Tag Archives: land value capture

Housing Minister ‘captured’ in disagreement over land value

By Kasia Banas, Consultant

In his first appearance in front of the Communities and Local Government (CLG) Committee on 5th September, Housing Minister Kit Malthouse MP made it clear he is not planning to introduce a new mechanism for capturing uplifts in land value.

Instead, Malthouse insisted the recently introduced “major reforms” to the NPPF will provide the significant and positive long-term effects that are needed for the process. But while land value capture is definitely off the table for now, he remains open-minded about any new proposals in the future should the reforms not deliver the expected results.

The hearing took place just a week before the cross-party committee of MPs investigating land value capture published its report and recommendations. Formed in late 2017, the committee’s findings are often in opposition to the Minister’s views on the issue.

Land Compensation Act 1961

One of the main recommendations of the committee report is for the government to amend the Land Compensation Act 1961, to give local authorities the power to purchase land “at a fairer price”, and to remove the right of landowners to receive hope value.

When asked about the need for such reform the Minister expressed his concerns about how it could slow down the land supply.

Industry seems to agree with him. Ian Fletcher from the British Property Federation (BPF) said: “If landowners don’t get the uplift in value from change of use, fewer landowners will come forward with land. This will exacerbate the housing crisis.”

BPF puts its support behind new measures such as strategic infrastructure tariffs, where development levies are applied across regions and authorities, such as the London-wide Crossrail CIL.

Compulsory Purchase Order

While the committee calls for further simplification of the compulsory purchase order (CPO) process, Malthouse believes it should be treated as a last resort option, saying CPOs may be appropriate in some cases, but rather than relying on them, he wants to create an environment in which there are enough incentives for the developer not to block new projects.

Voices from the sector such as Philip Barnes from Barratt Developments have questioned the committee’s proposals and their practicality. He asks, for example, what ‘no scheme’ and ‘hope value’ would actually mean in the real world of land valuation, and how a two price market can be avoided if the state wishes to issue CPOs at land values well below the level which rational landowners will sell at.

Community Infrastructure Levy

Commenting on the government’s response to the Community Infrastructure Levy (CIL) review, Malthouse believes that rather than an overhaul, incremental change and market monitoring are desirable for now given the objective of building as many homes as soon as possible. This seems a sensible approach considering Brexit and the current economic outlook.

The parliamentary committee has continued calls for total reform, and CLA director of policy and advice Christopher Price argues the current system already provides a range of benefits, with £6 billion raised via planning obligations such as the CIL and Section 106 in 2016/17.

Support for the report

Committee chair Clive Betts MP said that land value capture is fundamentally about fairness and necessity for the government to improve the infrastructure surrounding the new homes being delivered over the coming years.

His view is shared by the National Infrastructure Commission which welcomed the report’s recommendations and urged ministers to seriously consider these reforms as a source of funding of future projects. Similarly, RTPI chief executive Victoria Hills considers the current system of sharing land value uplift to not be working for the public good and in need of reform.

The government is yet to respond to the report but will do so in the coming year. Given Malthouse’s willingness to give the recent changes in the 2017 Act and new NPPF a chance, a major reform in the near future is unlikely.

land value capture for communities

Government looks Onward to land value capture reform

By Kasia Banas, Consultant

The government has been called on to consider radical reform of land value capture for communities in an open letter addressed to the Secretary of State for Housing, Communities and Local Government, Rt Hon James Brokenshire MP.

The letter from conservative think-tank Onward was signed by 16 organisations including the National Housing Federation, CPRE and Shelter, and identified ‘the way we buy and sell land’ as the primary cause of England’s housing crisis.

The signatories believe more gains from uplifts in land value need to be invested into communities, which will lead not only to less opposition to new development, but also to much better infrastructure. They propose the following three main steps to achieving that:

  • Monitoring the implementation of changes to Section 106 to ensure that councils deliver, and developers do not continue to ‘wriggle out’ of their commitments,
  • Giving local government a stronger role in buying and assembling land for housing, allowing them to plan new developments more effectively, share the benefits for the community and approve developments in places local people accept,
  • Reform of the 1961 Land Compensation Act to clarify that local authorities should be able to compulsorily purchase land at fair market value that does not include prospective planning permission, rather than speculative “hope” value.

Finally, the letter encourages government to look for good practice examples across the borders, to other countries that are considered to be doing a better job in creating desirable new places for the benefit of all.

There are however, voices from the sector that question the early enthusiasm that these ideas have sparked. Matthew Spry, Senior Director at Lichfields UK, cast a shadow of doubt on the comprehensiveness of the proposals and stipulated that some practical questions need to be answered about them. These include issues around the purpose of capturing land value, resources, a two-tier land market, fairness and more. He warned that the failure to consider these could result in “undermining delivery in a system that, for all its many faults, is beginning to supply more of the homes we need”.

The letter was published a month after the National Infrastructure Commission (NIC), the government’s infrastructure advisory body, recommended that councils be granted greater powers to capture any uplift in land value arising from planning and infrastructure decisions.

They also called for powers for local authorities to “levy zonal precepts on council tax, where public investments in infrastructure drive up surrounding property values by 2021″ and for Section 106 pooling restrictions to be removed by 2020 to increase effectiveness of the planning value system.

The government has committed to present the NIC’s assessment before parliament, and to respond to it within six months.

On 5 September 2018, the Housing Minster Kit Malthouse is due to appear at the meeting of the Communities and Local Government Committee, which is conducting an inquiry into land value capture. His evidence may provide an early indication as to the government’s position on the proposed changes to the land value capture system.