Land reform foundation for a new generation of social housing

“If we want to build high-quality social homes in this country, we need reasonably priced land to do it.”

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There’s cross-sector consensus that land reform is now the foundation for a new generation of social housing in England.

The case for reform is outlined in Grounds for Change, a collection of essays sourced across the sector and published to mark the start of a campaign to advocate for a fairer way of trading land.

Brought together by Shelter, contributors include Crispin Truman, chief executive of the Campaign to Protect Rural England (CPRE); Clive Betts, chair of the Housing, Communities and Local Government Select Committee; Nicolas Boys Smith, founder of Create Streets (and recently-announced interim chair of the government’s Building Better, Building Beautiful commission); and Will Tanner, director of think tank Onward.

There’s support for Shelter’s survey of chief council planners in England, which shows the cost of land is the biggest barrier to council house-building – two-thirds of respondents said it prevents them building more social or affordable homes.

And, since 1995, the value of land has risen by 544% compared to consumer prices which increased by 50% in the same period.

“If we want to build high-quality social or private homes in this country, we need reasonably priced land to do it,” said Shelter chief executive Polly Neate. 

“Yet under our current system, agricultural land becomes 120 times more expensive simply from receiving residential planning permission – and outdated legislation compounds the problem.”

Crispin Truman, CPRE chief executive, said: “Our broken land market means that developments are increasingly sited where there is the greatest profit to be made, rather than in the most sensible and sustainable locations.

“Yes, we need to build more. But these must be well-planned developments, where the profits from rising land values are invested in public green spaces, walking and cycling infrastructure, community facilities, and well-designed homes that people can afford to live in, rather than accruing primarily to landowners.”

A recent Savills survey of housing associations found ‘availability of land’ was by far the biggest constraint on them building more homes.

For councils not currently delivering housing, lack of land is cited as the leading reason.

Councils that are delivering housing cite lack of land as the second most important barrier to delivering more, just slightly behind the Housing Revenue Account borrowing cap, which government recently scrapped.

Rose Grayston, Shelter Policy Manager and Grounds for Change contributor, said social housing providers in 2019 either need an unusually affordable source of land – for example, land owned by a public body with an interest in seeing social housing built, such as a local authority – or they must find the money to compete with those buying land to build the most profitable kinds of homes for sale.

“Evidence gathered by the National Housing Federation from its members shows that providing social housing is often impossible under these circumstances,” said Grayston.

Grounds for Change identifies that the levels of direct investment which would be needed to purchase land at today’s market prices and then use it to build social homes at affordable prices would be considerable.

“In reality, if government increased grant for social housing without also reforming the land market, this additional demand for land would be factored into its cost – making it even more expensive,” said Grayston.

“Because of this, the problems of financing social housing are bound up with the problems of accessing the land on which to build it.

“It is not enough to pour more money into a broken system. As we increase public investment in social housing, government must also act to reform the broken market for land,” she said.

Grounds for Change recognises the prize of reform is great, referencing work by Civitas that estimates reforming the Land Compensation Act 1961 could slash 38% off the total development costs of a new scaled-up programme of social house-building across England.

This, in turn, would reduce the total cost of a building a new social rent home from £354,478 to £217,643 in outer London and from £381,103 to £254,925 in inner London alone.

Beyond delivering financial savings and more predictable development costs, Grayston says reforms to bring down the cost of land for social housebuilding will wrestle back control over what is built.

“For decades, our ambitions for social housing have been boxed in by land traders’ rising profit expectations – what is needed has been less important than what is possible,” said Grayston.

“Social housing providers have been forced to compromise on location, design, affordability and every other aspect of housing development in an attempt to keep some supply flowing through social housing’s darkest days.

“In a world where the price of land reflects what will be built on it, communities will have far more freedom to define development outcomes for themselves,” she said.

Earlier this year, Shelter’s commission on the future of social housing gathered a raft of evidence on the benefits of social housing for those who live in it today – as the  only tenure affordable to minimum wage earners across much of the country.

Stats cited in Grounds for Change show where social renters now pay on average 31% of their income on housing costs, this rises to 41% for private renters – said to face such high costs that one in five of them have cut back on food to pay the rent.

Land is usually the single biggest cost in building homes, making up 70% of the cost of a market home and responsible for 74% of the increase in UK house prices between 1950 and 2012.

Grayston says, while public money has built many social homes over the years since the modern land market was defined by the 1961 Land Compensation Act and subsequent case law, councils have often been forced to compromise on quality, design and density to cope with escalating land prices.

“Whenever governments have invested more public money in social housing, land prices have increased sharply because landowners have known they can charge as much as the government is willing to pay,” she said.

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