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One of the UK’s biggest housebuilders says the Labor government needs to “be belligerent” in setting tough new standards for the amount of housing available to drive down land values.
Greg Fitzgerald, chief executive of Vistry, said there must be no “grey areas” or exemptions to allow developers to build a lower percentage of affordable housing on their land to restore land values and help achieve the new government’s ambitions to deliver massive growth affordable housing.
“Once you have some gray areas, we. [housebuilders] they are great at wayfinding [of] building less affordable,” said Fitzgerald, whose company said it built about one in eight new affordable homes in the UK last year.
“If you absolutely know you’re going to have to provide X percent for available land — no gray area, no ifs or buts. [prices] descends. And we will be able to build more affordable. . . They have to be combative about it.”
The Labor government has begun setting out its strategy to reform the UK’s slow and complex planning system to deliver on its pledge to tackle the nation’s housing crisis by building 1.5 million homes over five years.
Fitzgerald’s comments address a hot-button policy area known as “land value capture,” which involves reducing the amount of financial benefits landowners receive when their land is approved for development — and using that money to provide more public benefits, such as infrastructure and affordable housing.
A hectare of farmland is typically worth £25,000, while the same area with residential development approval was worth £1.95 million, according to consultancy Capital Economics.
Fitzgerald said Labor had signaled “exactly” the right approach to capturing land values. He said strict and universal standards for the amount of affordable housing in development projects would force all housebuilders to bid less for land, which would lower the market price.
He said most locations today have 25-30 percent affordable homes. “If they increase it by 10-20 per cent, it will automatically mean that we and our competing group can only offer so much for the land,” he said. “A farmer still gets more for his land than it’s worth as a farm, but not as much as he might think it’s worth as a lot to build a house on today.”
Tony Crook, emeritus professor of regional planning at the University of Sheffield, said research from 2018 estimated that squeezing “hope value” out of land transactions by requiring developers to produce fixed levels of social housing “captured” about 30 percent of the value of the investment, which could otherwise go directly to the landowner.
“You are telling all developers that they will be expected to contribute to infrastructure and affordable housing. This will lower the value of the land and through this process the landowner is indirectly paying for the infrastructure by getting less for the land,” he added.
This approach would favor Vistry, which is increasingly focusing on partnerships to build homes for housing associations, local councils and large landlords – rather than private sales.
Fitzgerald said stricter standards for the percentage of affordable homes would level the playing field in the land market as different developers lined up to bid for suitable land.
The FTSE 100 group’s partnership strategy has enabled Vistry, which will take over Countryside in 2022, to defy a broad downturn in the housebuilding market, which has seen most builders cut output by up to a third as higher mortgage rates make it harder to do so. people buy.
Vistry, which includes the Bovis Homes brand, said on Tuesday it had built 7,750 homes in the year to June, up 8 per cent on last year – and was on track to build 18,000 by the end of 2024.