Through right to buy, help to buy, the stamp duty cut and starter homes the Chancellor has made it clear that getting people on the housing ladder is a central plank of Conservative policy. The...
Through right to buy, help to buy, the stamp duty cut and starter homes the Chancellor has made it clear that getting people on the housing ladder is a central plank of Conservative policy. The latest platform to reinforce this was Wednesday’s budget with the introduction of Help to Buy ISAs providing first time buyers with a government bonus for saving towards a house. The problem is that in the five years it will take to save for the full £3,000 subsidy, house prices are expected to be £40,000 higher. This means it does little to address the affordability of housing and instead the biggest impact will be on those who could already afford to save for a new home – a deadweight loss as John McDermott put it.
Alternatively, there is one measure that almost every commentator, analyst and economist agrees would make a genuine difference to affordability: building more homes.
So what if the £2.1bn projected spend for Help to Buy ISAs was instead used to build more homes? According to Shelter the government could build 65,000 homes directly. Or it could invest the money in land. One of the Centre’s key housing policy ideas is that the public purse can benefit from planning change – as was the case in the past with New Towns. Buying agricultural land, changing its planning class to residential and using the money made to invest in quality infrastructure, affordable homes or other fiscal priorities.
If £2.1bn was used to buy agricultural land near the country’s least affordable cities such as London at its existing use value – around £63,000 per hectare  – there would be space for 1.3m homes at suburban densities. The government and local authorities could build these homes directly and sell or rent them, or sell the land for the market to deliver. Either way the huge uplift in value would easily cover significant infrastructure costs, a windfall for government receipts and national GDP as well as much needed homes close to jobs.
What frustrates about the politics of housing is not that the affordability crisis is ignored, it is that the money that is spent is on fuelling demand and therefore house prices. Yet the answer is under our feet: we need to release more land for more houses where they are least affordable. But it will take strong leadership to identify these opportunities.
Next week we will be laying out the key issues of the General Election that effect and take place in cities, alongside setting out what the parties have offered so far.
 Agricultural land values are not available at local level, the national average given by DCLG in February is £21,000. The estimated London value is reached by increasing this average value by the same amount that house prices compare with the national average (double) – £42,000. It is expected that compulsory purchased land would be bought at 150% of market value, i.e. £63,000. Clearly this is used solely as an illustrative figure.
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