Public Land Value Capture: A new model for housing development in Scotland

Submission to Planning Bill stage 1 consultation

THE Scottish Government should change Planning laws so that the public-sector captures the uplift in land value that is derived from public investment in the land to finance a new generation of public housebuilding in Scotland, Common Weal has argued.

‘Public Land Value Capture: A new model for housing development in Scotland’ can be accessed in full here.

In a submission to the Scottish Government’s consultation on stage 1 of its Planning Bill, which closes today, Common Weal proposes that: “Public authorities should have the legal means to purchase land at existing use value, so that the uplift in land value from planning permission for development of the land is captured for the public good. The effect of this will be to reduce the cost of land for development considerably, as planning permission can increase the value of land by one-hundred fold or more.”

A similar idea was cited in The Guardian on Thursday (1 February) as being under consideration by the Labour party UK-wide, but it would be possible for the Scottish Parliament to amend the Planning Bill to introduce this now in Scotland.

The proposal would mean public authorities would identify simplified development zones which would be priority areas for public-led development, especially for housing. The land in these zones would be purchased at existing use value, rather than the current policy of purchasing the land at the anticipated future value once planning permission is granted (known as ‘hope value’).

Public authorities would borrow against the future uplift in land value from the granting of planning permission to develop the site. This borrowed sum could then be used to fund the master-planning, infrastructure and construction of public-rental housing, while some plots could be sold-off to the private sector at a profit. Either way, the reductions in land costs would eliminate land speculation in the development process and increase the affordability and quality of housing development. According to the ONS, the cost of land has risen enormously in the UK over the past 20 years, from £1.5 trillion in 1995 to £6.8 trillion in 2016.

A similar approach, cited in the paper, is currently utilised in the Netherlands and Germany, where the cost of housing is significantly cheaper than in Scotland. It was also used in the UK after the second world war, including to build Scotland’s New Towns, but was repealed in 1959.

Robin McAlpine, Common Weal Director, said of the submission:

“The benefit that would come to Scotland from being able to build high-quality, affordable public rental housing by letting the public sector buy land at a fair price and not the crazily inflated prices of the out-of-control housing market would be enormous. Developers making huge profits from doing nothing more than buying land and then pocketing the value that public planning permission adds to that land has loaded extra cost on the mortgage of every homeowner in Scotland. It is time for the public to take back control."

Ben Wray, Common Weal head of policy, stated:

“Unlocking land to make it work for the public good rather than to be speculated upon is the key to transforming the housing system in Scotland. To do this we only need to re-learn the lessons of the past, lessons that countries like Germany and the Netherlands have never forgotten – that the financial value contained in the granting of planning permission is a public good, one that the public should benefit from when it invests in the land.

“This simple idea was written into UK Government legislation after the second world war and made a major contribution to building a new generation of public housing in that era, including Scotland’s New Towns like Cumbernauld and East Kilbride. Now, with land values more than tripling over the past 20 years, it is essential to introduce this public land value capture policy again, and it is within the Scottish Parliament’s power to amend the Planning Bill to make this happen.”