Think tank: Let councils buy land, build and sell

Councils should be empowered by Government to purchase land, grant themselves planning permission and sell it on – with funds retained locally – the Adam Smith Institute argues today in a new report.

The report’s author Dr Madsen Pirie, President of the Adam Smith Institute, says that devolving power to local councils to purchase land and grant themselves permission on it can deliver money into their coffers and bring a house building revolution.

The report argues that the Government should let councils buy land, grant it planning permission and then sell it off – benefiting from the corresponding increase in its value. This process could yield billions of pounds to pay for public services – £30bn from the first million units according to the paper’s estimates.

Land with planning permission is extremely scarce. One estimate found that an acre of land was worth £2,500 without planning permission and £4m with it. By granting permission to land they own, councils can capture the monetary benefits for themselves and their residents.

A further advantage of this new initiative is that it would clear the way for many new houses to be built where people want them – relieving the pressure on the housing market and enabling young people once again to aspire to home-ownership.

The paper says that by allowing councils to purchase land and grant themselves planning permission there would be no need to impose new taxes nor increase borrowing with a burden on future generations. It would, however, boost growth with the accelerated house-building programme it facilitated creating jobs. This in turn would increase tax revenues without the need to hike rates.

With austerity under attack from both the political establishment and the electorate it might be an opportune time to try a new approach. The paper argues the Government will find it extremely difficult to meet its spending commitments while softening some of its expenditures without seriously exploring options such as this.

Sam Bowman, Executive Director at the Adam Smith Institute, said, “Right now, if you own a field that gets planning permission, you could stand to gain one or two hundred times in value what the field was originally worth. That massive uplift is called “planning gain” and the fact that local communities mostly don’t capture it is one reason they oppose new development so much – they only stand to lose from new houses being built near them.

“We need to change that. Not only would a system like the one we’re proposing make housebuilding much easier in the places it’s needed most, it would create a large and lucrative source of revenue for local government. That would truly be a win/win for everyone: more houses, more money for locals, and less of a drain on central government which can redirect some of the money saved to other areas.”

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