Land values, Property markets and Labour Party politics

1. Land values, Property markets and Labour Party politics Labour Land Campaign Meeting February 22, 2014

2. Property and the Crisis • Property and land speculation were at the heart of the financial/banking crisis • After the crash there were expectations of collapses and restructuring of the property sector; of property re-regulation; of public intervention in land and planning, and housebuilding; even of taxation of land values • But did anything change? – the sector did not collapse; there was retrenchment ; government stepped in to prop up the sector; the land ownership/value question went quiet again • What of the Left response? • Use example of housing shortage; this is not only land and property issue by any means but it reveals some of the the main issues for the Left

3. The housing shortage

4. Why the low levels of new build delivery? • Usual reasons: • (a) Demand factors: supply of credit and lack of affordability of new units • (b) Supply factors: Prices not rising fast enough for make development viable; lack of land and planning permissions for housing; • “The underlying constraint on housing is the supply of land” Barker. Interim Report p.10, HM Treasury 2003 • BUT these are symptomatic issues not the real causes. The key to understanding low levels of housing delivery lies in the monopoly character of the HB sector and the nature of the landowner/housebuilder business model • This model of delivery has achieved almost complete domination of public policy about land and planning for the past 30 years i.e. Since the New Towns programme came to an end.

5. Land banking • The size and quality of commercial landbanks is a key indicator of future trading prospects for the sector. • There are two types of land bank (a) Short term “oven ready” land banks with planning permission (b) Strategic long term land held mainly on options • The main stated reason for landbanks is to maintain a “pipeline” of land to plan and deliver future development • It is about much more than that; the creation of value (for their shareholders); and the capturing of land value by HB companies and landowners. • There are two elements to this value creation; • (a) Short term asset appreciation. Value is created first, by development land being included in local authority plans and, again, when planning permissions are granted and infrastructure is provided. • (b) Long term asset appreciation. “Land value for housing rises considerably faster than the rate of growth of the economy as a whole” p137 Calcutt Review. • Therefore, it would be irrational NOT to hold/control land as an investment

6. Long term trend in house prices

7. Land and the Housebuilders business model • “Housebuilders are not in the business to serve the public interest, except incidentally. Their primary concern is to deliver profits to their investors” p. 1 Calcutt Review, 2007 • “The perception that land for housing development is in short supply is a key element in the House builders business model” p.35 Calcutt Review, 2007 • i.e. The key to it all is inflation in land value and house prices

8. Concentration of power over land • After each crash and recovery (1973, 1989, 2008) the large housebuilders have grown larger and taken a greater share of the new homes market • Over the last 20 years the large builders (over 2000 homes pa) have increased their share of the total new homes market by 20% to while smaller builders have reduced their share by 20% • Over the last 20 years their land banks have increased proportionately, and continue to do so. Locally hope values have been spread out further around all major towns and conurbations as more land has been identified • Our research shows that the top 5 house-builders, who deliver 35% of total UK supply of new housing, have 12 years of UK total annual supply (at current rates) in their land banks

9. Agglomeration

10. Planning for New housing has been captured by the landowner/HB sector • State has become increasingly reliant on HB/landowner sector for delivery of new housing; neither government or the private sector provide opportunities in the form of capital, land or capacity to enable other sectors to enter the field. • HB model may have failed to meet public policy objectives but it successfully delivered private asset value • HBs and landowners have captured the Local Plan Inquiry and the Appeal system . Objections from the housebuilders dominate Core Strategy Inquiries arguing that strategies are “unsound” if they do not include enough housing land (even when HBs have not built on the land they own) • They have also captured crucial local plan policies such as on affordable housing because they argue local authority requirements make their schemes “unviable”, at which many local authorities have backed off

11. The Left Response: Planners Network UK Manifesto • Land reform; extend public/community land ownership • Communities to have a long term stake • Fair compensation • Strategic and local planning • Fair and transparent taxation of land • National skills programme for public interest planning • Local authorities more power and money to build • Community power and funding to build themselves • Root and branch reform of the house building industry; break up of the big six

12. How does this compare with Labour Party Initiatives on planning and land • “Use or Lose it” – refer to Lyons Commission • What will come out of it? • Garden Cities – land value capture/development agencies • Duty to Cooperate • Reinforcing Localism • Limited by economic policy context – the straightjacket • LP Planning Papers published in Nov 2013

13. What not yet in LP policy announcements • statement of the economic and social role of town planning • a taxation/funding strategy • a public land strategy • tackling lack of competition in the HB sector • rejection of viability rules • clarification of whether there will be a strategic planning level • re-statement of sustainability principles • NB Danny Dorling thesis

14. Conclusions • Economic revival is property led; the sector has survived and thrived • Divided public views on house price inflation • Labour and intervention: financial straightjacket; resistance to rent controls or tackling uncompetitive HB sector • Yet there is some movement on council tax banding/or mansion tax; on boosting housing supply; perhaps on affordable housing; scrapping the Bedroom Tax • How to organise? - Party lobbying - Community action – Appeals; Self build - Municipal housing initiatives e.g to build council houses; take on developers; campaign collectively