Traditionally in the UK the increase in land value through the granting of planning permission has always been captured by the landowner. Government figures suggest that a residential planning permission can increase the value of agricultural land from £22,000 – £1.95 million per hectare.
Elsewhere, particularly in Europe and Asia, public authorities can access the uplift in the value of the land and use the capital to finance investment in infrastructure to open up new areas of land for housing.
This approach is possible in the UK when the public authority owns all of the land though this is fairly exceptional. Whilst public authorities in the UK have the ability to compulsory purchase land the landowners are compensated as though the land already benefits from planning permission. The uplift in value is captured by the landowner and the opportunity to invest it in infrastructure is lost.
This could be about to change as the government considers wide-ranging reforms to how the increase in value of land resulting from public policy decisions is captured.
Clive Betts MP, Chair of the Department of Housing, Communities and Local Government Committee said:
“Our proposed package of reforms to taxes and charges will ensure a fair proportion of the increase in value arising from public policy decisions can be used by national and local government to invest in new infrastructure and public services.
In particular, 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.”
It is not going to happen overnight but these could be the early signs of significant reforms to capturing the value of land in the UK.
Full overview and access to more information on the government’s website at the following link: