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Inflated land prices are preventing the government from achieving its targets for building new social housing, according to a study.
Since the 1960s, local authorities buying land under compulsory purchase orders have had to pay inflated prices, offering a premium to landowners, including farmers.
Removing the premium and getting help from developers could help reduce the cost of building social housing by a quarter, or £4.5bn for the 90,000 social homes England needs a year.
The move would help places with the longest waiting lists the most, including London and the south-east, the New Economics Foundation said.
Cropland or other undeveloped land with planning permission is worth many times more than green belt land. When land is purchased speculatively for a premium, and the buyer believes he will get that permission, the premium is called expected value. The value of hope may increase as permission to build becomes more likely to be obtained.
But until the land is purchased by a local authority, probably while it is still protected, it is not worth any more, so the premium should not be paid, researchers said.
Alex Diner, senior researcher at the New Economics Foundation (NEF), said: “With record levels of homelessness, rising private rents and growing 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 its plans are blocked by unfair land rules. These rules must be reformed so the country can build the homes we need while offering homeowners fair and reasonable prices for their land.
“It is vital to continue reforming the 'value of hope' rule to ensure the government meets its housing targets, builds the homes we need and tackles the housing crisis..”
It comes as the government considers banning other bonuses for landowners, including marriage value, where a building owner receives a higher payment for extending leases on flats or houses with less than 80 years remaining.
The Freehold and Tenancy Reform Act 2024 proposes to abolish the value of marriage and cap land rents, although it is not yet law.
Charities, the National Housing Federation and a panel of MPs have suggested a target of building 90,000 new social homes a year over the next decade as part of a plan to help ease the housing crisis, which is making House prices fall further for many people.
While social housing is reserved for the lowest paid, building more will put less pressure on private housing stock.
In England, according to the Office for National Statistics, workers could expect to spend 8.3 times their wages on buying a home last year. A multiple of five times earnings is considered affordable.
Homes have cost more than five times income for more than 20 years, largely driven by rising house prices.
The government has been contacted for comment.
