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Jock Coats — Sun, 17 Sep 2006 20:32:24 +0000

Thanks Peter. I did kind of know about Montgomery as Lembit mentioned it once and I corresponded with him briefly about it.

In fact I was going to blog also about Swansea's problems with DCH - the gateway model you prefer in Wales for stock transfer is, or can be, a sort of a CLT modification.

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Chris Cook — Sun, 17 Sep 2006 14:34:15 +0000

In fact it is possible to build in a form of Land Taxation into the Community Land Partnership" model.

You do this by providing that the members of the CLP pay into a "Land Pool" in respect of a Land Rental (which is separate from the "Capital Rental" applied to the capital invested in the site itself).

This "Land Rental" could have a couple of components.

Firstly, a "Land Rental Unit" ("LRU") in respect of the amount of land used and an assessed location value (which could be negative).

CLP members would pay into the Pool and then the aggregate would be redistributed evenly. In this way there is a net transfer from those who utilise more land (per person) and land where the location has been enhanced (say by proximity to a new railway station) to those who utilise less land or less desirable land.

eg two properties with identical footprint and location value, one with two occupants and one with one.

Say each land footprint costs 1 LRU. The three occupiers pay two LRU's into the pot between them, and these are then distributed equally ie they each get 2/3 of an LRU back. The result is that the single occupier transfers 1/6 of an LRU to each of the other two.

Simple and elegant IMHO and the effect is analogous to that of the "Single Tax".

Secondly there is an interesting "Income Pooling" arrangement possible (which Woody of Devolve! has been practising for maybe 30 years, and in which I participate in a small way).

CLP members could each pay into a pool (say) 5% of their income, and this would then be pooled and redistributed evenly as a Dividend. The result is a net transfer from those earning more than average, to those earning less.

This would help the most disadvantaged to afford housing (since the "Capital Rental" in a CLP is agnostic as to means).

It also opens up a new way of addressing second-homers eg by applying this percentage as a land rental in respect of each property occupied and providing that an individual may only receive the CLP land "dividend" in one property (which is the one he nominates as his principal residence and where he may vote). So in his second home he is cross-subsidising the locals.

The partnership-based mechanisms I advocate have almost limitless application as policy tools. eg in conversation with an SNP shadow minister a couple of days ago I sketched a mechanism for further education funding half-way between grants and loans."

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Peter Black — Sun, 17 Sep 2006 13:07:52 +0000

Obviously the policy you write of is the English Housing Policy but it is replicated in Wales where not only is Mick Bates AM, our housing spokesperson, been promoting the idea but he is also actively trying to set one up in his Montgomery constituency.

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Jock — Sun, 17 Sep 2006 08:51:00 +0000

A couple of years ago I was, albeit not very assiduously, on the Liberal Democrat Federal Housing Policy Working Party. We produced a very good policy paper in my opinion. From my perspective it was good in particular because it included Community Land Trusts that I had already been working on for a couple of years before that.

At the time I suspected that the working party, or perhaps the wider party, did not fully understand the model, despite having heard it directly from the horse's mouth, so to speak, in the form of David Rodgers, Executive Director of CDS Co-operatives who commissioned the research that led to the model we are working to in groups around the country. But the wording in the final document was such that for those who knew about CLTs it was enough to show we supported them, and for those who didn't to give a flavour of them.

But we appear to have done absolutely nothing, as a party at least, to promote our policy in this regard (nor, to be fair, have we pursued Tim Leunig's idea of Community Land Auctions). And worse, over the past six months to a year, there has been a drip-drip of statements about housing that seem to suggest that even the most influential in housing in the party, our DCLG shadow team, do not understand CLTs' potential. And, if it could get even worse, I have once or twice offered to give them a briefing and been turned down.

There are new policy discussions springing up all over the place - at the Centre Forum, and in our Tackling Poverty and Inequality consultation for example - that seem completely to ignore our existing and not terribly old policy paper. I've even had more positive response from Michael Gove, whom I am still hoping to meet sometime after the conference season is over, because I believe that CLTs can help deliver David Cameron's stated aim of providing lots more affordable housing for local people in property hotspots "that are beautiful".

So, if the rest of the Lib Dems are happy tearing up our housing policy, or at least doing absolutely nothing to promote it, and plod away rewriting it willy nilly, then so will I. And believe me, I am radical when it comes to housing. Not, perhaps, as radical as the Bolsheviks, but not far off.

Readers will know that I am a Georgist Land Value Taxer. The Community Land Trust model actually shares a great deal with LVT. The CLT holds the land in perpetuity for the community. The residents buy shares in houses built on that land leasehold. So the value of the land can be used first to borrow against to build the housing without subsidy, and second the land remains locked up in the CLT so you don't need to crystalise out its changes in value but use it effectively to subsidise those who cannot afford a whole house complete with the land.

But I would go further. We conventionally talk of our homes as the "biggest investment" we will make in their lives. But they are generally only a "good investment" if the value of the site on which they are built rises. In practice, over the lifetime of the house itself, it is a cost. So much of a cost, in fact, that the Housing Corporation calculates that the whole life cost of housing is nearly double its headline build cost, in real terms. Think about it. That 1920s terrace; it's maybe had a new roof, new wiring, new plumbing, and all sorts of less ambitious maintenance jobs carried out on it in its lifetime. Any one of those bigger jobs carried out today is probably worth many times what it cost to build.

But if you didn't do those essential maintenance jobs to maintain its worth as a home, over decades you'd probably still end up making money, simply because of the rise in the value of the land it sits on. Value the owner or occupier does little if anything to create. It is in fact created by all sorts of interactions going on around it - public spending on transport (in particular) infrastructure but also other public services like schools; private expenditure like that new centre of employment down the road that suddenly makes that area desirable for professional high earners rather than the working class labourers for whom the area was originally developed.

And what is it an investment for? For leaving to our children? Even that is increasingly in question as more and more people find themselves releasing at least some of the equity in their property to see them through retirement. Is a home, then, a good investment for your retirement? Well, if you own it outright of course it will save you having any direct housing costs when you are no longer earning quite so much as when you are working. Many of the equity release schemes do not give rise to payments while you are alive but take the value of the lien out of sale value on death, but then you are leaving less to any family or other beneficiaries.

Even the way we pay for our homes in the first place does not tend to suggest they are an "investment" in the same way as we think of other investments. We borrow huge sums of money to buy them. We pay for them over 25 (and more now) years (although I do recognise that the average life of a mortgage is just eight years as people near the beginning of their careers and lives as home owners sell up, move and pay the first one off to take out another mortgage.

Wouldn't it be better, say, to be able to pay the costs of our housing as we go along, and put any spare into more genuinely economically productive investments? In Oxford there is, I worked out a couple of years ago now, about £9bn worth of owner occupied housing, of which about £6bn is "clear" equity and £3bn current mortgage debt. Think of the great things we could achieve collectively if we were able to put that £6bn let alone the remaining £3bn into investments in activities that will ensure the economic success of Oxford for generations to come?

And then there is the community fragmentation aspect of the twentieth century freehold revolution. In many cases these are really coming to the fore now, as the huge amount of suburban inter-war housing is getting past its design life. Once upon a time someone was lucky enough to buy up tracts of land and lay out estates that people wanted to live in. But they subdivided those estates into individual plots forever and now, when the old lady down the street dies a mini-developer moves in and wants to convert that corner plot into seventeen flats with no open space and little connection with the rest of the estate. People feel vulnerable to piece-meal change, with little control or influence as planning authorities often have different objectives - new density levels, different housing demand than when these suburbs were laid out and so on.

It seems also that the next "phase" of land enclosure is going to be enclosing communities, excluding the passer-by. Oh it will start out as a measured response to evidence of community problems, but once they have caught on you can bet it will become more commonplace to seek exclusivity alone.

If we as a party are going to embrace Land Value Tax, as I hope we shall, eventually, we will be admitting that the state does have an interest in what most of us thought was our "own property". There is a balancing act to ensure that people in that process do not lose out inequitably. We have existing housing policy that would enable more people to afford the housing security of owning the home they live in, while making a contribution to the state, based not on their incomes but on the added value the community and the state creates in their area.

What is the nation state after all? A territorial entity, a bundle of natural resources that has to be stewarded for the future? Or a collection of incomes to be harvested at a more or less arbitrary rate when the need arises?

I can show you a financing mechanism for housing that lets us buy shares in our communities. Shares in the income that the ongoing costs of housing produces. When you retire and can no longer buy any more shares, the people coming after you are beginning to buy theirs and you get an income from yours. You could trade your "empty nest" down and enjoy the surplus as you please, or hold onto it and continue with a home costing you nothing and any other investment and pension income you may have. Since you've been paying for the home, and not twice the price for the land, you've had years of lower costs that you can invest in productive investments to pass on for your children. As a shareholder in that neighbourhood you have a real say in what happens to the area.

Coupled with low, or no, other taxes, wouldn't that be quite an attractive, and more equitable, way of arranging our shared resources?

Jock's Place - Radical housing - Comments

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Radical housing