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Stuffing their mouths with gold

17th October 2011

By Rob Cowan

Another thing about housing and local government minister Grant Shapps’ call for the building of garden cities (see blog ‘Garden cities of… tomorrow?’). Shapps, writing in the Guardian, applauded Ebenezer Howard’s approach, ‘not relying on government, not spending public money, and not waiting until official bodies took over his ideas’. What Shapps did not say was that Howard’s strategy – for all its brilliance and continuing relevance today – did not work. Instead of garden cities being built on a large enough scale to change the grim face of Victorian urban Britain, only two were built – Letchworth and Welwyn Garden City. Both remained small, and Welwyn Garden City was taken over by the government’s new towns programme.

The one example that Shapps gave of ‘some of the later new towns [showing] how relying on a state vision can come off the rails’ was ‘the architects of early 1970s social housing in Milton Keynes who were obsessed with preventing the tenants having any opportunity for decoration or ornament in their homes’. If the architects really did object to that, they were hardly successful – Milton Keynes sports some hilarious examples of Norman-Foster-designed corrugated-steel houses retrofitted by their owners with stone cladding. Anyway, that is irrelevant to Shapps’ argument that the private sector should build new towns alone. There are flaws in the design of Milton Keynes, to be sure, but the new city is an excellent example of how regional planning, city planning and public infrastructure investment can provide a framework for successful private development.

Michael Edwards, commenting on this blog (‘Garden cities of… tomorrow?’), argues that building anything worth calling a garden city would require (i) breaking the stranglehold of landowners, (ii) re-discovering the importance of land acquisition at existing use value, and (iii) not giving future value growth away to leaseholders without a dynamic equity share for the collective interest. One of the most notable recent attempts to get to grips with this issue has been the economist Tim Leunig’s 2007 proposal for auctions of private land that would release a substantial part of the development value (‘betterment’, we use to call it) for public benefit. Leunig’s view seems to be that development should go where the market wants it to, which means leaving the north of England to its fate and, in his words, ‘stuffing the mouths [of people in development hotspots like Cambridge] with gold’ to persuade them to accept vast amounts of development. (His phrase recalls Nye Bevan’s strategy of overcoming the opposition of doctors to the creation of the NHS by ‘stuffing their mouths with gold’.)

Here’s how Tim Leunig’s system of land auctions is supposed to work (see his article ‘Land auctions will help give us the homes we need’, Local Government Chronicle, 11 March 2011). ‘The council first asks all landowners to name the price at which they are willing to sell their land. By naming a price, the landowner gives the council the right to buy the land for 18 months at that price. The council then writes a development plan. As now, they will take into account the suitability of the land offered for development, but will also consider the price of the land, and the likely financial return to the council.’ It is rather like buying a car, Leunig suggests. ‘You know your preferences, and can choose the most suitable car. But you might buy a different one if it is much cheaper. That possibility means whoever makes the best car for you has to offer you a good price. It is how well-functioning markets work.’  Having decided which land can be developed, the council auctions it to developers, keeping the difference between the price named by the original landowner, and that paid by the developer. ‘There is no risk to the council,’ Leunig writes. ‘If no developer wants the land, there is no sale and the original landowner retains the land.’

The government has said that it will explore Leunig’s idea, though quite how is not clear. In some way it seems a highly ingenious way of securing increased land values for the public benefit, rather than for landowners. But it may well be too challenging and complicated, and it is not clear how it can be reconciled with a supposedly democratic, plan-led system. Where do we go from here?

 



 

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  • Tim Leunig 17th October 2011

    There is a risk of cartel in some areas, but not all by any means. Remember that we are only looking for (say) 1% of the land mass - so the cartel would have to be all encompassing to be an issue. Remember too that cartels can be punishable by prison. Finally, I accept that the only sensible way forward would be a pilot - which would answer many of these questions.

  • Michael Edw... 17th October 2011

    Good work, Rob. How extraordinary the Leunig is! Try and get a comment from Kevin Cahill, author of the book Who owns Britain? and some excellent recent articles in the New Statesman. I am sure a tacit cartel would quickly develop in most areas or, at best, developments would have to be planned on a map which looks like swiss cheese.

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