23 December 2016

A simple way to solve the housing crisis

By Catharine Banks

We are in the grip of a very real housing crisis. And it is getting worse.

The building of affordable homes hit a 24 year low in 2016. Completion of homes in all tenures is sitting at around the 140,000 mark; still well off the 250,000 needed per year, and stubbornly below pre-financial crisis levels.

This has encouraged house prices to soar ahead of wage increases, with the average home in London now priced at up to 14 times average earnings – and 6.5 times across the UK.

There is no silver bullet to resolving this deepening crisis; it demands complex and varied solutions.

But there is one straightforward reform. One which, despite being cheap, relatively uncontroversial and probably highly effective, is rarely spoken about: improved transparency in the land market.

Although plenty of data on land exists, it is held in different formats by different agencies. Some of it is free and some can be paid for, but much remains inaccessible to the public. Even if you’re able to access the information, most datasets cannot readily be compared. For example, land ownership details and planning permissions are held separately under different formats by the Land Registry and hundreds of planning authorities.

This makes it incredibly difficult to understand who owns and controls land, and what permissions or restrictions apply to any given site.

This tangle of data has serious, tangible consequences, including preventing more homes being built. It acts as an unnecessary hurdle for those local authorities trying to make good plans, or sensible decisions on planning applications.

When local communities lack the necessary evidence, it’s very hard for them to hold their planners or developers to account.

As with any market, the lack of transparency creates information asymmetries, which create distortions and penalise consumers: if you’ve ever bought or rented a home, you’ll know how little real knowledge buyers have compared with the intermediaries they have to deal with.

Market opacity also gives existing holders of land and well-informed market insiders disproportionate advantages over small businesses and entrepreneurs.

This hinders competition in the market. With the data being difficult (and therefore expensive) to access, smaller housebuilders often find themselves struggling to locate potential sites. The Federation of Master Builders found that 67 per cent of SME builders cited a “lack of available and viable land” as a major barrier to building new homes.

What to do? As a starting point, the £3 Land Registry fee to research land titles should be removed. This would make little difference to the organisation’s income, which mainly comes from registration of titles. But it would make information on title plans and ownership free to access – with appropriate safeguards against fraud of course, such as a requirement to register prior to access.

This would not only help smaller developers to build more homes, but would provide a significant boost to the economy. Lateral Economics calculated that opening up Land Registry data could provide a 0.5 per cent boost to GDP, so in 2014 this would have provided an additional £1.8 billion in VAT.

The Government should also produce a reliable public index of land market transaction volumes and prices, to enable monitoring of market trends. Given how crucial land ownership is to the economy, it’s incredible that there is no index of this market already.

But not all land data is held within the Land Registry, and a myriad of benefits could be unleashed by standardising and releasing other public sector data.

Government rules should standardise the collection and storage of datasets held by public bodies, including planning applications and permissions, and environmental or heritage information. This could then be collated in a simple, online interface which would enable innovation and the development of new services.

For example, apps could be designed to identify land that might be suitable for self-build plots, by combining ownership, planning and infrastructure datasets.

This approach to collating and publishing would require initial effort and oversight by Government and local authorities, but it’s not unprecedented in this country.

The pioneering example is that of Greater Manchester Combined Authority, which has mapped their development sites and public and private infrastructure data.

There are signs that the Government is looking to take decisive action in this area. The Autumn Statement, for instance, included a decision to retain the Land Registry as part of the public sector.

These changes do not have to be far off into the future, but could become a reality within months, after the Government publishes its Housing White Paper in the new year.

While a range of reforms are needed to fix our housing crisis for good, improving the flow of data in the market is a straightforward change with an immediate pay off.

Catharine Banks is the Assistant Policy Officer at Shelter.