But, the state determines that only some land can be used for building, which acts to a) suppress the rent/price of all other land, and b) raise the rent/price of development land, whose supply is, thereby, even more limited. By limiting this supply of available development land, the supply of additional property is also limited, and so its ability to meet demand, pushing property prices higher, creating additional surplus profits, and so rent, and consequently higher development land prices. As I have set out before, the supply of housing has, in fact, risen faster than population, but demand, and in particular monetary demand, has risen faster. As the FT report, Oxford Economics have concluded,
“that net additions to the housing stock have exceeded the growth of households.”
And,
“house prices have jumped especially in the capital as interest rates fell and not because there is insufficient housing.”
(FT)
That creates, an inevitable incentive for landowners to seek to convert their land into development land, and to hoard it until such time that they can achieve that. It results in huge land banks in which land is effectively sterilised from any productive use, with landowners sitting on the land, waiting to obtain significant capital gains both from a general rise in land prices, and from a rise in the price of the particular land, as a result of its change of designation to development land.
“Behind the scare stories is a very simple financial fact: an acre of rural land worth £5,000 becomes an acre of development land worth between £500,000 and £1m once planning permission is obtained.”
See Also – Don't Trust The Tories On Housing
What also contributes to this, as Cahill explained in his book, is that the state itself encourages this, not just because of the sterilisation of large amounts of land in the Green Belt, but by the subsidies paid to landowners not to use their land.
“With rare exceptions, ownership dictates how land is used. Those who now "hold" the bulk of the acreage of the UK are extremely hard to identify, almost entirely because of the defects in the land registries. But they are for the most part the descendants - the so-called cousinhood - of the great landowners of 1873. Among them are the current Duke of Buccleuch, with his 240,000 acres, the Duke of Northumberland, with 131,000 acres, the Duke of Westminster, with 129,000 acres, and the Prince of Wales, with 141,000 acres.”
Comparing these huge landed estates running into tens of thousands of acres, the average farm size, by comparison is just 220 acres, which gives some idea of the concentration of land ownership, by the remnants of the old landed aristocracy. Cahill reports that, in Scotland, in comparison to the average £23,000 of subsidy received by farmers, the top 50 landowners obtained subsidies averaging around £300,000 per year, and with one receiving a subsidy of £1.2 million in 2009.
Cahill says of this coalition of interest,
“Most land in the UK held monopolistically by large landowners or estates follows the rules of what the American social economist Mancur Olson called "hidden coalitions". How these work in the UK and their impact on the housing market is very simply explained.
First, no one knows just how much land is available for development or from whom it is available. The result is that UK homes are both the smallest in Europe and the most expensive, with the land or site costing a vast proportion of the value of the dwelling. From the perspective of the 31 million people, or half the UK population, who pay direct taxes, what we are doing is in effect paying an inefficient business - the 325,000 "farmer" holders, or 0.5 per cent of the population - to keep hold of building land, further falsifying an already rigged market. The finer figures are worse. Only two-thirds of UK farms are owned; the other one-third is rented, mostly from the owners of the other two-thirds. In effect, the agriculture subsidy goes to the 0.36 per cent of the population that owns 70 per cent of the country.
If the 65,000 "farms" of under two acres are subtracted as economically meaningless, what you have is 50 per cent of the population, the taxpayers, paying 0.28 per cent of the population to hold the bulk of the country's landed assets and to make those plentiful assets scarce. The result is that the cost of a building site is two or three times what it should be for 70 per cent of the population. This is Britain's great property swindle.”
And, the extent to which this restriction on available development land exists, as I have indicated before, is the fact that, despite all of the claims about Britain being “overcrowded”, residential property takes up just 1% of the total land mass, with, by comparison, golf courses accounting for 2%!
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