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Column 25th April 2018

A quick way government could make homes £100k cheaper

Last week I reported the lack of affordable housing in the Vale and the inability of the District Council to become involved in direct delivery of affordable housing by acquiring land.

This week I want to report on a proposal to reform the land market which could reduce the upfront cost of an affordable housebuilding programme by more than a third, according to cross-party think tank Civitas.

The majority of the cost of housing development comes from the price of land, which increases significantly after planning permission is granted for new homes.

Official estimates note that residential land in England is worth an average of £2,100,000 a hectare, but in agricultural use the land would be worth £21,000 a hectare. Brownfield land would be worth £514,000 a hectare.

Civitas suggests that landowners receive only existing use value plus 50% instead of the 10,000% they currently receive. They say thatthis would see the cost of land in the South East fall from a residential land cost of £233,000 a unit to £123,000 a unit.

Without anyone taking additional profits this would reduce the price of the cheapest 3 bedroom new home in Wantage from £325,000 to about £215,000.

Civitas contends that if councils had the power to acquire land at fairer prices, before planning permission is awarded, the cost of building 100,000 homes could fall by about £9 billion.

Calculations by Civitas suggest that a 100,000-housebuilding programme could cost £23.5 million when landowners receive a windfall value when planning permission is granted, but if landowners were only paid a 50% premium on the current value of their land, this could drop to £14.5 billion.

Daniel Bentley, editorial director at Civitas, said: “It is clear that the only way to consistently build 300,000 homes a year is for the public sector to supplement market provision with a steady supply of new affordable homes. This would provide a much-needed alternative to the insecure private rented sector for low-income families, and by stepping up supply it would bear down on housing costs for everybody.

“Ministers have repeatedly suggested that council building needs to be part of the solution, but seem to be put off by the upfront costs. These costs could be dramatically reduced if landowners were prevented from pocketing the unearned windfalls that arise when sites are designated for new housing.”

That would make housing a lot more affordable and our schools, hospitals and social services might be able to find staff who could afford to live here.


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