So local authorities can’t access any of this valuation increase to spend on new local infrastructure needed because more houses have been built.
The right to own land is central to the idea of a liberal society like the UK. But ownership shouldn’t include the right to the entire increase in land value when planning permission is granted.
This vast “planning uplift” reflects the proximity of local roads and transport links, the proximity of shops and other businesses – all generated by state spending or the efforts of local firms over many years.
Currently, only a very small share of planning gains accrue to the state, mainly via Section 106 agreements, which require developers to provide modest community assets such as access roads or playgrounds. But even these weak conditions are often negotiated away, so desperate are local authorities, once permissions have been granted, to get the houses built.
As such, because very little of any planning gain goes to local communities, those same communities then rationally oppose development, as there are only downsides.
In numerous other countries, including much of Europe, parts of the US, Singapore and South Korea, planning gain does significantly accrue to the state, generating the funds to build new schools, hospitals and other infrastructure as new housing is going up. Such a system here would revolutionise the fraught local politics of planning, kicking the Nimbys into touch.
Securing land, then navigating our complex planning system, is a formidable barrier to entry for all but the biggest UK housebuilders. That’s why the industry is dominated by a handful of huge developers. But “hope value” rules mean that even they end up paying very high land prices, so they then build small, low-quality, overpriced homes to protect their margins.