has attempted to secure planning permission for a residential development with little or no affordable housing, ignoring the long-standing planning requirements on the provision of affordable homes set by the council.

An initial planning application was submitted in 2013 by the developer who were assisted by Gerald Eve as viability consultants. The council refused planning permission for this development twice on the grounds of not providing enough affordable housing, as well as other matters.

The case centres around the viability assessment of development and, in particular, how the price of land should be determined in planning, which is a tool increasingly used by developers and their viability consultants in recent years, to avoid complying with councils’ planning requirements on affordable housing.

Two lengthy public inquiries were held, both of which were won by Islington Council. Each time the low level of affordable housing provided on the scheme was being justified by the developer on factors such as the purchase price paid for the site, and land transactions of other schemes. Following the second public inquiry held in early 2017, an Independent Planning Inspector appointed by the Secretary of State, upheld Islington’s refusal of planning permission in his decision of 19 June 2017.

The developer then mounted a legal challenge against the Planning Inspector’s decision at the High Court. The Planning Inspector’s decision was defended in court jointly by Islington’s legal team and the lawyers representing the Ministry of Housing Communities and Local Government (MHCLG).

Normally, the role of the courts in planning disputes is very limited and restricted to legal technicalities only. However, in this case the Judge Justice Mr David Holgate allowed a fairly detailed examination of planning issues and the development viability evidence in particular.

Today (Friday, 27 April) he dismissed the legal challenge on all three grounds put forward by the developer, and concluded that he was satisfied with the Planning Inspector’s decision to dismiss the developer’s appeal and uphold the council’s decision to refuse the planning application.

Responding to the judgement, an Islington Council spokesperson said:

“We are delighted by the High Court judgement. This decision reinforces Islington Council’s long standing position that developers should abide by the councils’ planning guidelines – rather than overpaying for land and then trying to bypass our affordable housing requirements.

“There is a shortage of good quality, genuinely affordable housing in Islington and a significant unmet housing need. The council is doing everything it can to address this, because we believe that everyone should have somewhere to live that is affordable, decent and secure – and developers must respect these important priorities when they purchase sites in Islington.”

In a highly unusual move, in a postscript to the judgment, Judge Mr Justice Holgate also recommended that the current, widely used, guidance on viability assessments by the Royal Institute of Chartered Surveyors (RICS) should be revised “in order to address any misunderstandings about market valuation concepts and techniques, the “circularity” issue and any other problems encountered in practice over the last 6 years, so as to help avoid protracted disputes of the kind we have seen in the present case and achieve more efficient decision-making.”

This is something that the council has been calling for over the last couple of years, due to serious concerns about how the RICS Financial Viability in Planning (2012) guidance note was being applied in practice.

Islington Council’s planning guidance on Development Viability is very clear and specifically cautions developers against overpaying for land and using the purchase price as a justification for providing little or no affordable housing. This landmark judgment reinforces what Islington (and many other councils) have been arguing for years that affordable housing requirements cannot be bypassed by using the “dark art” of viability assessments to ignore planning policy requirements.”

http://www.islington.media/r/97837/high_court_backs_islington_in_a_landmark_planning_case_on

Letwin explains rationing new builds to keep up prices with a new phrase “absorption rate”!

“A Government-commissioned report has blamed delays in the house-building process on builders concerns about future sale prices.

In the Autumn Budget the Chancellor set up an independent review to look at the delays between planning permission being granted, and houses being built. This review is being led by Sir Oliver Letwin.

The Treasury has now published the commission’s interim report alongside the Spring Statement:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/689430/Build_Out_Review_letter_to_Cx_and_Housing_SoS.pdf

These initial findings suggest that house-builders concerns about sale prices are a major factor in slow “build out” of homes on many of these larger developments.

Letwin says this review had initially focused on larger housing developments and major housebuilders. Further analysis may look at smaller scale models.

In a letter to the Chancellor and Sajid Javid – the secretary of state for housing communities and local government – Letwin says housebuilders have cited a number of “limitations”, including a shortage of available skilled labour, the availability of capital, provision of local transport infrastructure and the slow speed of installations by utility companies.

But in the interim report Letwin says: “I am not persuaded that these limitations are in fact the primary determinants of the speed of build out on large permitted sites at present.”

He goes on to say the fundamental driver of build out rates, once detailed planning permission is granted, appears to be the “absorption rate” – that is the rate at which newly constructed homes can be sold into the local market without materially disturbing the market price.

This rate, he says appears to be largely determined at present by the type of home being constructed and the pricing of the new homes built.

The interim report goes onto say this problem can be exacerbated by many larger development having a style of size of home that is fairly homogeneous.

The next stage of this review will look at whether build-out rates could be improved, either by reducing the reliance on large builders, or by encouraging them to offer more variety in terms of the type and price of property offered.

The report adds: “We have seen ample evidence from our site visits that the rate and completion of the ‘affordable ‘ and social rented’ homes is constrained by the requirement for cross-subsidy from the open market housing on the site.” This can delay the build out of these homes, the report adds.

Letwin says he plans to publish more detailed draft analysis by the end of June, which will contain a more detailed description of the problem and its causes.

The independent review will then seek comments from interested parties before a final analysis which will include a list of recommendations to improve the situation.”

https://www.mortgagestrategy.co.uk/interim-report-planning-delays-published-alongside-spring-statement/