Renewal

Housing and land reform

Last Updated:
August 20, 2021
The Issues
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The housing crisis

In the quarter of a century since 1996, UK house prices have risen 161%: from around 4.5 times average household income then to around 8 times now. In 2018 renters spent 33% of their household income on rent, rising to 40% in London.

Affordability is a nationwide problem, with rural areas having a higher ‘affordability gap’ than urban areas. It is particularly acute in England, where in 2017 new build homes were unaffordable to 84% of renting families.

Unaffordable housing is linked to a sharp fall in home ownership, especially among young people and families with children, and to an increase in homelessness. Prior to the pandemic, the number of rough sleepers had more than doubled since 2010.

It is now estimated that more than 8m people in England – around 1 in 7 – are living in an unaffordable, insecure or unsuitable home. A range of different types and tenure of housing are needed – not just homes to buy, but better and more affordable social and privately-rented accommodation.

Housing supply and demand

To meet housing demand an estimated 345,000 new homes are needed per year in England alone. The level of housebuilding has increased in recent years but is still far below this level. 

It is widely argued that a core problem is the UK's developer-led model of housebuilding. Private developers compete for land and then 'bank' it, waiting until they believe they will make the most profit from increases in land values and from building homes. This causes significant delays and helps push up costs.

It also reflects the broader transformation of housing and the land it sits on into a financial asset. Over recent decades the public policy preference for private home ownership has been accompanied by the liberalisation of bank credit and accompanying financial innovation. Under these conditions, land and property have become both the most attractive form of collateral for the banking system and the most desirable form of financial asset for households and investors.

While some criticise the planning system for slowing development, the data doesn’t support this: 88% of new housing planning applications are granted. Local authorities are key to building more homes: the UK has never delivered homebuilding at the required scale without major locally-led public projects. Local authorities are under-resourced and often lack access to affordable land. They are also under significant pressure to sell off land they already own to balance their budgets.

Good affordable housing

Social housebuilding has declined sharply in recent decades. The 'right to buy' policies of the 1980s and 1990s led to greatly reduced income for local authorities, whose ability to borrow in order to build homes was capped until 2018. Today there are widespread calls for a major new programme of council-led social housing. Housing charity Shelter proposes that 3.1 million homes should be build over the next 20 years.  While local authorities now have the power to borrow, the reality of their funding situation means they will need support from national government to deliver on that kind of ambition.

Around 20% of UK homes are privately rented, up from 10% in 1996-97. In 2018 it was estimated that 16% of millennials will end up privately renting 'from cradle to grave'. The booming private rental market includes some of the worst quality housing stock and many renters have insecure housing tenures.  

Proposals for tackling this include giving renters legal protection from sharp price increases, maintaining and regulating a central register of private landlords, and bringing in controls on the rents that can be charged. Giving renters indefinite leases – as is currently the norm in Scotland – would allow evictions to be banned except for specified reasons such as the sale of the property.

Land and property taxes

The UK’s system of property and land taxation is regressive. This is particularly the case for council tax, where the poorest tenth of the population pay 8% of their income in council tax while the richest 40% pay 2-3%.

While noting that any change to the current system would be politically difficult, there is widespread agreement that the system needs overhaul and many proposals have been made for reform.

One option would be increase the number of council tax bands at the top end, making the tax less regressive. An alternative would be to replace council tax with a proportional tax on the value of housing.

A different option would be to tax the land, not the property. A land value tax is a levy on the rental value of land, rather than the buildings on it. A longstanding reform proposal, this would help ensure that land with housing planning permission was not left derelict or undeveloped. It would also capture the uplift in land value that occurs when infrastructure is built or planning permission granted which has nothing to do with the landowner's own efforts.

Other proposals include the reduction or abolition of stamp duty, which reduces the volume of house sales and acts to discourage older people from downsizing.  

Reforming land ownership

A number of proposals for solving the housing crisis focus on giving power and ownership of land to communities. 

In one model, that of Community Land Trusts, land is gifted to or purchased by a community-run body to develop affordable housing and hold it for the long term. In Scotland such trusts are supported by a Community Right to Buy for neglected land.

A second area of focus is ensuring more land is brought into, or kept in, the public sector. Campaigners call for a halt to the programme of selling off public land for development which, they warn, is leading both to unaffordable housing and a reduction in the state’s ability to decide what gets built where.

Proposals have been made for the establishment of a Public Land Bank or similar body to take an oversight of how best strategically to use land in the public sector, and to bring more land into public ownership. 

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