COMMENT: A new land tax could hamper plans to deliver 1m homes in the Cambridge-Milton Keynes-Oxford corridor, writes Simon Thomas, partner, residential development, at Bidwells.
Imagine you’re the head of a land-owning family. You’re considering selling an asset that has been in your family’s ownership for generations. It’s a once-in-a-lifetime decision.
The land is well located but the government then announces plans to tax the sale heavily to pay for its expensive infrastructure plans.
What would you do? Sell up fast to beat any impending legislation? Or wait until better and more certain market conditions exist? It’s a big decision. You can sell it only once.
These questions are being asked by landowners, developers and land promoters in the Cambridge-Milton Keynes-Oxford corridor holding land with medium to long-term development potential.
New rail/expressway link
The government is supporting the delivery of a new east-west rail link and construction of a new expressway road through areas of the countryside not touched by major new infrastructure for decades.
Landowners are rightly asking how these plans might affect them and where the route of the new £6bn expressway road might go.
At the same time, the ministry for Housing, Communities and Local Government select committee has launched an inquiry examining new methods of capturing any uplift in the value of land associated with the granting of planning permission or nearby infrastructure improvements such as major new railways and roads.
On the face of it, land value capture might seem a tailor-made solution to funding the huge costs of this project, but it will not deliver the 1m homes also promised for the corridor by 2050.
Any new development land tax would jeopardise housing delivery by potentially restricting the supply of land.
We have long seen the potential of the Cambridge-Milton Keynes-Oxford corridor to become the UK’s next economic powerhouse and play its part in solving the housing crisis by delivering a substantial number of new homes.
The imposition of new taxes on development land to help deliver these laudable aims would be counter-intuitive.
Most landowners accept that CIL, section 106 obligations and the delivery of affordable housing as fair sharing of the value uplift and mitigation against the impact of development.
Triple-whammy
A land value capture tax would be a triple-whammy, an additional financial burden on new development.
The CAMKOX project is long-term. There isn’t time to sell up fast and beat legislation that could be here in 12 months.
A land value tax would almost certainly prevent suitable land coming forward, slow the pace of housing delivery and make the government’s aim of delivering 1m homes in the corridor close to impossible.
Viability is now at the heart of the planning process. The NPPF recognises that development must generate “competitive returns” for both landowners and developers. For the landowner, this means a price for their land which is sufficient incentive for them to bring it forward. The imposition of an additional uplift capture mechanism would act as a disincentive.
The select committee inquiry promises a review of previous attempts to capture land value uplift.
Earlier attempts such as the development charge (1947-52) and land commission (1967-70) failed largely because landowners were willing to wait on developing their land in the hope of a policy change to bring out a more favourable taxation environment.
There is no reason to suggest that any similar measure introduced now would have a different outcome.
Landowners will often release development land only when they feel it is the right time for them. If they consider conditions to be unfavourable, they will retain the land for future use, sometimes for decades.
To provide the housing supply that the country desperately needs, proposals must not be seen as adversarial, and landowners’ views and perspectives should be taken into account. A more sophisticated approach is required.
