Property industry and politicians working to “serve the many”
The property industry and left-of-centre may not be the most obvious of allies, but at the BPF we work closely with politicians of that hue at local, regional and national level, and on the whole we find them a passionate and pragmatic bunch, who have many shared objectives with our sector.
We both want to deliver more housing, regenerate our towns and cities, invest in our regions, deliver productive workplaces that are good for growth and support the health and wellbeing of employees, and help people, via pension provision, to save for their old-age. We will sometimes have disagreements, for example on land value capture, but they are generally respectful, and how wealth and assets are distributed in society is a wholly legitimate topic for political discourse whatever political party is concerned.
Where there is a line to be drawn however, is where misunderstanding of our sector leads to poor policy work. It was therefore somewhat of a surprise to read the paper commissioned by Labour this week, called “Land for the Many”. Not only was it full of inaccuracies and misunderstandings, but the negative tone of the narrative was so overpowering that it drowned out much of the technical content. This, perhaps explains why the paper received such little media coverage, particularly broadcast, and why the author spent much of the next 24 hours tweeting his frustrations. Were our broadcasters censoring, which was the accusation, or simply turned off by its tone?
The title “Land for the Many”, also ignores the fact that property is already democratised through our membership. You can rent or own your own home, but you can also own a small bit of a large office or shopping centre or a high tech industrial unit, or student halls via your pension directly, or via investment in property company shares. The report stresses: The Bank of England should use credit guidance and other macroprudential tools to encourage a shift in bank lending away from real estate, and towards more strategically useful sectors of the economy, and also development should be led by democratically-accountable public bodies and communities, not private developers operating according to the need to maximise shareholder returns. However, surely there is nothing more useful than putting a roof over peoples’ heads, and property investment (debt and equity) which delivers better workplaces, that in turn improve productivity and employee health and wellbeing. Our industry recycles the pension savings of millions of citizens into improving the built environment. It is also hugely successful at attracting investment from overseas institutions that in turn also helps support housing provision, regeneration and improved workplaces. The shareholder returns identified, help support today’s pensioners with income. Development is already led by democratically accountable public bodies and communities, via local authorities and community involvement in the planning process.
The idea that investment in manufacturing is virtuous and investment in property is somehow not, is so far from the reality of our modern economy – the two are intertwined. Trying to operate McLaren, Nissan or Boeing plants out of a 1950s shed is not going to be productive and retain their investment. Modern manufacturing, and indeed services, need modern real estate. Rationing capital to the sector is also likely to hurt the worst-off people and regions most.
Turning to some of the key policy recommendations of the report:
Set an explicit goal to stabilise house prices. Not a wholly new idea. Kate Barker in the mid-noughties was mooting similar proposals. The challenge is not just increasing supply and in the right places, but the other tools at any Government’s disposal are limited. Using monetary policy to simply curb house prices tends to harm the economy as a whole. Fiscal measures, such as CGT on residential sales, have not been politically palatable.
End buy to let and support an ambitious programme of social housing. Must we choose? I think the majority of BPF members would support an ambitious programme of social housing building, but our mantra over the past few years has been that 300,000 homes per annum will only be delivered by all sectors firing on all cylinders. Even when the aspiration was 200,000, the Lyons Report for the Labour Party in 2015 recognised the need for all sectors to contribute.
Replace business rates with a Land Value Tax – A pure land value tax would cause a massive disturbance and be very complicated to calculate as it would require all properties to be assessed for their optimal rather than current use. It would ease the tax burden on most of the nation’s utility companies, yet it would hit small businesses with a tax increase of up to £1.1bn and would take £1.7bn out of the charity sector, based on previous work by the Liberal Democrats. It would be a distraction from much needed business rate reform. There would have to be a new local government funding system as the redistributive effects of LVT versus business rates would be different. The valuations would require some sort of appeals mechanism as they would prove highly contentious.
Make property developments democratic and accountable by creating New Public Development Corporations – Development Corporations can be helpful where you have scale development and significant land assembly and planning resource issues. We accept they have an important role in those circumstances. In most development circumstances, however, land assembly is clear cut and the planning authorities are local authorities, which are democratic and accountable.
New Public Development Corporations should be given the power to purchase, develop and sell land in the public interest – Again, in certain circumstances, such as new settlements, this can be helpful. However, property rights are also a key facet of a modern democracy and there are various protections in place to ensure citizens’ land and property rights are protected. Trying to compulsory purchase is therefore rightly the subject of legal scrutiny and can take a long time. Context is everything. The public interest in creating a new town or major infrastructure link may outweigh individual property rights, providing fair compensation is paid. Simply allowing the state to purchase any old land feels a very uncomfortable place to be.
Reform the Land Compensation Act so that land is bought at current value rather than future value. There is no need to reform the Land Compensation Act. Any local policy requirements will already be reflected in land values and compensation arrangements, for example on affordable housing or design requirements. The idea that the landowner gets an unencumbered future price for their land is not what happens.
The sell-off of public land to the highest bidder should end. This is simply not the case at present. Best Consideration rules already allow for public land to be sold at an undervalue. Guidance on some of the rules could be clearer, but they have existed for decades. Interventions in this area also have to be careful of international state aid rules.
Whatever Government comes next will face some meaty challenges, some old, some new. How to narrow regional economic disparities, re-purpose our high streets, and equip our people and businesses for a very different world of work. All of these challenges will require significant property investment, which neither public or private sectors can deliver alone, but working in partnership they may just have a chance. Most on the left and right of politics recognise that. For a historical example, witness the London Mayor baton passing from Ken Livingston to Boris Johnson, politically poles apart, but in the need for investment and public and private partnership perhaps not too far apart. We should not therefore rise to demonise left or right, but correct their misunderstandings of how our sector works and what it contributes.
Kindly shared by British Property Federation (BPF)