What makes development on 9 percent of UK land a set point?

Advocates for greenbelts and open lands find Government proposals to build outward unsettling. But the housing shortage for a growing population may require it.

Members of a national organization that campaigns for the protection of countryside, the Campaign to Protect Rural England (CPRE), heckled UK Planning Minister Nick Boles when he spoke at their annual meeting in June 2013. He proposed that the 9 per cent of England that has been built upon should be increased to 12 percent. This proposition proved to be a lightning rod, bringing about strong opposition from the CPRE and other aligned organizations.

But is it such a terrible idea? Can open lands be forever protected as sacrosanct? The UK population grew by 7 percent in the decade measured by Census 2011, a trend that shows no sign of abating. Homebuilders cite a plethora of reasons why they build only about half as much as is needed, but land investment funds eagerly seek places to invest and build. It is the economics of scarce land that constitutes a large part of the equation.

Toward those interrupting him as he spoke, Minister Boles lashed out by saying that rural villages would “become fossilized” if land development were blocked in certain areas. Indeed he makes an important point, as the number of individuals engaged in agricultural work has diminished in recent decades, due largely to increased efficiencies in how farming is done. If new (non-agricultural) employers cannot find a population of workers, they simply will not locate their operations where the population is scarce.

To be clear, the housing shortage in the UK is so critical that the following are now points of deep concern:

• The laws of supply and demand seem to be hard at work – much to the disadvantage of the homebuyer. The Institute of Economic Affairs (IEA) reports that, in nominal terms, “house prices in the UK have increased by a factor of nearly forty over the last forty years. Rent levels have followed suit.”

• Social housing, which once numbered 5.5 million units in 1981, now is reduced to 3.8 million. On the waiting list are 1.75 million households. People without dependent children are excluded from this list altogether. This further adds to the price pressure in market-rate housing.

Such discussions almost always prove to be contentious. And data from one study to the next sometimes provide widely different opinions on such matters.

One misperception is that the National Planning Policy Framework (NPPF) tilts land use toward development over greenbelts and the official Areas of Outstanding Natural Beauty (officially designated countryside lands deemed to have significant aesthetic and environmental value, so determined by the UK Government by way of Natural England). To the contrary, the Institute of Economic Affairs (IEA) observes that the NPPF advocates for residential development on open (raw) lands outside of the greenbelt and Areas of Outstanding Natural Beauty.

The CPRE counters that more than 400,000 brownfield sites already have planning permission and should be built upon first before green lands are developed (buried in that statistic is how many of those sites have industrial waste residue that needs remediation, an additional cost added to an already expensive housing equation).

The IEA singles out the blame for the housing crisis. According to its report, “Abundance of Land, Shortage of Housing” (IEA, April 2012), “Planning restrictions are a key determinant of housing costs.” The report advocates for a liberalisation of the land use planning system as a means to address the housing affordability crisis, citing a number of studies conducted in the UK, elsewhere in Europe and in the United States.

The battle will undoubtedly wage on for some time to come. But to be clear, institutional and private investors (often, those interested in a joint investment land opportunity do so through alternative investment funds) are increasingly interested in raw land as an investment, seeking planning changes that enable them to add to the housing stock on otherwise non-productive acreage. When those planning changes are achieved, the process is effective. But before an investor elects to participate in a land-to-houses scheme, they should consult with a qualified financial advisor who can help weigh the nature of the investment against other savings strategies.