House of Commons Communities and Local Government Committee Financing of new housing supply Eleventh Report of Session 2010–12 Volume II Additional written evidence Ordered by the House of Commons to be published 23 April 2012 Published on 7 May 2012 by authority of the House of Commons London: The Stationery Office Limited List of additional written evidence (published in Volume II on the Committee’s website www.parliament.uk/clgcom) Page Birmingham City Council Ev w12 BuildStore Financial Services Ev w106 Chartered Institute of Public Finance and Accountancy Ev w102 Coalition for Economic Justice (CEJ) Ev w1 Confederation of Co-operative Housing Ev w20 Professors Tony Crook and Peter Kemp Ev w50 Professors Tony Crook and Christine Whitehead, Drs Ed Ferrari and Gemma Burgess and Ms Sarah Monk Ev w63 East 7 Ev w76 G15 Ev w34 Genesis Housing Association Ev w80 Gentoo Group Ev w95 Nigel Grainge RIBA Ev w61 Hackney Council Ev w56 Highbury Group on Housing Delivery Ev w46 David Holliday Ev w1 Hometrack Ev w91 The Housing Forum Ev w10 Igloo Regeneration Ev w104 Dr Tim Leunig Ev w89 London Borough of Newham Ev w73 Newark and Sherwood Homes Ltd Ev w3 Moat Ev w6 Midland Heart Ev w7 National Association of Estate Agents and Association of Residential Letting Agents Ev w22 National Self Build Association Ev w100 New Local Government Network Ev w113 Northampton Borough Council Ev w19 Northern Housing Consortium and North West Housing Forum Ev w26 PlaceShapers Ev w53 Regenda Group Ev w45 Resolution Foundation Ev w88 Riverside Ev w29 Scottish Government Ev w83 Southwark Council Ev w40 Tenant Services Authority (TSA): the social housing regulator Ev w97 Waterloo Housing Group Ev w35 Westminster City Council Ev w24 cobber Pack: U PL: COE1 [SO] Processed: [01-05-2012 11:03] Job: 018846 Unit: PG01 Source: /MILES/PKU/INPUT/018846/018846_w037_michelle_FNHS 63 New Local Government Network.xml Communities and Local Government Committee: Evidence Ev w1 Written evidence Written submission from David Holliday If Housing Act 1985 Part X Overcrowding is repealed there will be a need for an additional 600,000 dwellings on the adoption of Housing Act 2004 Part 1 “crowding and space, bedroom standard”. This figure has been with me for a few years. Few people would argue that statutory overcrowding provisions need revision now that overcrowded dwellings are so prevalent. I do not intend to add opinion to financing new housing; formerly slum clearance schemes released land for development. Criteria like: having a WC entered externally from the house are no use now, but terraces of urban houses with less than four storeys could be fair game for clearance, and development involving six storey properties. I don’t want to see this, I’m 60 years old. Local planning authority should be able to retain some of the original housing, though often more than 100 years old, still tenable. Housing Health and Safety Rating System (Version 2) provides a précis of crowding and space. October 2011 Written submission from the Coalition for Economic Justice (CEJ) 1. The Coalition for Economic Justice (CEJ) Organisations that make up the CEJ are concerned with: — fair, efficient and effective taxation; — the collection of natural resource rent to pay for public expenditure and to replace those taxes that are unfair, avoidable and/or which act as a drag anchor on the economy; — policies that ensure the efficient use of the UK’s and the world’s natural resources; and — policies that enable the provision of affordable homes, affordable business premises and which stimulate the sustainable production of goods and services. The CEJ has no political party allegiance though some of its member organisations do. 2. Summary of CEJ’sResponse The true economic value of each site (the economic rent) is the surplus income the site can produce in excess of the market-determined rewards to suppliers of things made and services used in the process of production. — With particular regard to funding housing supply the CEJ recognises there are two distinct elements that make up the cost of housing provision: (I) the cost of constructing and maintaining the building itself; and (II) the cost of the land (ie the site or “location”) each building occupies. — The cost of constructing or maintaining a building does not vary to any great extent across the country; there may be marginal differences in wage levels and purchasing building materials but these are insignificant compared to the variable cost of the land. However, the cost of purchasing or renting land does vary considerably according to each site’s location. Buildings deteriorate and lose value as normally happens with anything made by human effort. — Land is a natural resource and is of fixed supply with no cost of production. Some locations are naturally more attractive or desirable than other locations and this is reflected in land values. But, the value of a particular site naturally increases as population grows, local services improve or the productivity of a site is increased by improved techniques such as new technology or labour-saving methodology. In addition, the selling price of a site can be subtly inflated by sellers who demand a price higher than the current value in anticipation of future land value increases (hope value) and by land speculators keeping buildings empty and sites idle thus creating an artificial shortage of land and hence a fabricated increased scarcity value. cobber Pack: U PL: COE1 [E] Processed: [01-05-2012 11:03] Job: 018846 Unit: PG01 Source: /MILES/PKU/INPUT/018846/018846_w037_michelle_FNHS 63 New Local Government Network.xml Ev w2 Communities and Local Government Committee: Evidence — The true economic value of each site (the economic rent) is determined by the surplus income that a site can produce in relation to a marginal site with no surplus income. The surplus income of a site is measured by deducting all the costs of production from the total income that the site produces. The cost of production includes wages, raw materials, machinery, computers, buildings, tools, transport costs, essential expenses, bank charges and a “reasonable” profit. Where these are in balance, the site will be used to produce wealth. Where the costs of production are greater than income, the site will be below the margin and will remain unused and jobs and homes will disappear. However, the greater the surplus of income over production costs, the greater the annual economic rent of the site. This surplus is clearly not a cost of production but a windfall for the economy which is currently collected by landowners. — However, taxes on wages and trade increase the cost of production, reducing the rent surplus and force some sites that could produce without taxes below the margin—creating unnecessary unemployment. — As local economies flourish around a site, so the surplus income—the rent—increases and landowners take that surplus as their unearned income. — The CEJ argues that the rent of land is created by society’s combined economic effort and not by owners of land and therefore should be collected by government to pay for the cost of running and improving public services.1 By collecting at least some land rent from landowners, government has the opportunity to abolish or reduce those taxes that stifle positive economic growth and cause unemployment and poverty. — The CEJ and others who examine the economic effects of privatised land rent predicted the current financial crisis would occur due to speculation in land causing a property bubble encouraged by the banks unfettered lending to speculators.2 — The CEJ asserts the economy will inevitably be subject to regular and predictable economic booms and busts so long as the economic rental value of land (and of other natural resources) continues to go to private owners instead of being used as a positive form of taxation. 3. CEJRecommendation In response to this consultation on funding housing, the CEJ therefore advocates the shifting of current property taxes off buildings and on to each site’s annual rental value according to its optimum permitted use by abolishing current property taxes (National Non-Domestic Rates, Council Tax and Stamp Duty Land Tax) and introducing an annual Land Value Tax on all land thereby: — acting as an economic incentive for property owners to bring empty and underused sites into full use; — increasing the supply of building land for sale rather than it being held out of use for speculative purposes; — reducing the opportunity for land owners to exploit public investment into projects that require the purchase of land by increasing land prices above its true economic value; — reducing the need for “urban sprawl” on to green land with the wastefulness of commuting; and — ensuring grants provided to business or organisations are used for the purpose intended rather than being leached into land values3 and therefore being diverted to land owners as happens at present. 4. CEJ’sResponse toIssuesSet out in theConsultationPaper (I) How and where the more limited capital and revenue public subsidy can best be applied to provide the biggest return on the investment, in housing supply terms The CEJ asserts that under the present system of taxation, any public subsidy or grant will ultimately increase the rental value of the land, by the same amount as the grant or subsidy.4 This effect has been observed over the years by economists where subsidies are granted to farmers under the Common Agricultural Policy; rate free periods and grants given in previous Enterprise