The Influence of the Land Commission on the Supply, Demand and Price of Building Land

Victor Saldji

[An "Open Letter" addressed to Sir Henry W. Wells,
Chairman of the Land Commission, 1 October, 1969]

With respect, I beg to submit the following for your kind attention.

1. There appears to be an almost complete breakdown in communication between those who maintain and administer the Land Commission Act 1967 and those who are affected by it.
   
2. Although the betterment levy provisions appear to be the main source of confusion and disquiet, I submit that some points for disquiet may also arise out of the provisions for the acquisition, management and disposal of land by the Commission.
   
3. A review of the position regarding land acquisition was given to the House of Commons on 6th February 1969. The Minister of Planning and Land, Mr. Kenneth Robinson, said that so far the Land Commission had completed the acquisition of 279 acres. Negotiations for the acquisition of a further 2,100 acres were in hand. Farther cases in which the Commission had approved action (which did not, of course, mean that every acre would be acquired) covered another 5,500 acres and many other oases, involving thousands of acres, were under investigation. The Minister also stated that it often happened that as a result of the Commission's intervention, land was put on the market and made available for development which would not otherwise have become available for building. There had already been more than 100 oases, covering nearly 1,000 acres, in which the Commission's action had led to land being made available in this way for development. [Hansard Vol. 777 Col. 617].
   
4. The danger that its intervention in the land market, on a voluntary basis, might influence prices upwards is however recognised by the Commission, In The Birmingham Post of 30th December 1968, property correspondent, Kenneth Jackson reports that a spokesman for the Land Commission stated that: "Land prices could rocket well above the incredibly high figures already being asked, if the Land Commission divulged the prices it paid for sites."
   
5. This would particularly appear to be the case in connection with the Commission's advertising for "White land" with development potential. As "White land" by definition is land which does not have planning consent, the implication is that if the Commission were prepared to buy, then the prospective seller could safely assume that development permission would be granted before too long. The temptation to co-operate initially with the Land Commission, but to break off negotiations once the stage were reached when the Commission was ready to buy, would seem to be one to which members of the Country Landowners' Association might well succumb. That in fact is what their Association recommends that they do, according to property correspondent, Michael O'Halloran, in The Financial Times, 18th March 1969.
   
6. In connection, with the betterment levy it would appear to be a matter of some urgency that as much evidence as possible should be gathered into one place so that a dispassionate appraisal can be made of its influence on the residential building land market.
   
7. In what I hope may be a useful contribution to such a pooling of evidence, I append to this letter gleanings from the published reports of land practitioners, builders and others, none of whom speak without authority. These reports relating to the years 1967 and 1968 are such as have come within my ken and I should welcome an opportunity to fill the gaps.
   
8. The valid conclusion appears to be that: "Except in areas where there is no great demand, vendors undoubtedly expect the current prices to reimburse them for betterment levy compared with prices ruling prior to the 1967 Act". [Report for 1968: Bernard Thorpe & Partners of London, Bournemouth, Tunbridge Wells, Oxted, Swindon, Hereford, Worcester, Birmingham, Liverpool, Leeds, York, Newcastle, Belfast, Glasgow and Edinburgh. The Estates Gazette, 28th December 1968].
   
9. Equally valid appears to have been the comment of Bernard Thorpe & Partners when reviewing the building land market only eight months after the Land Commission Act came into operation [Report for 1967. The Estates Gazette, 30th December 1967]: "We feel quite sure that in the areas of great pressure for land the price has increased since April 1967, but this does not apply in other areas. There are cases where owners are reluctant to put the land on the market or even apply for permission to develop, because of the compulsory powers".
   
10. Yet the Minister for Planning and Land could tell the House of Commons on 6th February 1969: "There is no justification for the ... claim that prices have risen as a result of the Land Commission" [Hansard, Vol. 777 Col. 6l6]. And on the same occasion, Mr. Frederick Willey, who as Minister of Land and Natural Resources had piloted the Land Commission Bill through the House of Commons, said: "It is no good constantly saying that the levy is increasing the price of building land. It is not."
    
11. What I believe to be a vital clue to this incredibly confident repudiation of fact is a remark attributed to your goodself in The Yorkshire Post of 26th February 1969. You are quoted as saying that you do not think that Owners ask more for their land because of the levy. "If they could get 40 per cent more they would charge it anyway, wouldn't they?".
    
12. But this surely is to assume that the relationship between supply and demand remains the same as it was before the imposition of the levy.
    
13. Insofar as this assumption appears to be profoundly affecting the ability of men of good will to see clearly the influence that the betterment levy is in fact having on the market in building land, I crave your indulgence for a moment's digression into the realms of economic theory.
    
14. There is apparently only one type of "land tax" that would leave the supply and demand situation unchanged and that is the tax on the economic rent of every parcel of land, irrespective of whether it were being used or not. Economic rent being a differential, no allocative influence would be exerted, provided that the tax were levied on all rental or capitalised economic rental values. [See p.449 An Introduction to Positive Economics by Richard G. Lipsey, Professor of Economics at the University of Essex. Weidenfeld, 1966].
    
15. However, a very different influence is exerted by the betterment levy, insofar as it bites only as, and when land is materially developed, or disposed of for material development, and in this regard I would respectfully refer you to "Housing, Town Planning and the Land Commission" [Hobart Paper 40; I.E.A., August 1967] by Mr. P.G, Pennance, head of the Economics Department of the College of Estate Management. Under the heading, "The taxation of pure land values" Mr. Pennance points out that in the light of possible betterment levy "In deciding whether or not to market land, owners will weigh developers' bid prices against their own preferences for sites or the values realised from their existing uses."
    
16. Insofar as a market is made up of expectations, prospects of political change would of course also be borne in mind by both prospective vendors and purchasers.
    
17. I hope that the appended gleanings may be helpful in the opening up of a line of communication, and would commend them to your attention. They do, I believe speak for themselves regarding the influence of the Land Commission on the supply of and demand for residential building land and on the price of such land.

Regional Land Market Reports