Landowners ’make multi-million-pound profits through no effort of their own’
Extra funding for new local infrastructure and affordable housing could be raised by changing the way increases in land value caused by public policy decisions are captured, the housing, communities and local government committee has found.
It argues local authorities and central government should capture a “significant proportion” of this uplift in value to invest in new infrastructure and public services.
The committee produced a report, Land Value Capture, following an inquiry into the subject.
“Land value capture is fundamentally about fairness and necessity,” said Labour MP Clive Betts who chairs the committee.
“Fairness, because the current system allows landowners, through no effort of their own, to make multi-million-pound profits from the substantial increases in land value that arise from public policy decisions, such as the granting of planning permission. As these increases are significantly created by the actions of the state, it is right that a significant proportion of this should be shared with the local community.
“Necessity, because if the government is to meet the challenge of providing enough new homes over the coming years, then they will also need to find the funds for improving the surrounding infrastructure.”
Reform of the Land Compensation Act 1961 was one of the key recommendations, with MPs suggesting local authorities should be given the power to purchase land at a fairer price.
Betts said: “There is a growing consensus that the Land Compensation Act 1961 requires reform. The present right of landowners to receive ‘hope value’ is distorting land prices, encouraging land speculation and reducing revenues that could be used for affordable housing, infrastructure and local services.
“Ensuring local authorities have the power to compulsorily purchase land at a fairer price will provide a powerful incentive to build a new generation of new towns and the extra homes that we so desperately need.”
MPs also suggested reforming the community infrastructure levy to remove complexity and the extensive range of exemptions that currently limit its effectiveness, as well as allocating more resources to local authorities to ensure they are able to negotiate robustly with developers.
Responding to the report, a spokesperson for the National Infrastructure Commission said the report “highlights the real need to consider new and pragmatic ways to pay for our infrastructure in the future – something our National Infrastructure Assessment also finds.
“In particular the committee’s recommendations on reforming measures including around compulsory purchase and compensation match our own.
“We would urge ministers to seriously consider these reforms as one of a number of ways to fund projects in the future.”