Land value capture

The government’s land value capture aspirations are particularly focused on land released from the green belt. In order to gain residential planning permission in the green belt, a developer would have to provide 50% affordable housing, improvements to local and national infrastructure, and improved publicly accessible green space.

This would be a significant shift for the land market and is a policy designed to reset landowner expectations; the National Planning Policy Framework (NPPF) consultation sets out a proposal for limiting benchmark land values for development sites at little more than 10 times agricultural value.

But whether or not this is compatible with the desire to boost housebuilding is unclear. Will it give landowners the incentive they need to engage in the promotion and local plan process?

Lessons from the past

Previous Labour government efforts to introduce a betterment levy or development land tax were strong disincentives to bringing land forward. And while landowners may be prepared to accept less in exchange for a shorter and more certain planning process, without sufficient returns from residential development it’s likely sites will either remain in their existing use or be sold for alternative uses such as logistics which may provide a better return.

We are in the very early stages of change and caution is required to avoid unintended consequences.

There could be potential to capture up to an additional £1 billion per year, but the challenge is to design mechanisms that ensure landowners believe bringing land forward for residential development is worth their while. Failure to do so risks disrupting the level of supply needed to ‘get Britain building again’.

Further information

Contact Emily William or Lydia McLaren