The New Economics Foundation (NEF) is urging the government to abolish the “hope value” premium on land for residential development, claiming it inflates land prices and blocks the construction of urgently needed social homes.
Under current rules, local authorities must pay inflated prices for land, reflecting its potential future value if planning permission is granted—even when no plans for such development exist. This policy, known as “hope value,” has been criticised for driving up land costs and slowing progress on addressing England’s housing crisis.
Cutting costs, boosting supply
The NEF estimates that scrapping the hope value premium could save the government £4.5 billion annually—a 25% reduction in the cost of building 90,000 social homes each year. This could be particularly impactful in London and the South East, where social housing waiting lists and homelessness rates are highest.
Reinvesting these savings could deliver an additional 27,000 social homes annually, helping to close the gap between the country’s housing needs and its current delivery.
The case against ‘hope value’
The hope value premium dates back to the 1960s and requires local authorities to pay not just the market value of land but also its speculative future value with planning consent. A report from the Centre for Progressive Policy found that this premium can increase land costs by up to 275 times their current value.
The Levelling Up and Regeneration Act 2023, introduced by the former Conservative government, included provisions for scrapping hope value in specific cases, but these powers remain underused.
A solution to the housing crisis?
The NEF argues that eliminating the premium and reforming land purchase rules would not only reduce costs but also align with Labour’s ambitious housing targets. Labour has pledged to build 300,000 new homes annually, including 90,000 social homes, under its “back the builders, not the blockers” policy.
A NEF spokesperson said:
“With record levels of homelessness, rising private rents, and increasing housing insecurity, this country desperately needs a new generation of social homes. The government has rightly declared tackling the housing crisis as a ‘moral mission,’ but their plans are being blocked by unfair land rules.”
“Reforming the hope value rule is vital to hitting housing targets, building the homes we need, and tackling the housing crisis. It’s time to prioritise communities over land speculation.”
The wider implications
The debate over hope value highlights broader issues in England’s housing market, particularly the role of speculative land pricing in slowing affordable housing delivery. Reforming these rules could not only accelerate social housing projects but also provide fairer compensation to landowners, reducing tensions between developers, councils, and local communities.
For investors, this could signal a shift in the dynamics of land acquisition and development, with implications for long-term property market strategies.