Three growth-friendly reforms for the UK’s damaged planning system

The author is professor of economics at Oxford college

After the spectacular demise of Trussonomics, contemporary fascinated with the way to resolve the UK’s fiscal disaster has turn out to be a precedence. The brand new chancellor, Jeremy Hunt, urgently wants market-credible options that improve long-term progress. An necessary component in a smart bundle is to allow much better land worth seize. This entails sharing extra pretty the rise in worth that outcomes from growth permission between society — the taxpayer — and personal landowners. It could be a big supply of recent funding, and cut back the constraints on progress that come from landowners and from the excessive costs of land with growth permission.

We’d like three issues. First, a planning system that might, on change of use, direct that the uplift in land worth be cut up between the nationwide or native planning authorities — to assist meet infrastructure or housing wants — and the present landowner, whose portion can be truthful reward for promoting the land. The Oxford Civic Society helps land worth seize with a 50:50 cut up.

Second, an modification of the Land Compensation Act 1961 in order that native and central authorities may, the place essential, compulsorily buy at a worth near the prevailing worth. This is able to exclude “hope” worth — that may at some future time come up if planning permission got for change of use. The obligatory buy choice reduces the danger of 1 landowner blocking growth by extracting an unreasonable holdout revenue from a venture entailing a number of plots of land.

The large costs of residential land owe a lot to the exorbitant privileges given to landowners by the 1961 act. This entitled homeowners to compensation for subsequent planning permission for years following a voluntary sale. On this, the UK is an outlier. In international locations corresponding to Germany and the Netherlands, a fairer stability has been struck between the property rights of landowners and people of society. The UK would do effectively to study from stellar examples of using land worth seize for housing and infrastructure tasks in cities corresponding to Freiburg, Frankfurt and Rotterdam. Enhancing LVC can be a giant step ahead in planning cities and cities for the twenty first century.

Lastly, the federal government’s fiscal guidelines ought to turn out to be extra growth-friendly, shifting the main focus from constraining authorities debt relative to gross home product. As an alternative, the purpose needs to be to reinforce the general public sector’s web asset worth (belongings minus debt) the place the market worth of land is counted on the asset aspect of the stability sheet. Within the brief time period, acquisition of land for the general public sector funded by debt would then go away the web asset worth unchanged. Nevertheless, planning consent would quickly improve land values owned by the general public.

One of many advantages of land worth seize is to scale back opposition to new housing — this will come from those that concern, generally with good cause, that the shortage of ample infrastructure will put unacceptable strains on native providers. A well-functioning LVC system would assure correctly funded new infrastructure, encouraging welcoming attitudes to new housing. There’s a rising acceptance throughout political events and definitely among the many public that housing and planning markets will not be match for objective: they don’t seem to be working for the widespread good, and will not be delivering the affordable housing expectations of most younger folks.

The homeowners of land within the UK have pocketed too excessive a proportion of advantages from the funding that others, particularly taxpayers, made in infrastructure and different growth. The privileges granted by the 1961 act have contributed to the excessive prices of land within the UK and constrained progress. Excessive land prices are a part of the rationale for the UK’s housing issues: lack of affordability offers us the very best common commuting instances and least well-insulated properties amongst main northern European economies. All this should change.