Why Do Land Values Matter?
Tom Cordell examines the approach taken to create modern homes in Liverpool where, although land values are low, there are still challenges to overcome.
Why should we care about land values? Because more than any other factor they determine where we will live, who we will live among, and the size and quality of our homes.
In London and the south east of England, lack of access to adequate housing is almost always rooted in high land prices – they drive high rents and purchase prices, and hinder efforts to build new homes for social rent.
In Liverpool, on the other hand, land values are so low that homes could almost be called cheap, with three-bedroom houses starting at around £60,000. But this brings with it a new problem: the cost of upgrading a house to modern standards can be higher than its value, making it hard for owners to justify the cost. The consequence is a backlog of poor grade housing and falling real house prices.
In the 1960s and 1970s, governments addressed this problem by offering owner-occupiers grants to improve housing and often stepped in to buy up homes, modernising and turning them into good quality council homes for rent. Housing costs stayed low and communities were supported to stay put.
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Thatcherism in the 1980s ruled out these kind of practical interventions and, by the time New Labour came to power in the late 1990s, much of Liverpool’s housing was decaying. The Blair Government was besotted with free market ideals and refused to consider a return to past solutions. Instead, if the market couldn’t fix the housing, New Labour decided it would fix the market.
Its policy, known as Pathfinder, was to give local authorities new powers to compulsorily purchase and then demolish big swathes of their cities. The idea was to force up property prices by deliberately creating housing scarcity, in the belief that when house prices had gone up, a new kind of middle-class owner would move to the area and pay for home improvements. It was a Blairite policy that never really addressed what would happen to the displaced working-class communities.
In Liverpool, Pathfinder faced huge opposition, with the fight pitching residents against local and national government. For residents, fights to save homes are all-encompassing battles. It took 11 years before Liverpool City Council was forced to abandon its demolition plans. But victory for the residents didn’t answer the question of how to fix the blighted areas of the city. The council wasn’t in a position to do much. Ironically, it had more powers to destroy homes than to build them.
A second legacy of the Blair era was that the council had completely withdrawn from providing housing, having transferred its stock to housing associations. One solution seen at Granby Street was to hand the housing over to local people to fix. The council offered derelict houses to anyone willing to fix them up for a pound – only a bargain if you ignored that the refurbishment costs roughly equalled the value of the home.
In the same streets, a community land trust also took over homes and, with a patchwork of funding, is restoring them for sale and rent. Colourful street planting, crowded noticeboards, and bright colours have created an engaging, almost home-made feel, giving Granby Street a feeling of freedom and joy that is lacking in most of today’s British cities. But, while this is fine for those who want to join in and get their hands dirty, what about the housing needs of those who don’t and have the same time, skills and resources?
A few minutes walk away is an area known as the Welsh Streets. With its neat rows of Victorian houses all painted in the same slightly sombre palette, at first encounter it feels like a flashback to a 1970s local authority improvement scheme. In fact, it is the work of a private investor-funded business called Place First, which took over the site from the council. Its promise is to offer housing for low rents which will rise no faster than consumer price index inflation plus 1%. It believes that it can operate a profitable private rental business in areas of Britain where land costs are low.
Earlier this year, Liverpool City Council announced ambitious plans to build new 10,000 new council homes. Financing this will prove challenging. With no existing stock, the council lacks collateral or rental income to support new building. A change of national government could unlock direct funding to build and repair the city’s homes but, until then, the patchwork of alternative housing models rising from the ruins of Pathfinder provide glimpses of alternative housing futures made possible where land is cheap.