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<h1 id="features_header">Landed in trouble</h1>
<p id="article_info"><span>Published 18 February 2024</span></p>
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<p>What the country needs is a national bank of reconstruction.
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<p>Alan Greenspan’s admission that he might have made a mistake as head of the US Federal Reserve ranks as one of the world’s greatest understatements. What he and many others would not see is that self-regulating markets will not correct themselves and return to equilibrium. </p>
<p>In the past 200 years, regular cycles of boom and bust have ended with the implosion of land price bubbles, at about 18 yearly intervals. </p>
<p>In modern times, the cycle intensified as homes became commoditised as speculative investments, used as self-replenishing credit cards. </p>
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<p>Since Thatcher’s big bang, politicians have encouraged credit-driven house price inflation and a bogus liquidity that created an illusion of a healthy economy. Brown’s medicine is still macro-retail therapy and expensive PFI spending, rather than saving and investment. The pre-Budget statement in November changed nothing. </p>
<p>Government and developers must relearn that they have to invest before realising genuine value uplift. During the past two centuries, 5 per cent has proved a modest yet sustainable return. With the economy only growing at about 2 per cent, speculative trading in land is self-defeating, except for those who cash in before a crash. </p>
<p>We need investment that rebuilds production capability, not the frenzy of the trading floor that makes money out of nothing. Even bankers now talk of rediscovering the ‘real value’ of assets, and Quaker banking principles… for a while, anyway.</p>
<p>Ginnie Mae, the US government’s National Mortgage Association, is the publicly owned sister of the bankrupted Fannie Mae and Freddie Mac. Ginnie guarantees housing credit, and focuses on low-income borrowers. It sells no derivatives, has strict rules on affordability and is now overwhelmed with interest from savers. What better model of housing bank do we need? </p>
<p>The government should capitalise a new national bank of reconstruction. It should integrate the roles and resources of the Public Works Loan Board, the Housing Finance Corporation, Partnerships UK, European Investment Bank, EU funds and a range of public investment programmes to resource affordable housing, community building and regeneration, and act as banker for forward funding of infrastructure in growth areas.</p>
<p>The new bank will need a partner in managing change. The Homes and Communites Agency (HCA) will publish its first business plan shortly. With a big programme of grant and investment finance, it has the opportunity to mobilise the combined resources of councils and the reformed regional development agencies. </p>
<p>With them, the agency can become the dominant market maker in land supply, create a supply of serviced land with infrastructure and reshape landowners’ expectations of value. It can also attract private finance for infrastructure and affordable homes, show how to make spatial planning work and support new smaller scale and self-commissioning housing providers.</p>
<p>Councils and the agency must be supported by government, with a fiscal regime that rewards innovation and long-term investment in sustainable infrastructure and penalises asset price speculation at marginal tax rates. It should also support landowners promoting sustainable living, discourage allocated land being kept out of the market or used unsustainably, and share long-term value uplift created through public and private investment.</p>
<p>Together, a national bank of reconstruction, central and local government and the HCA could consign the short-termist and unsustainable ‘slash and burn’ culture of land development of the past 30 years to the waste bin of history. It has been an historical aberration, and has contaminated everything we do and how we think. We will live with its fallout for generations.</p>
<p>A developer client says: ‘What is happening in the market now is not a problem. It is the start of a solution.’
He is right. We can repeat the errors of the past 36 years – or we can do something different</p>
<p><em>Stephen Hill is director of C2O futureplanners. Indy Johar is director of ze’ro ze’ro research and architecture.</em></p>
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