When agricultural land is granted planning permission, its value can increase by a hundredfold or more.
This raises the question of who should benefit from the financial windfall arising from a public policy decision to grant planning permission.
What is the fairest way to share the increase in value, and how can it be captured?
While agricultural land might be valued at £25,000 per hectare, land with planning permission could increase to £5.7m per hectare
Land value capture is a way of recovering some or all of the value that public investment generates for private landowners.
When public infrastructure investment, such as planning permission or new train lines, increases the value of land, several questions emerge:
- Should it only be the landowner who benefits?
- Should the local authority be able to reclaim a proportion of the increase in value it helped to create, and use it to build schools, roads and social housing for the community?
- If the community should take a greater share of the uplift in value, how should this work in practice?
We are launching an inquiry to find out.
£185 billion could be realised over the next twenty years if an England-wide system of land value capture was introduced.
Land value capture is not a new concept.
After the Second World War, new towns - such as Milton Keynes - were built by individual development corporations which had the power to acquire land at its existing value. The increase in land value was then reinvested in local infrastructure.
However, over the last 70 years, the law has changed repeatedly, affecting how much of the increase in land value the state is able to reclaim from landowners.
Current methods of ensuring landowners and housebuilders contribute to local infrastructure include Section 106 planning obligations and the Community Infrastructure Levy. But are these working or sufficient?
It has been argued that our present housebuilding model is too generous to landowners and doesn't give local authorities the resources they need to build the infrastructure that new housing developments require.
In addition, some landowners and housebuilders have been accused of unfairly avoiding their obligations to pay for infrastructure, through legal challenges and opaque viability assessments, placing the burden for new infrastructure on local taxpayers.
"Private landowners can take advantage of rises in land prices arising from public investment in infrastructure and the granting of planning permission for housing.
Should they benefit from this public investment and these decisions of public policy? Should we be doing more to ensure the infrastructure required by these developments is paid for by those who actually benefit from it?"
- Clive Betts MP, Chair of the Communities and Local Government Committee
Our inquiry will look at whether there could be changes to land value capture mechanisms to enable councils to capture the significant uplift in land value that planning decisions and infrastructure projects often stimulate.
We will consider:
1. Are current methods, such as the Community Infrastructure Levy, planning obligations, land assembly and compulsory purchase adequate to capture increases in the value of land?
2. What new methods may be employed to achieve land value capture and what examples exist of effective practice in this area, including internationally?
3. What are the possible advantages and disadvantages in adopting alternative and more comprehensive systems of land value capture?
4. What lessons may be learned from past attempts to capture the uplift in value?
Share your thoughts on land value capture with the Housing, Communities and Local Government Committee.
Submit written evidence to our inquiry and watch our public sessions online from April. Find out more on our website.
