Labour's Housing Policies

[Posted by Prof Henry G. Overman]

Swamped with plans for new What Works Centre for Local Economic Growth plus policy book summarising lessons from first five years of SERC research - so not much time for party political conferences. However, a number of people have asked for my take on Labour's conference commitments on housing. Here's my first pass, building on Randeep Ramesh's helpful summary in the Guardian.

Setting aside the issue of whether 200k per year is enough (and more or less than previous commitments) my thinking runs as follows:

1) Tackle land hoarding.

Fine in principle, assuming we are talking pure speculative activity. I'm not sure how big a problem it is, however.

If we are talking about land with permissions my back of the envelope calculations from earlier in the year suggest a 400k figure is highly misleading: "Unimplemented units are either unstarted or under construction. Of the 399,816 headline figure 37% are unstarted (down from 47% in 2008). Units under construction make up the other 63%. In terms of numbers of units that equates to around 150k units un-started, around 250k under construction." (which squares with a more recent 200k figure coming from the National Home Builders Federation).

That's clearly not enough for the 1.4m homes that could go on 'strategic land bought with options' (the Guardian says that figure comes from Ed Milliband's office). That must mean that most of these options are for land without permission. You buy this land because it's cheap now but would be worth a lot with planning permission. Once it gets planning permission you have to build on it to realise those gains. What you don't do is buy expensive land with permission and sit on it waiting for prices to rise. How do we know this? First, because that would be counted in the 150k figure above (and it's not the only source of delay - much of that will be for developers that went bust). Second, because it doesn't make much sense to hold land with permission just because of general land price inflation (again, the 150k figure confirms this). All of this might suggest that Ed Milliband's office doesn't understand much about planning gain.

2) Give urban centres the right to grow

In other words, force the shires to take houses that they don't want. This could help (although it would be a return to the kind of top-down planning that Labour used during the 2000s) although it sure as hell won't be popular!

3) Create development corporations

According to the Guardian these "would seek cheap agricultural land to buy and build on – and use the profits from the sale of houses to repay the investment. The attraction for Labour of these corporations is that any borrowing stays off the government's balance sheet." This one is almost funny. Cheap agricultural land is land without planning permission, once it has planning permission it may still have plants growing on it but it's not agricultural land and it's certainly not cheap. For example, the latest 2011 VOA report suggests agricultural land in Oxfordshire is worth £20,995 per hectare; with planning permission for residential it's worth £4m (i.e. 200 times as much). So, if this is really what Labour is planning the trick is to buy agricultural land where the LA will not grant permission and then over-rule the LA, grant central government planning permission and build housing on it. You could, of course, achieve the same thing by getting rid of LA control over land planning, take the same land, grant permission and impose restrictions on the private sector developer that you then sell that land to (at £4m per ha). The beauty of this has nothing to do with whether or not it's on the government balance sheet. It is, however, going to require removing LA control over the land planning process and handing this to top down central government planners. To put it modestly, that's quite a big step.

I'd need more time for a proper analysis - and as I said the underlying interpretation of Labour policy came from the Guardian article linked above - but still doesn't look particularly convincing.