An interventionist strategy based on a Sovereign Land For Homes Bond
Millions of people feel immense frustration when listening to the news. The government wants to build 1.5 million homes by 2029. Yet, policy remains heavily reliant on profit-driven private developers to deliver them.
Everyone needs needs a home to live in but relying on the private sector to solve an affordability crisis is deeply contradictory [1, 2]
Some might go as far as to say not only is it is ineffective but naive in the extreme. Property development companies have neither the skills, the motivation nor business model to deliver affordable housing.
The flaw in Private-Led Development
Private property developers operate on rigidly commercial business models. Their primary goal is maximizing shareholder value, not meeting social needs. Their business models aim for:
- Strategic Land Options: routinely buying or purchasing options on well-located land.
- Profit Optimization: routinely delaying buildling until cycles of market conditions and planning permissions maximize site values
- Margin Targets: industry viability models typically prioritize profit margins of 15% to 20% over lower-cost affordable housing units.
This approach constitutes an engine for extraction and a system where affordable housing is treated as a minor planning concession rather than a national necessity. The market is working efficiently against national and human needs.
Lessons from Post-War Reconstruction
We have faced structural housing shortages before. Following the Second World War, the state recognized that the market alone could not rebuild the houses needed by the nation. [1]
The landmark post-war housebuilding program succeeded because the government stepped in directly. Local authorities were empowered to acquire land, establish new towns, and construct over a million homes—including innovative prefabricated designs. [1, 2, 3]
Land Costs as a Proportion of House Prices
Land cost is the single largest component of new build prices. In the UK, land often accounts for 50-60% of the final selling price in London and the South East, while in regions like the North East and Wales, it may be as low as 15-25%. If we average out regional differences one might say a rough rule of thumb on new build homes land cost is about 30% of the final price of a home. Construction costs and fees typically represent 30-35% of the total price, although there are significant regional variations here too. The remainder is profit.
Creating A Parallel Affordable Housing Market
Instead of the state building social housing or relying on the market to do so, it should provide land at zero cost for social housing to those with the capability and motivation to make quick starts. It can do this by an interventionist strategy by compulsorily purchasing 50% of the land banks of major private developers that they hold back development for profit optimisation.
The logic of the existing neoliberal free market is a property investment and development industry whose professionals deliberately drive prices up with their 24/7 online investment programmes programmes [1] and similar. The system maximises rents and values everywhere they can find affordable or underpriced regional differences. This juggernaut market modus operandi is an engine for ever increasing prices and ever increasing debt.
In short private developers have rigged the market and pretended it is the natural course of things which it is not but sadly the government has had neither the courage nor imagination to do otherwise than taking advice from the market ‘professionals .
If young people are to have a stake in our nation, the state must step in because the market is unable to provide affordable housing
A targeted public purchase of under utilised land banks at near agricultural or option prices can unlock delivery of hundreds of thousands of affordable homes and liberate the capture of planning uplift for the public and be repaid over a century with modest annual sums or via uplift sharing.
This could create a parallel housing market at about a third lower prices than the standard commercial sector with which the private sector would have to compete. Crucially it would also unleash an economic ripple effect of economic growth that local people would experience directly.
To add insult to injury current tax rules allow developers to deduct costs associated with the capture and acquisition of land (including option fees and certain financing costs) against taxable profits whist ensuring this land is not available for much needed affordable housing. So the government is actually subsidising the housing shortage by providing private devlopers with tax relief while they hold on to land banks and wait for planning uplift to maximise profits sufficient to deliver returns to absentee shareholders.
This not only artificially limits supply but reduces the public tax take on the substantial private gains realised when agricultural land is converted to residential use, hoovering up the planning uplift for private rather than public or community benefit. Yet private sector uplift is wholly dependent upon and only delivered when the public sector approves planning permission.
This represents a double loss to the public and community sectors who pay for the infrastructure that private developments depend upon in terms of transport, drainage, amenity infrastructure, location and nature. For too long developers have assumed they are entitled to externalise these costs by enclosing and harvesting local value for the beneft of their shareholders.
The answer is to create a parallel affordable housing market by:
- Creating a Sovereign Land For Homes Bond
- Compulsorily acquiring 50% of developers’ unused landbanks at or near the cost they have paid
- Granting 100?year zero?cost leases to councils or housing associations or approved affordable housing providers who can commit to start building within 12 months.
- Land costs would be recouped over 100 years via low annual repayments or an uplift charge on development.
There is no doubt that private sector developers and their allies in the press will push back strongly aginst this. However one way of looking at this structural housing crisis is as an equivalent to the effects of a war. This time it has been a war that developers, property professionals and their shareholders have been waging against affordable housing for thirty years or more and it is time for structural adjustment through strategic government intervention.
Any intelligent business man will tell you that if the figures for investment add up it makes sense to borrow to build an asset that will increase health, productivity and prosperity- hence the proposal for A Sovereign Land For Homes Bond or equivalent.
Further details and key number are below
Key Numbers
- Target purchase of stock: (50% of major developers’ landbanks) approx 585,000 plots equivalent to approx 225,000 acres.
- Baseline llustrative purchase cost (i): £2.7bn (at £12k/acre); sensitivity £1.35bn–£5.6bn.
- Illustrative uplift per plot: £195k–£595k (market dependent).
- Simple 100?yr annuity to amortise £2.7bn at 2% real £62m/year (?£106/plot/year).
- Uplift?capture example: 20% of £150k uplift ? ~£30k/plot ? ~£17.6bn gross across 585k plots.
- Any entrepeneur knows that borrowing £2.7 billion to create a perpetual asset of £17.6 billion makes sense and ringfencing the borrowing through a Sovereign Land For Homes Bond would make complete sense.
Expected Impacts
- It would create a large potential boost to affordable housing supply (e.g. 20% conversion would create 117,000 homes).
- It would removesmajor land cost barrier per unit, reducing capital requirements and enabling deeper affordability.
- Capture planning uplift for public benefit and creates a revolving land fund.
Finance Options
- An annuity model would create a predictable small annual public outlay (~£62m/yr baseline).
- Uplift?share : collect a % of development uplift at sale/start of development; align repayments with value created and can fully cover costs and fund further purchases.
Implementation & Safeguards
- Require 12?month build?start to prevent hoarding; prioritise councils/NPPS/approved RPs with delivery capacity.
- Pilot in one high?demand region to test valuation, legal compensation, and administration.
- Include governance: eligibility criteria, clawback for non?delivery, indexed repayments, and transparency on site allocation.
Legal and Delivery Risks
- Compulsory purchase compensation rules and optioned title complexity may raise costs above agricultural baseline.
- Planning, infrastructure (s.106/CIL) and remediation obligations affect deliverability and value capture.
- Requires strong project management at local level to meet 12?month start condition.
Next Immediate Actions
- Commission legal/valuation rapid review (6–8 weeks) on compulsory purchase for optioned vs freehold land and likely compensation ranges.
- Design a pilot (select 1 region) and map candidate landbank sites with local authorities and housing associations.
- Model uplift?capture mechanics (10/20/30% scenarios) and prepare draft legislation/regulations for lease terms, delivery obligations and repayment arrangements.
Political Benefit
A targeted public purchase of under?utilised landbanks at or near agricultural prices can unlock hundreds of thousands of affordable homes at approximately one third less cost capture planning uplift for the public, and be repaid over a century with modest annual sums or via uplift sharing.