Labour propose buying some land for new housing at below open market value. If confirmed, this is a momentous error. Ignoring deeply entrenched senses of right and wrong is high risk. Overseas examples overlook a key difference. Their transition period is finished. In England it has not started. The land lobby is powerful, patient and well funded. It will wait for a policy reversal. More supply delay will result.
If Labour come to power at the next election and give local councils powers to buy some development land at agricultural value, excluding hope value this decision will be an error of historic repetition. Beyond tinkering at the edges the change will not clear the housing supply blockage. A large part of the property industry will rise in opposition. All the same at a personal level I understand and warmly support this sentiment, but not this sort of unfair selectivity. It abuses every fibre of professional experience. Ignoring deeply entrenched senses of right and wrong is very high risk.
The naivety of Labour’s intention is plain, when it is claimed their approach will be similar to existing compensation arrangements in Germany, France and the Netherlands. Fair enough, but Labour have overlooked a crucial difference. The market for development land in those countries is played out by actors who know the local rules, so local land owners are not unexpectedly penalised. To match these European examples the changes Labour propose must first be introduced and implemented over a timescale which eliminates the confiscatory element. From the owners point of view, to make the compensation change fair the introductory cycle before the policy change takes effect must be 10/20 years, matching valuation changes in the hope value. The shorter the introductory cycle the more hope value will be, and will be payable. Between ten and twenty years, depending upon local market conditions due to uncertainties hope value dwindles to zero, at which point the principle of inherent unfairness, or inequitable treatment falls away entirely.
During this transition period, to avoid accusations of this sort, Labour must accept compensation is paid at market value rates. It is the price to pay to avoid being seen as bullies, and to remove this criticism, which is a legitimate source of anger. The value of a piece of land is not based on facts. It is based on a perception of the facts. Each should mirror the other. This is not always the case. Valuers can usually measure the open market reality, and if this amount is paid, landowners will usually accept the outcome.
Ian Campbell
3 June 2023
