30 May 2022

To fix the housing crisis, the Government should start by selling its own land

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Politicians are often keen to blame others for the housing shortage, whether it’s young people spending too much money on Netflix and avocado toast, buy to let landlords, second home owners, or that hardy perennial – immigrants. 

Another favourite is to blame the property developers (especially, of course, those villains the ‘overseas property developers’) for buying up land and sitting on it in the hope it’s value will rise as demand for housing inevitably outstrips supply.

But when it comes to ‘land banking’, the real culprit is the Government itself. State land banking exists on a gargantuan scale. Last week the Ministry of Defence published details of its land holdings. It owns 849,000 acres – that’s equivalent to the size of Cornwall. Or more than twice the acreage of Greater London. To put it another way, it’s enough space for 4.25 million family homes. 

Yet last year the MOD only disposed of 1,482 acres. That is less than a fifth of 1%. I do not deny that our soldiers need space for their training exercises. Nor would I claim that all the land would be viable for development. I just question whether it is really necessary for 99.98% of the previous year’s total to have been retained. 

A much bolder approach to selling state land is needed to ease the housing crisis. Oliver Letwin made a heroic effort to do something about this when he was a Minister in David Cameron’s Government. It took a while to work out how much land the MOD owned. At first, it thought it was a mere 600,000 acres (roughly the size of Surrey). A dig around in the records found it was quite a lot more. 

In his memoirs, Hearts and Minds, Letwin says: ‘There was roughly as much land held to support the activities of a couple of hundred thousand army, navy and air force personnel as there had been when we had about ten times as many people under arms in the Second World War; there were numerous golf courses, riding stables and other appurtenances that seemed to serve no obvious military use; and so it went on.’ 

It would have made rather a good Yes Minister episode. 

Not that the MOD is the only hoarder. Transport for London owns 5,700 acres, equivalent to the size of Camden. (The Mayor of London is sitting on a further 1,576 acres coming under other bits of his empire.) Network Rail, an ‘arm’s length’ public body of the Department for Transport, owns 128,000 acres. Natural England owns 470,000 acres. Then we have the NHS, local authorities…. 

I am not suggesting that all – or even most – of this land be sold off for housing. But just 5-10% of it would be plenty.

The Government is selling a bit of land – the figures for the last financial year showed that £473.5 million was raised. In some years it has been a bit higher – £1 billion to £2 billion. But it should be cranked up to £20 billion, £50 billion, a £100 billion. Not just providing the space for 10,000 or 20,000 homes, but hundreds of thousands a year. 

The staggering scale of the state portfolio would give the Government plenty of choice. It could first fast track itself planning permission. It could ensure the design was attractive and that building was taking place where the Government wanted. The huge potential proceeds from land sales would allow some funding for infrastructure – also for social housing if that was wanted. 

Yet even with those provisos, there should be enough funds left to make a useful dent in the National Debt – which would also mean easing the burden on of interest payments. We are told that £83bn of public spending this year will go on debt interest. It is quite right to express indignation at wasteful public spending. But retention of unused state property comes to the same thing. 

Incidentally, when it comes to ‘land banking’ by property developers this was a subject that Lewtin also investigated. But here he concluded that the profit maximising conduct for a developer is to proceed with building. The delays in doing so were due to the planning system. Even when approval had been granted in principle getting all the specific conditions signed off would take months, or (more realistically) years. 

In the same way, it makes no financial sense for the state to be sitting on all that surplus land. The hitch is that commercial rigour does not apply. Perhaps it could be replicated by the Treasury declaring that Government Department’s budgets would be docked if sales targets were missed. Perhaps it is a matter of political will – a determination to overcome the forces of administrative inertia. 

For it must be on the supply side that the real housing solutions will come. The defeatist notion that we have a fixed amount of homes and can manage matters by fiddling around with demand just won’t work. Driving away the landlords from the market might make it easier for first time buyers to get their offers accepted. But a lower share of rented properties would mean higher rents. We could have a war on holiday homes – which would make holidays more expensive. I suppose cutting immigration would cut demand – but also mean fewer construction workers thus making increasing supply even harder. 

In reality looking at the demand side is displacement activity. It just amounts to convenient scapegoating by the Government. 

So we look elsewhere. I would be the first to agree that the planning system is the biggest reason why supply is artificially constrained and house prices absurdly high. But state land banking is another big factor which gets far less scrutiny than it should.

Jostling with the housing crisis as the greatest challenging facing the Government is the soaring cost of living and keeping the public finances under control. Is it not wonderful serendipity that a much less indulgent approach to state land banking could dramatically help with all three? A sales drive is needed that would make the Thatcher privatisations of the 1980s look footling by comparison.

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Harry Phibbs is a freelance journalist.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.