A wide range of voices are starting to advocate a more imaginative approach to land acquisition, ranging from the housing charity Shelter to the free-market Adam Smith Institute. But it is not as simple as it sounds, because there has been a change in the law since the Fifties that prevents the purchase of land for housing at anything less than its residential value. Under the 1961 Land Compensation Act, landowners are entitled, in the event of compulsory purchase by the state, to the value of their land with residential planning permission – even if it does not yet have that permission. This has become a charter for hoarding. It also lies at the root of our dysfunctional housing system. It means that land, especially in the highest-demand areas, is drip-fed slowly at rates that maximise the returns to landowners but only by keeping housing costs high. Reforming the rules so that the “market value” of land does not, in law, reflect speculative, future values would be transformational. Councils could build many more homes if they wished. But it would also enable developers to get hold of land more cheaply and so provide more of the homes we need, in the places we need them most.
Land-value capture by local authorities could help boost UK housebuilding without any dramatic increases in government spending, writes Daniel Bentley in The Telegraph. The suggested scheme is based on the principle that farmland is valued at a fraction of residential construction land. The government could buy farmland, re-designate it as residential and profit from the resultant jump in value, enabling authorities to sell off portions of the bought land to developers to raise cash for their own house-building and infrastructure projects. •