Nationalisation of land won’t solve the housing crisis

IF BREXIT is the defining political challenge of our times, then solving the housing crisis runs it a close second.

It is an intransigent problem with wide-reaching social and economic implications, and one for which politicians of all persuasions are desperate to find solutions.

As the debate evolves, and the sense of urgency increases, key questions are being asked about whether the state should be playing a more direct role in the market.

This includes ideas of greater use of compulsory purchase of land or new ways to ‘capture land value’. It’s a debate that none of us can afford to ignore, least of all the CLA, the membership organisation for owners of land, property and businesses in rural England and Wales, which is playing a leading role, bearing in mind the profound consequences for our membership.

When considering this issue, it is important to start from an understanding of the social and economic context. It is called a ‘housing crisis’ for a reason. An increasing divide is emerging between those who own property and those who do not, one closely correlated to age.

The post-war generation have been the main beneficiaries of meteoric house price rises (especially in the South-East). In the 1960s and 70s, 18 to 36-yearolds spent between five and 10 per cent of their income on housing costs. Today it is more than a third. Today’s 30-year-olds are half as likely to own their own home as the baby boomers. Many commentators see this divide as the reason for the current unsettled political landscape. The solution, everyone agrees, is to build more houses.

For much of the past 10 years, government focus has been on seeking to boost supply through removing perceived barriers in the planning system. The introduction of the new National Planning Policy Framework radically simplified the rules, but frustratingly for the Government it has not resulted in the necessary increased housing supply.

This is partly a problem of contradictory ideas. On the one hand the Government has sought to hand more decision-making power to local people (who are more often than not opposed to any new development), and on the other seeking to force authorities to dramatically increase the amount of new houses.

The resulting chaos and logjam in local council offices has created a worrying loss of faith in the planning reforms and continued supply shortfall.

Outside of the government, and perhaps increasingly within it, there is anger and frustration at a ‘broken’ housing market that is dominated by an oligopoly of private developers that are suspected of manipulating the market to inflate prices.

This view is behind the ideas tentatively floated in

by the Labour Party last month. Their proposals are to create a new government-run ‘Sovereign Land Trust’ using the powers of compulsory purchase to buy land at ‘agricultural use value’ to build affordable and council housing at lower costs, thereby ‘capturing the value’ of the land for the benefit of the wider community.

It’s not just a Labour idea. The Conservative former Ministerial high-flyer and policy thinker Nick Boles MP is perhaps the most enthusiastic supporter of the policy. Radical it might be, but at a time when Ministers are desperately seeking solutions, it is one that could quickly become Government policy.

There are obvious and immediate issues of fairness. The idea that the State can, through development control, prevent the landowner from building on their own land and then later compulsorily acquire it at a cut price to develop it itself is deeply iniquitous. It is a recipe for confrontation and in reality, probably a long-winded, uncertain and expensive process.

There are also major risks for the wider economy. Taken to its extreme but logical extent, an extensive nationalisation of house-building could lead to a crash in land prices that would put companies, shareholders, homeowners and pension investors at peril.

If we are to tackle the housing crisis, the key is competition, not compulsion. Government should be working to bring more public land forward for development as part of the solution, increase the number of house-builders and support businesses to create secure, well-paid jobs in areas where house prices are not as inflated. After all, the housing crisis in the South-East is partly a reflection of the lack of well-paid skilled jobs in other areas.

Addressing the housing supply challenge does indeed require new solutions, but if there is any area of public policy that does not need an extra dose of antagonism it is planning.

Compulsory purchase is by its nature draconian. Policymakers should not view it as a silver bullet but as an absolute last resort, and should instead constructively engage with landowners to solve this divisive political challenge for the benefit of the young of our nation.