Understanding the geography of affordable housing provided through land value capture: Evidence from England

Alexander Lord,Chi-Wan Cheang,Richard Dunning

doi:10.1177/0042098021998893

Abstract

Governments the world over routinely undertake Land Value Capture (LVC) to recover some (or all) of the uplift in land values arising from the right to develop in order to fund infrastructure and public goods. Instruments to exact LVC are diverse but are usually implemented independently. However, since 2011 England has been experimenting with a dual approach to LVC, applying both a tariff-style levy to fund local infrastructure (the Community Infrastructure Levy) and negotiated obligations, used primarily to fund affordable housing (Section 106 agreements). In this article we employ a difference-in-differences (DID) method to identify the interaction of these two instruments available to local planning authorities. We explore the question of whether the Community Infrastructure Levy ‘crowds out’ affordable housing secured through Section 106 planning agreements. In so doing we show that the interaction of these two approaches is heterogeneous across local authorities of different types. This raises questions for understanding the economic geography of development activity and the theory and practice of Land Value Capture.

Highlights

Inflation in residential real estate prices has become a hallmark of urban life for many citizens the world over
This state– market interaction is a common feature of polities the world over and, the economic mechanism differs from context to context, the underlying principle remains the same: for a private developer to deliver new housing at market rates there will often be a statutory requirement for this profitorientated activity to be accompanied with social, environmental and economic public goods
In some areas the existence of Community Infrastructure Levy (CIL) has provided an additional mechanism by which Land Value Capture (LVC) can be exacted

Summary

Introduction

Inflation in residential real estate prices has become a hallmark of urban life for many citizens the world over. The average treatment effect in Model [1] shows that CIL-charging LPAs on average were able to secure six more units of S106-funded affordable housing after adopting CIL. The result in Model [2] provides a detailed breakdown of the impact of CIL on affordable housing across all ten groups of LPAs by the level of development viability present in the local authority areas (as measured by average house prices).

Results

Conclusion