Local authorities should have a wider ability to set taxes and charges on developers in order to better capture any increases in land values after planning permission is granted, the Commons housing, communities and local government committee has concluded.
According to its new report, these charges would help local and central government fund the infrastructure needed for new housing developments and deliver new affordable homes.
The committee has also called for reforms to the Land Compensation Act 1961 to make it easier for councils to compulsorily purchase land at a lower price and for additional resources to help planning authorities “negotiate robustly” with developers.
Citing evidence from the Local Government Association, the National Housing Federation and the Royal Town Planners’ Institute, the committee said these orders were needed to acquire the land needed to achieve the government’s house-building targets in newly created garden cities, towns and villages.
Committee chair Clive Betts said: “Land value capture is fundamentally about fairness and necessity.
“Fairness, because the current system allows landowners, through no effort of their own, to make multi-million pound profits from the substantial increases in land value that arise from public policy decisions, such as the granting of planning permission. As these increases are significantly created by the actions of the State, it is right that a significant proportion of this should be shared with the local community.
“Necessity, because if the government is to meet the challenge of providing enough new homes over the coming years, then they will also need to find the funds for improving the surrounding infrastructure.”
The committee report also cites an August 2018 letter to the housing and communities secretary from 16 organisations including Shelter, Civitas and the National Landlords Association and the National Housing Federation which called for a greater sharing of land value.
The co-authors said in the letter: “The root of England’s housing crisis lies in how we buy and sell land. When agricultural land is granted planning permission for housing to be built, the land typically becomes at least 100 times more valuable.”
Government statistics show that agricultural land can increase in value from £21,000 per hectare to £1.95m per hectare after planning permission for residential use is granted, the HCLG committee report said. It added a “significant proportion” of this uplift in value should be used to invest in new infrastructure and public services.
LGA housing spokesman Martin Tett (Con) said: “We have long–called for reforms to land compensation and compulsory purchase laws and are pleased that the committee has called for the government to implement several of our recommendations.
“Rising land prices is one of the most influential contributors to our housing crisis - it means less homes are built, they are less affordable, they are built more slowly, there can be compromises on quality, and there is not enough funding left over for vital local infrastructure and services that communities need to back development.
“There are therefore huge gains for communities, economies and public services in allowing councils being able to capture potentially billions of pounds worth of land value increases to invest in the very infrastructure and services that generate those increasing values.”