The Institute for Public Policy Research (IPPR) has called on the government to give local authorities new powers to zone land for development and freeze land price designated for housing.
The IPPR report calculated that a plot of land in Oxfordshire worth £25,000 could be valued at £5.6m after approval for residential development claiming that landbanking was a “driving force behind the broken housing market”.
Luke Murphy, associate director at IPPR, said: “Conventional wisdom suggests that the UK has a problem with house prices, but the reality is that we have a problem with land.”
Based on figures showing that the value of land has risen 500% to £5trn since 1990, compared to a 219% rise in property values over the same period, Murphy added that the “speculative land market” had created significant wealth inequalities and “a poorly functioning housing market”.
The report also makes a series of suggestions for dealing with the issue including councils buying land and selling at higher prices to developers or entering into partnerships with landowners to share the proceeds of the sale.
Earlier this year, a review into landbanking, chaired by former minister Sir Oliver Letwin, claimed that the government is being prevented from meeting its target of building 300,000 new homes every year by next decade because of two major factors: developers have slowed the system down by restricting the release of new-builds and a severe shortage of bricklayers. However, the former Conservative minister stopped short of supporting accusations of landbanking by the UK’s leading developers.
Commenting on the report’s findings, Chris Procter, director at developer Caddick Land, said: “IPPR are correct to identify the price of land is a significant contributing factor to the cost of new homes but in reality the value of land with residential development planning consent reflects the cost and difficulty of securing planning permission. An artificial freeze prices could have unintended consequences to the supply of land through landowners taking the decision to hold on to assets rather than trade in the open market.
“The best way to bring down the price of new housing is to increase supply in the locations people want to live in most and that means reforming the planning system to make housing delivery easier and remove barriers to entry for SME developers that will help diversify housing provision.”