18.12.18
Letwin Review: A golden opportunity, but does it add up?
Source: PSE Dec/Jan 2019
Lois Lane, policy and research advisor at the Campaign to Protect Rural England (CPRE), analyses the outcomes and recommendations of the Letwin Review, and makes the case for radical reform of the country’s broken land market.
Last month, we argued that the final report of Sir Oliver Letwin’s review of build-out offered a golden opportunity for the government to show that it is serious about tackling the housing crisis and safeguarding our countryside. There is a clear need to build much more affordable housing, especially homes for social rent. Far more also needs to be done to meet the housing needs of rural areas in particular, where average incomes are significantly lower than in urban areas. In his draft analysis, Letwin was clear that the business model of the large developers is causing major problems, delivering expensive homogenous homes, only as fast as the open market can absorb them without lowering prices.
Having identified the problem, we hoped that Sir Oliver might recommend some truly transformative measures to fix our failing system. In particular, we called for reforms to the dysfunctional land market which underpins so much of what is wrong with the way we currently deliver housing.
So, how does the final report measure up? Right now, it is hard to say. Letwin has offered some promising recommendations, but they are full of complexity and detail. It remains to be seen how well they will translate into locally-applicable policy.
The principle of diversifying sites in order to speed up build-out rates is a good one. Homes for social and affordable rent, Rent to Buy properties, specialised housing for older people... the idea is that, by building more of these varied types of homes on large sites, delivery rates could be substantially increased without lowering the price of open market homes.
To this end, Letwin recommends the adoption of “a new set of planning rules […] to provide a diversity of offerings” on large sites, and the establishment of a National Expert Committee to advise local authorities and arbitrate disputes. These recommendations are largely of a piece with what we had been led to expect from the draft analysis. They have been broadly welcomed by the housing sector, though some organisations have voiced fears that a new independent governmental committee is more likely to result in increased bureaucracy than increased delivery.
Perhaps the most interesting of the report’s proposals, however, is that councils should use their new powers to enforce diversity rules to cap the value of land at 10 times the agricultural value on large sites. This would mean that a hectare of land would rise in value in many areas of England from £21,000 in agricultural use to just over £200,000 with planning permission for housing, rather than the £2m or more that it would typically be worth today.
If this proposal is adopted, and if it has the anticipated effect, it would represent a radical shift in the way that land is bought and sold, and in landowners’ expectations of profit.
It is likely, however, that changes will be needed to primary legislation, as well as just planning policy, in order for the recommendation to be effective. Under current compensation rules, set out in the 1961 Land Compensation Act, it is unclear whether local authorities could legally ensure that land values really are capped at 10 times existing use value, even in cases of compulsory purchase.
The Act currently enshrines the right of landowners to be reimbursed for the ‘hope value’ associated with any prospective planning permission they might have expected to receive for a site.
There is an argument that sufficiently clear and well-enforced planning policies would have the effect of removing hope value by removing the prospect of any alternative scheme being realised, but there are bound to be landowners and planning barristers who think otherwise! We might have to wait until 2021, when the proposals would be due to come into effect, to find out whether they are workable.
The impression CPRE has is clear. The public expects fundamental change to how housing is provided in this country. We would have liked Sir Oliver to recommend more radical land reform, but at the very least we would urge the government to adopt his recommendations in full.
Overall, there is much to like in this report. The fundamental recognition that market absorption rates currently dominate the UK housebuilding industry is extremely valuable, as are the recommendations to support local authorities to play a greater role in assembling and masterplanning large sites to improve the variety of homes being delivered.
Yet itʼs hard to shake the feeling that this is a missed opportunity. Having apparently contemplated some truly radical reforms to our broken land market, Sir Oliver has ultimately shied away from recommending an end to hope value.
Whether or not that will ultimately turn out to matter remains to be seen.
Top image: Dominic Lipinski via PA Images
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