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From Whitehall to Town Hall

Guest article by Alex Dismore of Cratus

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Amid the daily wrangling over it-that-must-not-be-named, it was easy to miss James Brokenshire’s written statement on planning, smuggled in alongside the Chancellor’s Spring Statement.

In this was the much-anticipated response to Sir Oliver Letwin’s review into build out rates. Whether this short statement qualifies as the ‘full’ response we were promised remains to be seen, but this glimpse into the Government’s thinking is worth a closer look.

For those wary of further significant changes to the planning system, this was in many ways a welcome anti-climax. Much of what Sir Oliver recommended was ‘welcomed’ or ‘noted’, or, as an uncharitable reading would suggest, kicked into the long grass.

Firstly, the entire industry should be pleased that the accusation of deliberate land banking seems to be finally and officially quashed. In its place is the Government’s commitment to improving market absorption and thus build out rates through better housing diversity – of size, type and tenure. This message is one that Kit Malthouse has been repeating at every available opportunity and is clearly a priority for MHCLG. Additional planning guidance will be forthcoming.

The most politically eye-catching of Letwin’s proposals was to impose levels of diversity as a means of capturing more land value, with guidance as to how to use this to capture uplift above ten times the existing use value. The Secretary of State’s response to this was tepid at best and acknowledged the industry’s scepticism. So, where does this leave the wider land value capture (LVC) debate?

An LVC tax of some kind – requiring reform of the 1961 Land Compensation Act – is not short of some fairly evangelical supporters in academia and politics. Its focus on land as a fixed and stable commodity makes it the darling of many economists, inspiring interest groups such as the All-Party Parliamentary Group on Land Value Capture, which has ties to the Liberal Democrats, and the Housing, Communities and Local Government Select Committee’s inquiry from last September.

In Whitehall, however, it’s an issue that illuminates some interesting inter-departmental dynamics. The Prime Minister is reportedly in favour of something more radical than the current system of developer contributions – her Special Adviser on housing, Toby Lloyd, is formerly of Shelter and is a vocal proponent – but she faces opposition.

The Chancellor has said the right things about helping local authorities capture more land value through the existing system, but he heads a department that is institutionally keen on taxes that are easy to collect and administer, often regardless of whether or not they make economic sense (see Stamp Duty). This likely precludes an LVC tax. Meanwhile, at MHCLG the preference is to let the current system ‘bed in’. Brokenshire’s team is also acutely aware that they must avoid discouraging land from coming forward.  

But the issue has by no means gone away. Perhaps, in a future that Mrs May could only dream of, a PM will have the parliamentary numbers and the personal authority to lean on the sceptics and get something through. A future Labour government would almost certainly look at it (a land value tax on already developed land was in the party’s 2017 manifesto).

As always at Cratus, we’re interested in how the national affects the local. After the local elections this month, the conversation on the ground tends to be about things less lofty than land value capture and more about the fundamentals of where housing goes. And in many, often Conservative, areas the cry is, ‘not here!’

This creates the interesting optics of Conservative councillors seeking votes by whipping up anti-development sentiment and bashing their own Conservative government’s housing policies. Not that ministers will mind too much. They know the equation. At the national level, the party’s future electoral success depends to some extent on winning young votes through more housing. Whereas, locally, many Conservative councillors earn their crust by being seen to defend their patch from excessive development. Perhaps it was an appreciation of these local dynamics that inspired James Brokenshire’s decision not to intervene in Thanet’s local plan?

What’s certain is that local elections will come and go, but the government’s ambitious housing targets and the onus on councils to deliver them will remain. And the pressure comes from right at the top. As the sun sets on this Prime Minister’s reign, increasing housing supply will be her number one – perhaps her only – domestic achievement. 

Alex Dismore