Hope Value Premium Reform Could Boost Social Housing Supply

The New Economic Foundation (NEF) is urging the government to abolish the "hope value" premium on building land, claiming it inflates costs and obstructs the construction of much-needed social housing.

The New Economic Foundation (NEF) is urging the government to abolish the “hope value” premium on building land, claiming it inflates costs and obstructs the construction of much-needed social housing.

This reform could drastically reduce land costs for local authorities, enabling the construction of thousands of additional social homes annually.

Key Proposals and Findings:

Local authorities are currently required to pay a price premium for land based on speculative future development value, even if no planning permission exists. Abolishing this rule could save the government £4.5 billion annually when building 90,000 new social homes, cutting costs by nearly 25%.

Savings would predominantly benefit London and the South East, where housing demand and homelessness rates are highest. Redirecting these savings could enable the construction of an additional 27,000 social homes annually.

The Levelling Up and Regeneration Act 2023 grants the Housing Secretary discretionary powers to remove the application of hope value. NEF suggests expanding this to a blanket policy.

The Case Against Hope Value:

Excessive Price Inflation: Research from the Centre for Progressive Policy shows hope value inflates land prices by an average of 275 times.

Barriers to Housing Targets: Labour’s pledge to build 300,000 homes annually, including 90,000 social homes, is undermined by inflated land acquisition costs.

Impact on Local Authorities: High land prices disproportionately affect areas with long housing waiting lists and high homelessness rates, compounding housing challenges.

Industry and Advocacy Responses:

NEF’s View: “The housing crisis cannot be resolved without fair land pricing. Reforming hope value is vital to meet targets and create secure housing for vulnerable populations.”

Labour has promised to support “builders, not blockers,” focusing on easing housing development barriers and increasing social housing output.

Groups like Shelter emphasize the moral urgency of constructing 90,000 social homes annually, particularly in regions with severe housing shortages.

Potential Benefits:

Enhanced Housing Supply: Redirecting funds from inflated land costs to construction could accelerate social housing delivery.

Fairer Land Valuation: Ensures landowners receive reasonable compensation while prioritizing public need.

Economic Boost: Increasing affordable housing would support economic stability by reducing housing insecurity and homelessness.

Conclusion:

Reforming the hope value premium offers a path to more affordable land acquisition, enabling local authorities to meet housing targets and reduce homelessness. By aligning land costs with realistic values, the government could take a decisive step toward resolving the UK’s housing crisis.