Land value capture in the planning system is a distraction from the redistributive measures needed to tackle England’s housing crisis

A key policy aimed at tackling housing inequalities in England does as much to obscure and sustain them, a Cardiff University report concludes.

Academics assessed land value capture (LVC) in the planning system, which aims to redistribute increases in the value of land resulting from development between state, community and private actors. The underlying premise of this policy is that landowners should not retain all of this uplift as it is unearned and is economically inefficient.

Under the current framework, a proportion of the increased land values should therefore be redistributed to help pay for affordable housing and public infrastructure. But the policy can be controversial, is prone to gaming by developers and there have therefore been frequent attempts at reform and adjustment over the past few decades under the political pressure of the housing crisis.

Based on the last release of the government’s estimates (August 2020), agricultural land outside London granted planning permission for residential development would, on average, increase from around £23,000 per hectare to around £2.67 million per hectare – multiplying in worth by 116. Land now constitutes most of the value of a home in the UK and academics say there is significant scope for more effective redistribution of unearned land values to help pay for public infrastructure.

Lead author Dr Edward Shepherd, based at Cardiff University’s School of Geography and Planning, said: “England’s land and housing settlement is in a state of emergency. The private developer-dominated system that has prevailed over the last 40 years has manifestly failed to produce housing and development outcomes that adequately meet social need.”

“Housing is unaffordable for many, and infrastructure is under-funded and underproduced.”

“The current UK Labour government has promoted a range of adjustments to land value capture policy aimed at encouraging more housing development while seeking to secure a proportion of land value uplift to flow towards affordable housing and public infrastructure. But this won’t be enough to ensure it meet its own housing targets or improve affordability for the majority.”

Co-author Dr Tim White, who carried out the research while at Cardiff University and is now based at Kings College London, said: “Because of the government’s reliance on the speculative private housing development model to deliver most new homes, the scope for land value capture in the planning system is limited by housebuilder and landowner profit demands. There is also greater scope for gaming by resource-rich developers.

“Our report shows that continuing to tinker with land value capture policy will not deliver the transformative change that is needed. While there are certainly incremental policy adjustments that can and should be made to improve outcomes in the short-term, what we truly need are more ambitious social-redistributive measures involving landed property and its value combined with less speculative housing delivery models.

“A structural shift towards a more active public-sector led delivery of affordable homes and public infrastructure, delivered at scale, could be part-funded by land value redistribution if more ambitious policies were developed.”

This report is the product of an Economic and Social Research Council-funded project entitled Ideology, housing and land value capture: Uncovering the politics of development land value.

Academics analysed more than 100 parliamentary debates and policy documents from the 1940s to the present to understand how land value capture debates have been framed and the issues identified and represented. They also carried out more than 50 semi-structured research interviews with experts as well as two round table discussions with academics and policymakers.

There is also a sister report tackling the Wales policy context. Based on a workshop with stakeholders, this identified the need for clearer national policy on land value capture to seek to secure more affordable housing and improve transparency in the decision-making process. However, as in England, the report concludes the wider goal should be to shift towards a less speculative public-sector enabled delivery model.

Dr Shepherd added: “If the preceding decade has demonstrated anything, it is that the political pressures of the housing crisis affect political parties of all stripes. There is therefore genuine political potential to improve housing development and land value capture policy outcomes at the margins, as well as via more ambitious reimagining of what may be possible.”

The latest report, Who should own the value of land? Housing, power and the deep politics of land value capture is available to view here.