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The Labour government needs to “be belligerent” in setting tough new standards for the amount of affordable housing in order to force down land values, according to one of the UK’s largest housebuilders.
Greg Fitzgerald, chief executive of Vistry, said there must be no “grey areas” or exceptions that allow developers to build a lower percentage of affordable housing within their sites, in order to reset land values and help achieve the new government’s ambition to deliver a huge boost in affordable housing.
“As soon as you have any grey areas, we [housebuilders] are fantastic at finding ways [of] building less affordable,” said Fitzgerald, whose company said it built about one in eight new affordable homes in the UK last year.
“If you absolutely know that you are going to have to provide X per cent for affordable — with no grey area, no ifs or buts — land [prices] will come down. And we will be able to build more affordable . . . They need to be belligerent on that.”
The Labour government has begun to lay out its strategy to reform the UK’s slow and complex planning system to deliver on its promise to tackle the national housing crisis by building 1.5mn homes over five years.
Fitzgerald’s comments address a thorny policy area known as “land value capture”, which involves reducing the amount of financial benefit landowners receive when their land is approved for development — and using that money to deliver more public benefits such as infrastructure and affordable housing.
A hectare of agricultural land is typically worth £25,000, while the same area with residential development approval was worth £1.95mn, according to consultancy Capital Economics.
Fitzgerald said Labour had signalled “exactly” the right approach to land value capture. He said strict and universal standards for the amount of affordable housing within developments would force all housebuilders to bid less for land, reducing the market price.
He said most sites today have 25-30 per cent affordable homes. “If they increase that by 10-20 per cent, that will automatically mean that we and our competitor group can only offer so much for the land,” he said. “The farmer will still get more for his land than it is worth as a farm, but not as much as he maybe thinks it is worth as a pure house building site today.”
Tony Crook, emeritus professor of regional planning at Sheffield university, said that research from 2018 estimated that squeezing the “hope value” out of land transactions by requiring developers to produce fixed levels of social housing “captured” about 30 per cent of the value for investment that might otherwise have gone directly to the landowner.
“You say to all developers they will be expected to contribute to infrastructure and affordable housing. This will depress land value and through that process the landowner is indirectly paying for infrastructure by getting less for land,” he added.
This approach would favour Vistry, which has increasingly focused on partnerships to build homes for housing associations, local councils and big rental landlords — rather than for private sale.
Fitzgerald said tougher standards for the percentage of affordable homes would level the playing field in the land market when different developers line up to bid for suitable plots.
The FTSE 100 group’s partnership strategy has allowed Vistry, which took over Countryside in 2022, to defy a broad downturn in the housebuilding market, which has seen most builders slash their output by as much as a third because higher mortgage rates have made it harder for people to buy.
Vistry, which includes the Bovis Homes brand, on Tuesday reported it built 7,750 homes in the year to June, up 8 per cent from last year — and was on track to build 18,000 by the end of 2024.
