Subscribe to read:

UK Labour party plans land law shake-up to cut prices

Upgrade your account to read:

UK Labour party plans land law shake-up to cut prices

Digital or Premium Digital

You can also subscribe to the FT Digital or Premium Digital with Google

UK housebuilding

UK Labour party plans land law shake-up to cut prices

Move would seek to accelerate low-cost housebuilding in England

John Healey, the shadow housing secretary © PA

A Labour government would change the law and set up a new agency to enable councils and developers to buy land in England from private owners more cheaply in an attempt to accelerate low-cost housebuilding.

John Healey, the shadow housing secretary, said the Sovereign Land Trust would buy agricultural land at “near current-use value” rather than the vastly inflated prices it sells for when earmarked for development.

The move is likely to anger landowners hoping to profit from the sale of property for development but be welcomed by housebuilders.

“The policy would apply across the board,” said Mr Healey. “So we take land profiteering out of the market and reduce the cost of land as an inflated component of the cost of homes that are eventually built.”

Under the 1961 Land Compensation Act, councils are not allowed to buy land at its agricultural value and must pay a speculative “hope” value calculated as if there were already planning permission to build on the site.

That can make the land more than 100 times more expensive than its original value.

A report in November for the government by Oliver Letwin, a former cabinet minister, recommended that the housing secretary should cap residual land values on large sites at about 10 times their existing use value.

Mr Healey said a Labour government would take a more radical approach and legislate to enable land to be sold at close to its current value in order to be used for housebuilding. In addition, powers of compulsory purchase would also be strengthened for the English Sovereign Land Trust and councils to use where necessary.

A report for Mr Healey written by Nicholas Falk, director of the URBED Trust, a consultancy, cited foreign examples, including Leipzig in Germany and Eindhoven in the Netherlands, where public planning is used to lead regeneration.

Methods already exist to extract charges on the uplift in land values from housing development, including “Section 106” payments and the community infrastructure levy.

Section 106 payments are private agreements under which councils demand that developers build social infrastructure, such as new schools, affordable housing or minor roads, in return for planning permission on their housing development.

The levy is a planning charge introduced in 2008 that enables councils to demand a financial contribution from developers that is earmarked for local infrastructure.

But Mr Falk argued that those schemes did not raise enough money to overcome the administrative difficulties of joining up development and transport schemes.

“[The levy] could readily be replaced by a simple formula that took account of the value created, and hence the uplift in land values to create a more predictable system and one that avoids overloading overstretched infrastructure and professional capacity,” he wrote.

Mr Falk set out various options for how much compensation landowners could get from state buyers, with the “general principle that the value of a serviced housing plot should be 25 per cent of the total value, which would be in line with both Dutch and German practice”.

Labour plans to use the new trust to buy up non-green belt land on the edge of cities and parcel it out for development to councils and housing associations.

It would also lead the packaging of land in strategic corridors, for example the proposed Cambridge-Milton Keynes-Oxford arc. The trust would also support regeneration projects in so-called left-behind towns in northern England and elsewhere.

Mr Healey said the trust could start life as part of Homes England, the existing housing quango, although it could become a separate entity over time. It could also fulfil some of the functions currently carried out by the European Investment Bank.

Copyright The Financial Times Limited . All rights reserved. Please don't copy articles from FT.com and redistribute by email or post to the web.

Content not loading? Subscribers can also read UK Labour party plans land law shake-up to cut prices on ft.com