In a speech to Labour party councillors on the 3rd of February, Jeremy Corbyn set out his plans to challenge the status quo of how houses are built in this country. At the heart of Labour’s plans are changes to the way that the possibility of gaining planning permission – the right to build on land – increases the value of land.
The current system means that when councils want to compulsorily purchase land to, for example, build houses, they have to pay landowners the “hope value” for that land rather than what the land is actually worth. The hope value takes into account the extra value of the possibility that the land will receive planning permission in the future. This means councils have to pay more for land than it is worth because possible future development will increase the land’s value. This means a hectare of agricultural land worth around £20,000 can sell for closer to £2m if it is zoned for housing.
As Jonn Ellegde puts it “landowners are being compensated for something that doesn’t actually exist yet” while at the same time “if landowners themselves get planning permission to build, the state has to pick up the tab for the extra infrastructure that new homes or offices require.” None of this is very conducive to councils building houses.
John Healey, Labour’s housing spokesperson has announced plans for a new English Sovereign Land Trust to buy land at a price closer to its real value. This would require a change to the 1961 Land Compensation Act. Before 1961 the state purchased land in a similar way to the one Labour now proposes and the planning regime prior to 1961 enabled much of the rebuilding efforts following the Second World War. Healey suggested that a change in the law would allow 100,000 council houses to be built for £16bn rather than £26bn.
Landowners look likely to challenge such changes, possibly through the courts, and the reforms have been branded “deeply sinister” by chief secretary to the Treasury Liz Truss.
However, some Conservative politicians have backed changing the law. Former Tory planning minister Nick Boles argues that the way prices are calculated currently is artificial, driven by “the nationalisation of development rights” rather than by market forces, creating artificial scarcity. Housing secretary Sajid Javid also sounded open to changes in the planning regime saying, “I think it’s right that the state takes a portion of that uplift [from development of land] to support local infrastructure and development.”