Government Urged to Scrap Landowner ‘Price Premium’ to Address Housing Crisis – Wales Online
A recent study has found that eliminating a “price premium” currently paid to landowners could be a crucial step in the government’s efforts to tackle the ongoing housing crisis. This move could significantly lower the cost of delivering 90,000 social homes each year. The New Economics Foundation (NEF) conducted modelling that showed scrapping this premium, based on the potential future value of the land with planning permission, could reduce the annual cost of social housing construction by £4.5 billion, a 25% decrease. This change, coupled with stronger financial contributions from developers through Section 106 agreements, could pave the way for substantial savings and the delivery of more social homes.
The impact of scrapping the price premium would be particularly significant in London and the South East, regions with extensive social housing waiting lists. The analysis suggests that reinvesting the money saved could lead to an additional 27,000 social homes being constructed. The government has set a target of building 1.5 million homes over five years, with experts emphasising the need for 90,000 new social homes annually to address housing demands effectively. The current “hope value” rule, introduced in 1961, mandates that councils pay additional sums for land even if the landowner does not intend to seek planning permission.
The Levelling Up and Regeneration Act 2023 granted the secretary of state the authority to waive the application of hope value on a case-by-case basis. However, the process of seeking approval from Whitehall has been criticised for adding bureaucratic hurdles and potentially delaying the construction of social housing. The Labour Party has indicated intentions to go beyond the Act’s provisions, promising further amendments related to hope value to facilitate land unlocking in the public interest. These proposals have met with resistance from landowners, with concerns raised about the potential undervaluing of their land.
The Country Land and Business Association, representing landowners in England and Wales, has expressed opposition to the broader land reforms, suggesting that they could force farmers to sell their land below its true value. Additionally, there may be legal challenges to the proposed changes based on potential infringements of landowners’ rights under the European Convention on Human Rights. Despite these challenges, Alex Diner, a senior researcher at NEF, emphasised the necessity of fair and reasonable reforms to ensure that the government can achieve its housing targets and address the housing crisis effectively.
Data from the Office for National Statistics indicates a growing trend of rising land prices constituting a larger portion of property values in the UK. This shift has contributed to escalating property prices and rents, amplifying the costs and risks associated with new home construction. Notably, farmers have voiced their discontent with recent inheritance tax changes affecting farming businesses, limiting relief to the first £1 million of combined agricultural and business property. The intersection of land prices, tax policies, and housing construction presents complex challenges that policymakers must navigate to foster a more sustainable and inclusive housing market.
In conclusion, the debate over land reforms and their implications for housing provision underscores the intricate relationships between land ownership, property development, and social welfare. As stakeholders advocate for fair and transparent policies that balance the interests of landowners and the broader community, finding common ground on these issues will be essential for addressing the pressing housing needs across the country. Reforms that prioritise access to affordable housing, sustainable development practices, and equitable land use can pave the way for a more resilient and inclusive housing sector in the years to come.