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MPs urge shake-up to deter land speculation and boost affordable housing
MPs have called for a change in law to discourage land speculation, allow councils to buy back land at a “fairer” price and kickstart a new generation of new towns.
In a 60-page report on land value capture, published today, MPs on the Housing, Communities and Local Government (HCLG) Select Committee also argues for a “simplification” of the compulsory purchase order (CPO) process to make it faster and cheaper for local authorities.
The report is the result of the committee’s inquiry looking at how soaring increases in land value can be captured more “fairly and efficiently” and be spent on extra affordable housing, infrastructure and public services.
Clive Betts, chair of the HCLG Select Committee, said the current system “allows landowners, through no effort of their own, to make multimillion pound profits from the substantial increases in land value that arise from public policy decisions, such as the granting of planning permission”.
He added: “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.”
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The committee has recommended reforms to the Land Compensation Act 1961 to give councils the power to buy land at a “fairer” price. The changes, the committee argued, would give councils a “powerful tool” to build a new generation of new towns and new developments within existing areas.
Mr Betts added: “There is a growing consensus that the Land Compensation Act 1961 requires reform. The present right of landowners to receive ‘hope value’ is distorting land prices, encouraging land speculation and reducing revenues that could be used for affordable housing, infrastructure and local services.”
In its evidence to the committee, Shelter said that the act was “fundamentally an outdated piece of legislation” which “distorted land prices”.
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The committee also recommended simplifying the CPO process to make it easier for councils to use.
“It is concerning that, in many low-value areas, the financial compensation offered by local authorities or central government for property is not sufficient to purchase an equivalent replacement elsewhere,” the report said.
“The government needs to assess how best to address this inherent unfairness in the CPO system and explore whether, in some circumstances, it may be more appropriate to provide an equivalent replacement for what has been acquired.”
Elsewhere, the report called for reform of the Community Infrastructure Levy (CIL) to “remove complexity and the extensive range of exemptions that currently limit its effectiveness”.
The report noted: “CIL is far too complex and the extensive range of exceptions need to be removed. Importantly, there has to be greater certainty that the infrastructure associated with development is actually delivered at the appropriate time, sometimes in advance of development commencing.”
On Section 106 agreements, the committee said “further reforms” will also be needed if the system is to boost the amount of infrastructure and affordable housing.
“The government should work with the Local Government Association [LGA] to provide additional resources, training and advice to local planning authorities to ensure that they are able to negotiate robustly with developers and that local authorities are consistently able to contract for the appropriate level of planning obligations,” the report said.
Responding to the report, Martin Tett, housing spokesperson for the LGA, said: “We are pleased the committee recommends that government provides extra support to councils, through the LGA, to help give local authorities a strong hand in negotiations with developers.
“Government action on these recommendations would have a significant impact in building more homes with the right infrastructures and places that people want to live and work.”
A National Infrastructure Commission spokesperson said the report "highlights the real need to consider new and pragmatic ways to pay for our infrastructure in the future - something our National Infrastructure Assessment also finds".
The spokesperson added:“In particular the committee’s recommendations on reforming measures including around compulsory purchase and compensation match our own.
“We would urge ministers to seriously consider these reforms as one of a number of ways to fund projects in the future.”
The government has two months to respond to the report.
Giving evidence last week to the inquiry, new housing minister Kit Malthouse vowed to keep an open mind on ideas.
