My Lords, I need to make it clear that Amendment 89 is not Labour Party policy; it is my view and I believe it is supported by millions of people in the country. Despite my repeated interventions, this is the only amendment I have moved in my name
and I therefore need to take a little more time in dealing with it. I think you will find that my previous interventions have been very brief.
Amendment 89 offers us the opportunity to debate the cost of land—the real cost before the profiteers move in. It concerns the impact of land cost on the property market, speculation in land by the land banks and property speculators and hoarders, house price inflation and capital gains tax on developing land. It is about the compulsory purchase of agricultural land for housing development.
I recognise that exception is already made in law for exceptional rural housing development. However, while on occasion that land is offered free or at marginal cost by landowners, it is often offered in return for planning permission on land which is sold at market prices. I argue for the need to go much further, and have done so in interventions on a number of occasions during the course of the Bill.
When we want to build an airport, roadway, motorway, bypass, bridge, railway line, reservoir or development in the public interest, under present arrangements we use powers under various pieces of legislation, in particular the land compensation Acts. Compulsory purchase orders are issued, signed off by the Secretary of State, and the land is acquired at its then market rate, plus an uplift. The uplift can include an occupant’s loss payment, a basic loss, an allowance for the replacement of land to include fees and taxes paid, disturbance costs and an allowance to cover the cost of land unreasonably affected by adjacent development. These additional costs are usually but not always marginal compared to the costs of the original CPO land in question.
The process applies where agricultural, pastoral or arable land is the subject of compulsory purchase. By my reading, the justification for the CPO is set out in Section 226 of the Land Compensation Act 1965, as amended by Section 99 of the 2004 Act where it states that a local authority must not seek a CPO unless it feels that the development of the land will,
“promote improvement of the economic well-being of the area … and promote the improvement of the social well-being of the area”.
Denning, in his judgment in Prest v Secretary of State for Wales, opined on the justification for compulsory purchase, saying that,
“Parliament only grants it, or should only grant it, when it is necessary in the public interest”.
He then went on to set out the safeguards.
5.30 pm
The issue for me is quite simple: what is the public interest as described by Denning? What defines the social and economic well-being of an area, as described in law? I would argue, as I believe would the great majority of the British people, that it must include housing the people. There is a housing crisis, with unrelenting house price inflation at a time of escalating student debt: hundreds of thousands of young people will never be able to afford a home because of student debt overhanging their early years. We have huge levels of migration into the United Kingdom. People even live in sheds in parts of this country: in Slough and parts of London, people put sheds in their gardens,
illegally, and put people into them. That is the scale of the problem. The English housing survey shows the lowest level of home ownership in 30 years. There is a high incidence of overcrowding, with the particular problem of the younger generation living at home. We have unparalleled levels of homelessness, with ever-lengthening waiting lists.
One of the most important reasons for this is to be found in the 2015 report by the All-Party Parliamentary Group on Population, Development and Reproductive Health. It says:
“Urban areas are often densely populated and vulnerable to violence and unrest”.
The report highlights the crime and violence associated with rapid urbanisation. In other words, high levels of population in high-density areas can bring about crime. It therefore follows in my mind that acquiring land at agricultural, local market prices under the process that I have described, for the purpose of housing the people, is perfectly justifiable. Under the law, there can be no reason why housing the people, in the public interest, should be impeded by speculation in land.
I am not arguing that land subject to existing planning consent should be CPOd at knock-down prices—that would be wrong—but I am arguing that land not so designated, but needed for housing, should be CPOd. If we are going to meet this huge pent-up demand for housing, we are going to have to expand into the green belt and planners are going to have to compromise. We are going to have to build genuinely affordable housing on the edge or margins of many of our towns and cities. I personally can see no other way. There are those who argue that, following planning designation, the market should determine the price of land. But why should the benefit of a stroke of the planner’s pen fall to the fortunate few, to the detriment of the unfortunate many? Our fathers did not go to war to preserve the privileges of the few; they fought to preserve the rights of the many.
When I talk about privilege, I am talking about unjustifiable, speculative profit. The profit on land is staggering. I have consulted the Valuation Office Agency. The estimated value of a hectare of typical agricultural land in the United Kingdom is £21,000—£8,000 in Scotland and £25,000 in arable England. According to figures from the VOA published on the DCLG site in February 2015, that same land, when granted permission for housing development, would fetch the following figures as opposed to £21,000: £846,000 in Allerdale, in my former constituency; £990,000 in Liverpool; £1.5 million in Doncaster; £1.4 million on the outskirts of Birmingham; £2.3 million in Harrogate; £2.5 million in York; £3.4 million in Watford and Dartford; £5.3 million in east Hampshire; and £5.7 million in Barnet. This is land that is available for agriculture at £21,000 an acre. To put it bluntly, what is going on is a disgrace. The VOA based its calculation on 35 two, three or four-bedroom houses per hectare, so it is a pretty accurate calculation. These stroke-of-a-pen planned price increases are denying millions of people their homes. Not that the fortunate few are the only beneficiaries: the taxman seizes his share in capital gains. We cannot go on like this.
In Nijmegen, Holland, the Waalsprong urban extension is being built on 1,350 hectares of agricultural land: that is not much short of 3,000 acres. There will be about 11,000 homes with public services and facilities to accommodate a future growth of up to 30,000 residents. This is being delivered by a public/private partnership, with the local authority owning the land, having acquired it at a low cost to facilitate the development, it being agricultural land.
In Sweden, there is the 11,000-home development in Hammarby, just outside Stockholm. This high quality, environmentally sustainable development is being built 10 times faster than the same kind of development in England because land costs are lower, so there are fewer incentives to drip out supply while waiting for prices to rise. I am indebted to Shelter and Mr Steve Akehurst for assembling that data on European land for affordable housing.
I turn now to the matter of housing title. Why cannot we have a new system of title in the United Kingdom, whereby we acquire the land under the process that I have described—following development—and sell it to the house buyer under a new form of title, which I have described as crownhold, qualified leasehold or covenanted freehold? This is how I envisage the arrangement: the local authority identifies the land for housing, purchases the land under the formula described, designates the land for housing development and enters into a joint venture with a developer. The developer develops the site, and the joint venture sells the housing development under the new title. The housing is subject to a ground rent set down in statute—let us say £300 per annum, 10-year renewable, payable to the original land vendor—and the homeowner is free to buy the freehold under a simplified leasehold enfranchisement arrangement. Equally, the homeowner is free to sell their title, whether it be the acquired title or an enfranchised title. You could also introduce on sale a tapered levy to contribute towards the cost of enfranchisement on each subsequent sale, after the original purchase has taken place.
What are the implications of all this? First, the original landowner gains not only agricultural price plus uplift, but later, a ground rent and the benefit of enfranchisement. Secondly, landlords would have to judge whether it was better to cede the land for development or wait for full commercial benefit from planning permission on green belt land—which otherwise they could rarely get, indeed probably never—in the vain hope of waiting to develop the land in question. Thirdly, substantial releases of land on this basis would help stabilise the property market and might even lead to a switch from housing investment into more commercial forms of investment in the national interest, as is the case in Germany. I have always believed that the reason the Germans do so well is that they concentrate not on property investment but on real investment.
I was advised by the noble Earl, Lord Lytton, this morning in an email that the profit the developers generally expect is in the region of 22%, allowing for a land price of probably £5,000 or £6,000 a plot; it would be a lot less than that in reality, but it has to be serviced. If you could build, as I said the other day,
a three-bedroom house for £80,000, you could sell it for £110,000 or £120,000 and housing costs would be greatly reduced. It would carry a mortgage of some £500 to £550—and that is a high rate at the moment—which would allow hundreds of thousands of people to buy their homes, save us a fortune on social housing and render the Bill for the fairies.
Finally, there could be a danger that landowners might use the identification of land for crownhold development in support of their applications or appeals for full commercial planning consent, and for inclusion of that land in the local authority’s local development plans—a sort of piggyback principle—and use the demand or the proposed designation for crownhold as the basis on which they can then apply for a more profitable planning permission. It would have to be made clear that opposition to the identification of land for crownhold development would be a major factor in refusing consent in full commercial benefit planning applications.
It is just a thought. A lot of people in this country believe that land is overpriced and that that is the problem —it is certainly my belief. One day we will change the system. I do not expect it to happen tonight, but I hope it is not too far away.