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As I and colleagues at LSE have not just been arguing but demonstrating for ten years, there is an accelerating housing crisis. This is a crisis of supply — a lack of building, and particularly a lack of building of the types of houses in the places people want to live. Look at the total of 3.3 million homes built in the last 30 years and compare it to the previous 30 years, 1959 to 1988, when we built about 7.5 million. That suggests a shortfall in the past generation of well over three million homes.
Where demand was strongest — where people were trying to move to; where they would be most productive, and where they could access the best job opportunities — supply was even worse. Over the nearly 40 years from 1980 to 2018, 56,340 houses were built in Barnsley and Doncaster combined while population increased by only 22,796. In Oxford and Cambridge only 29,430 houses were built but population grew by 95,079.
The root cause is a lack of land, especially near good jobs where there is most demand. Both the crisis of housing affordability and its underlying cause — the restriction of land supply — are reflected in price changes. The real price of houses has increased five-fold since the mid-1950s; but that of the price of land to put them on: fifteen-fold.
While the shortage of houses is real, however, the shortage of land is imaginary. It is constructed by policy and effective lobbying to protect the privileges of the well off by rhetorically greenwashing the Green Belt.
The mid-1950s is when the British decided to limit land supply for homes by imposing the Metropolitan Green Belt. The idea may have originated as ‘green lungs for cities’ but when imposed in 1955 that was not the point. There are other designations to preserve land that is scenically attractive, environmentally rich or provides recreation: National Parks, Areas of Outstanding Natural Beauty (AONB) and Sites of Special Scientific Interests (SSSIs), amongst others. Green Belts serve no environmental or amenity purpose. As the Minister of Housing wrote:
‘Even if…neither green nor particularly attractive scenically, the major function was…to stop further urban development.’
This purpose was confirmed in the NPPF of 2012 and again in 2019. Green Belts are simply land, mostly privately owned and without public access, on which building is prevented. They are very large — London’s stretches from the North Sea to the edge of Aylesbury. In total they cover 1.4 times as much land as all urban development and their area has hardly changed since the first measure available, in 1973. Moreover, the most important land use within them is intensive farming – one of the most environmentally damaging uses of land there is.
So how can we build more homes in places people want to live, while at the same time improve the environment by reducing our carbon footprint? How might we replace subsidies to commuter rail and provide funds to pay for better infrastructure and services for communities hosting development? Can we achieve all this alongside transparent funding for social housing on a generous scale?
This may sound like policy magic or political wand-waving but in the paper just published by the Centre for Cities we spell out how it can be done. The steps are simple but logical and would take no environmental or amenity land while creating a new area of public green space substantially larger than Sherwood Forest and 15 times the area of London’s Hampstead Heath.
There are four steps.
1. Permit building on all land within 800 metres of any commuter station with a service to a major city taking less than 45 minutes, providing that land had no marker of environmental or amenity value (no building in an AONB, National Park, or other kind of park or public green space; nor on SSSIs, ancient pasture, flower-rich meadows, bogs or floodplain).
2. Give the sole development rights to this ‘buildable’ land to new development companies set up by the transport authorities such as National Rail or Transport for London, who own the tracks and stations. Since these new development companies would be the only ones able to develop the land for homes, they would be the only buyers able to offer above the value of the land for agriculture. Currently, the lucky land owner on the fringes of London, for example, would effectively win the lottery if they got permission to build houses. The price of the land would jump about a 1,000-fold from £20,000 to £20 million a hectare: over the whole area south and east of a line from the Wash to Bristol the land would jump to a minimum of £3 million a hectare.
The suggestion here is that this value uplift should pay for commuter rail services replacing current subsidies from government. It may be necessary to keep compulsory purchase powers available in the background, at least until people got used to the new arrangements.
3. Impose a transparent, 20% Land Development Charge (LDC) on the sale price of all homes built on the land. The LDC would replace both ‘Section 106 Agreements’ and the Community Infrastructure Levy – both appallingly inefficient mechanisms for trying to capture ‘planning gain.’
4. The proceeds of the LDC should go to the fourth and final innovation: a special purpose Urban Development Corporation, along the lines of the London Docklands Development Corporation, which successfully regenerated London’s Docklands after 30 years of planning and political stasis. There should be one of these for each city-region — defined by a 45-minute commuting time — which would take over the planning powers of the relevant local authorities to ensure that the identified buildable land was developed in a co-ordinated way, taking account of existing and developing rail capacity. It would also ensure that 10% of all the buildable land was reserved for new public space — that is where the green space substantially bigger than Sherwood Forest would come from.
The revenues from the LDC would be used exclusively and transparently to fund much needed social housing and to invest in new or improved infrastructure: local roads, school or medical services. This is to improve the services available not just to the new residents, but existing ones too, thereby greatly reducing the perfectly understandable opposition to new development current fiscal arrangements generate.
The reader may want to know how many homes could be built and what revenues could be raised for social gain. The paper provides carefully worked out examples for five major English cities: Birmingham, Bristol, London Manchester and Newcastle. We start by identifying all the commuter stations providing a service to these cities in 45 minutes or less. The results are shown in map below. There were 1035 stations with qualifying, ‘buildable’ land within 800 meters based on satellite data — about 47,000 hectares in total and, as noted, none with any marker of environmental or amenity value. All this is currently used either for intensive farming or some is woodland. The woodland was included because of the requirement that 10% of all the land identified would be reserved for new public green space and woodland is ideal for that whilst providing wildlife habitat and carbon capture.
How many houses and how much new revenue would result depends on assumptions about the density of development and house prices. Two densities were modelled: 40 and 50 homes to the hectare. Prices were assumed to be as at October 2016. On this basis, the proposal would generate some 2 million new homes and the LDC would raise about £100 billion over time as the houses were built and sold. That would be the equivalent to all the houses built in England in the last 15 years, adding about 8 or 9 per cent to our stock of houses. This figure is just for the five cities used to test the idea. The revenue estimates ignore any revenue from the sale of commercial buildings.
Apart from building higher-spec new homes, these would be much more environmentally friendly than typical car-oriented current developments. Not only would they meet modern insulation standards, but by offering shorter rail-based commuting times to employment centres, they would lower carbon footprints. As the companies developing them would have an interest in maximising the use of stations and rail, they would be planned to feed the rail system – not the roads. Instead of providing windfall gains for a few lucky land owners, the land value uplift would be channelled to improve infrastructure and fund social housing, as well as replacing tax revenues to subsidise commuter rail.
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