“it’s not my bricks and mortar that’s gone up in value, it’s the permission I have to have a house in my particular Street”
1
A cheap starter home from Poland
At agricultural prices a plot big enough for a house with a reasonably sized garden costs about £1000. A starter home, the M2, shown in this second video, can be bought from Poland for about £10,000 [1]. There are other options this cheap.
“the car-free city costs between two and five times less”
In 1992, Carlo Ripa di Meana was the European Commission Envioronment Commissioner. He called for cities to be free of cars he said he was ready to become car-less, and so should other city dwellers, to prevent Europe’s cities being choked by the internal combustion engine.
The search is now on for policies which can provide cheap housing – lots of it – and to avoid a dramatic fall in house prices. In addition to promote lifestyles that will not ruin the climate.
Once the effects of the climate restrictions in the NPPF are accepted, there is an obvious solution: All new housing in York must be for residents without cars. (There will be a further paper which will include some possible exceptions for individuals in these developments.)
Making all new housing car-free addresses P1 to P6 above:
P1) It allows a large expansion of the housing supply at a much cheaper cost.
P2) It does not cause a precipitous reduction in existing house prices because,
in the short term, existing dwellings with have a premium value to car
owners.
P3) It allows a large reduction in the cost of housing for the less affluent
P4) It allows for the development of ways of living that are within climate constraints.
Of course, the planned green belt should be scrapped. It ossifies a very bad plan and prevents the flexible development of York at a time when it is necessary to make large changes to the way we live.
Cheap housing, negative equity and crashing the banks
“it’s not my bricks and mortar that’s gone up in value, it’s the permission I have to have a house in my particular Street”
0
Planning permits (again)
A previous article, Planning permission is not a natural resource, gave a meaning to the term planning permit: A planning permit is a right to have a building or ‘other structure’ on a plot of land It is a separate entity from the physical land of the plot.
Note 4th January 2023: Recently, I have been using a clearer term, “Property Location Rights”, to stand for the legal rights that planning permission creates.
“Property Location Rights are not natural resources” would have been a clearer title.
However, the ONS does now divide the value of a house into the value of the “bricks & mortar” and the land it stands on. Their next step should be to separate the land value into the value of the land, if it had no planning permission and the increase in value that planning permission creates.
An earlier article Planning gain in the York Local Plan calculated that in York a typical plot of agricultural land worth £600 has its value increased to £182,000 when planning permission to build a house on it is given: an increase in value of over 300 times.
Here it is argued that this increase is not correctly accounted for by saying ‘the land’ has increased in value but by saying the increase in value divided between the land and another entity, a planning permit. This is the right to have a building on the plot. This division is semantic but, as will be seen in future articles, it is important.
In economics, land is a natural resource with fixed supply. Planning permits are not. I suggest that the two should be considered separately. This means the ‘plot value’ is divided into the values of land and the value of ‘planning permits’.
Planning permits are ‘the rights that planning permission creates’ but not all have been created by planning processes. Planning permits, as meant here, include historic rights that were acquired because they have existed for sufficient time. (Cf. Certificate of lawfulness.)
Here, the value of land (‘land as a natural resource’) will be assumed to be the best guess at its ‘default use’: agriculture or natural land. In the context of this article, this is not an important choice.
2
The ONS calculate land to be over half the UK’s wealth:
The proposed green belt in The York Local Plan creates a lock on large scale housing development, making changes difficult for the next twenty years or more. It has the effect of preserving the planning gain captured by land owners and rewarding home owners by increasing the value of their property.
Most of the cost of a new house in York is planning gain – the extra value that planning permission adds to a plot of land when planning permission is granted. I have estimated it to be £182,000 per house, nearly two thirds of the cost.
Planning gain is so large in York because the demand for homes is much higher than the supply. The supply of new houses is limited by planning permission because without planning permission a new house cannot be built. The 2018 York Local Plan restricts the supply of planning permission for future years so the supply of houses will also be restricted. This will keep the the price of new houses in York much higher than other parts of the UK such as Bradford or Liverpool.
Between 2018 and 2022, the UK House Price Index, compiled by the Land Registry, has risen from 115 to 150 – an increase of 30%. The UK HPI is a measure of house price rises in the UK. This means the estimates of planning gain below are underestimates. Now, it is reasonable to say:
In York, an area of agricultural land big enough for a house has a value of less than £700. This increases to around £200,000 when planning permission is given to locate a house on the plot.
Planning gain in the York Local Plan
The estimates below suggest the total planning gain is equal to 30 years of the council tax that York collects.
It’s not paid to York citizens, it goes to lucky landowners.
The £2.5 billion is enough to build 10 new large hospitals or 150 secondary schools, with 1,000 pupils each
— or even 10,000 new Bentley’s for the Lord Mayor
10,000 Bentley’s for the Lord Mayor?
Planning gain is the difference in the value of undeveloped land without planning permission and the value of the land after planning permission is granted.
rss feed
