Stockholm syndrome

Since the new Stockholm suburb of Hammarby Sjöstad is the model for Gordon Brown’s eco-towns, we should ask why we get lower land utilisation, with far less affordable housing, at much greater cost – and how Sweden can still produce places for mixed communities of a quality undreamed of here.

Who pays the cost of developing land?

Why is this disparity so important? Apart from the obvious fact that more money for land leaves less for other goods, we need to think carefully about who really pays the costs of land development.

Our planning system mediates between the public good and the private interests of landowners and developers making a return. The appetite for public ‘goods’ has grown.

The provision of affordable housing, public space, and civic and local transport infrastructure are all established section 106 obligations for developers under the Town and Country Planning Act, which can discount the value of land, or add to the cost of a home. Now we should add the expectations of ‘place-shaping’, adaptability to climate change, community asset ownership and devolved neighbourhood governance.

Overarching all this is the long-awaited reversal of 30 years’ under-investment in infrastructure – the price the Treasury was willing to pay for the International Monetary Fund’s support in the short-lived financial crisis of 1976. The burden of this backlog, and the need to invest quickly in future-proofed infrastructure and utilities, falls almost entirely on new development through current section 106 practice, even though improved infrastructure benefits us all.

The planning gain supplement and the Lyons Review have been lost opportunities to rethink who benefits, and thus who should pay and how.

In July, English Partnerships launched its annual report with news that it was working with the Treasury on new standard models for making developers pay for infrastructure. This feels like more of the same, effectively imposing taxes on production, whether directly through the levy or incidentally through pricing for risk and transaction costs that fall unfairly on new home owners.

Why make an already high-cost product even more unaffordable? How can new homeowners possibly afford all this?

In truth, they probably can’t. Only the availability of cheap credit has made it possible up to now – and not paying the real costs of infrastructure. Today, we can see that cheap credit has not been a victimless benefit. In the end, of course, it simply runs out.

Time for joined-up policies

There is a sense with the Brown administration that a crunch moment has arrived. The search is on for integrated planning, land and housing policies.

So what would a sensible housing policy look like? We offer a sort of postcard from Sweden, in the form of the principles outlined in the box. It has six (yes, just six) guiding principles that embody values that are widely accepted by politicians and the public.

We could probably all sign up to principles 1–5, in terms of simple commonsense and fairness. But number 6? That, of course, is the killer, because without dealing with unearned land and house price inflation, none of the other principles can possibly succeed.

The six principles are already the housing policy of Sweden, a country that has no social housing and where co-operatives are the largest and most popular form of tenure. Since its 1974 housing reforms, Sweden has provided sustained demand-side assistance to individuals who are unable to afford full-price housing, giving people the choice to live anywhere up to the accepted minimum standards. This has been underpinned by supply-side action to ensure that the redistributive effects of assistance for individuals are not undermined by scarcity of land, infrastructure and access to housing.

Sustainability and land value

So what are the new administration’s plans? Hazel Blears, giving evidence to a select committee in July, put the emphasis on helping first-time buyers and shared equity arrangements, with home building given priority over ‘environmental issues’. In other words, sustainability is presented as a policy obstacle not a framework for creating sustainable communities.

For now, then, it seems that sustainable living is not recognised in policy or practice as a public ‘good’. It is a rising cost that must be borne predominantly by private individuals.

Our current ‘slash and burn’ approach to housing development means extracting full cost recovery, maximum land value and development profit at the point of sale of a completed home. By the time the landowner, the developer, planning authorities and building control have extracted their share of value, there is nothing left for the ‘place-shapers’, for the future care and adaptation of the place. Yet incoming owners and buy-to-let landlords can extract more inflationary value increases without any further investment in the asset, and without any recovery of ‘rent’ for the enjoyment of the public goods provided.

Land banned: '£60,000 homes' in the government's flagship Millennium Community at Allerton Bywater were intended to show how cheap construction can be. Land costs were left out of the equation. Those homes have now gone on sale starting at £159,995 for a two-bed townhouse

Our culture celebrates speculative gain of land and housing as a public good, yet it is only achieved at the private expense of others. Raising house prices in low-value areas is heralded as a mark of successful regeneration, yet existing residents are often priced out of their home markets.

Home buyers are made to feel they should pay more for a more sustainable home, yet that only makes expensive housing even more unaffordable, and environmental sustainability becomes socially exclusive – a privilege for the better-off.

We are careless in the way we treat the price of land and the costs of land development. We have not been imaginative in how we use land, and rights for the use of land, as resources for creating the wealth that sustains the quality of place and our ability to enjoy sustainable lives in mixed communities, at a price that is fair to all.

Paying fair shares

Our failure to extract a ‘rent’, to tax land and housing in return for the public goods from which we all benefit, becomes a tax on the as-yet unhoused or the poorly housed. The least well-off will continue to experience the worst housing and the worst health. This is no basis for creating mixed communities or living sustainably. If ‘mixed’ is more than a political clich , it has to give meaning to social, environmental and economic wellbeing through a political commitment to redistribution and progressive fiscal policy that we have not seen in a generation.

The problem with land is that, like sustainability, it is such a big issue. The decisions can appear just too difficult. They transcend normal political time horizons. Far-sighted leaders are in short supply. So instead, we display a boundless capacity to play around the margins of the problem with short-term fixes that mostly make matters worse.

Sweden has followed its policies more or less consistently for more than 30 years. When the municipality of Stockholm came to London’s Building Centre in June, it explained exactly how the work at Hammarby Sj stad was done – the municipal leadership, assembling land, reinvesting land receipts in infrastructure especially transport, integrating planning, procurement and service delivery, joining up public and private investment, and securing long-term place management.

But what did the audience ask questions about? They wanted to know what type of fuel was used, and what sustainable design features would make new homes attractive to purchasers in the UK. Talk about not seeing the wood for the trees. Sweden is a land of forests, and so they have leaders who can tell the difference.

Stephen Hill is a chartered surveyor, and director of sustainable development and faculty at Beyond Green