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Land tenure

Land for new green towns, and often new green quarters, is usually brought into public ownership, either by agreement or under compulsory purchase powers. The route is:
  • Development Corporation (DC) buys the land freehold at compulsory purchase values.
  • Commercial sites are sold on 99 year leases – providing funding source for infrastructure.
  • Housing sites are not sold, but made available free to builders under contracts requiring the corporation to grant a 3000 year lease of each completed house.
  • The builder can be a self builder, a small builder or a volume house builder, but has to start building on the land in accordance with the DC guidelines within two years and complete within three or the contract lapses.
  • The DC owns the land in perpetuity, and is prevented from selling housing plots by its constitution.
  • The lease provides for the payment of a ground rent for the enjoyment of the land, the value of which remains with the corporation. The ground rent is tied to an appropriate index, so it rises with inflation.
  • The builder sells each completed house to purchasers (or the self-builder completes his house) and calls on the corporation to grant the 3000 year lease. The lease is granted to the purchasers.
  • First-time buyers can be allowed a rent holiday of a number of years, during which they only have to pay mortgage instalments. This gives time for their income(s) to rise and the real cost of their mortgage payments to reduce due to inflation.
  • The house may become forfeit in the event of non-payment of the ground rent, so house owners and their mortgagees must both ensure that this does not happen.
  • When house owners want to move they sell the lease on the open market and the new purchasers then pay the ground rent.
  • The DC borrows against future rental income to fund infrastructure investment.
  • When the DC has repaid the land acquisition costs it is wound up and the ground rents go to the ConnectedCity council to be used for the benefit of the city.
This method:
  • Allows developers and self-builders to begin building immediately, without having to pay for the land or obtain planning permission.
  • Ensures that developers’ profits come from the value added by constructing the dwellings, exactly as a manufacturer’s profit is made.
  • Breaks the link between house prices and land prices, providing a rapid supply of housing.
  • Allows the development corporation, when fixing the ground rent, to share the uplift in value with purchasers and thus make all the housing affordable.
As the ground rents will continually rise with inflation, they are a reliable source of future income against which, even before they become payable, the development corporation can borrow.

Although ConnectedCities prefers the above approach, the principles of which were at the core of Howard’s original thinking, there are similar methods which have been proposed. Co-operative Land Banks (CLBs) own the land, and their shares are distributed to residents pro-rata to the area occupied by their dwelling. Ownership in a dwelling or commercial building takes the form of shares in the CLB and a transferable lease from the CLB. Leases on dwellings are perpetual. Those for other buildings are time-limited.

Residents gain equity in the entire site, not just the area occupied by their dwelling.

The CLB is a company with shares, but there is one vote per resident no matter how many shares they may hold. ‘Pioneer’ homebuyers are issued their share gratis. Later buyers purchase the dwelling from the previous owner and the shares for the land from the CLB.
 
The value of a house in the open freehold market system consists of two elements: land and building. The person who is prepared to pay most for the land gets to build the house. But since the package of land and house together has a fixed value determined by how much potential purchasers can afford, the person who has paid the most for the land has to build the cheapest house.

If the land is removed from the equation builders are no longer competing on how much they will pay for it. Instead they are competing on how attractive a product they can offer for the money which the house purchaser has available after paying land rent.

(click to enlarge)
Land values and their attribution within a new green town.