Why the success of the 12 new towns will hinge on how we treat land value

I welcome the ambition behind the new towns programme. A dozen large-scale settlements, each with at least 10,000 homes, should unlock real capacity for housing, including a substantial number of social and affordable homes. On some estimates, the programme could support up to 48,000 new affordable units.

From a policy perspective, that is exactly the kind of scale that is needed to meet the government’s ‘challenging’ 1.5 million homes target. However, I also work closely with landowners and from their perspective, the question is more complex: will the new towns programme create a meaningful opportunity, or do the timeframes and potential upside make them sufficiently attractive?

The answer will depend less on the headline ambition, and the viability and ultimately their success will depend more on the detail of affordable housing expectations, compulsory purchase and land value capture.

 

Affordable housing and the shrinking residual

We already know that the new towns will not be low-obligation projects. In addition to significant infrastructure requirements, high levels of affordable housing are required: 40 per cent as a base assumption in many strategic locations and even higher proportions in or around the Green Belt. These requirements sit alongside increased requirements for homes for social rent, increased infrastructure contributions, biodiversity net gain and higher construction costs.

This creates real pressure on viability, which is exacerbated by rising build and finance costs since Covid with housebuilders struggling to progress schemes where sales values fall below £300 per sq ft. Even on high value areas in parts of the South East, viability is an issue for sites with high affordable housing provision, infrastructure and CIL rates as well as other planning costs. In marginal markets, the numbers already look tight. When residual values fall below a landowner’s aspirations, sites will not come forward, however necessary the need for more homes.

So there is a considerable risk in relation to the roll-out of new towns that too many expectations are placed on to each hectare and that landowners are reluctant to sell.  If the financial upside is too low and the timeframes are too long, then this will mean that large sites will fail to deliver.

 

Land assembly: partnership or compulsion

Land assembly is already one of the hardest parts of bringing forward strategic sites. Farmers and other landowners are being asked to part with their primary asset in a context where tax and regulation often move against them. Changes to Agricultural Property Relief on Inheritance Tax from April 2026, for example, will see the first £1 million of qualifying assets remain exempt, with anything above taxed at 20 per cent. For farms valued above that threshold, this is another disincentive to sell.

Furthermore, use of compulsory purchase – enabling land to be acquired at a “fair” value rather than at a price that reflects hope value – is already causing consternation, with landowners asking: fair to whom?

If landowners perceive that they are required to sell at a discount that ignores planning potential, confidence will erode further. And for new towns, the government will need to incentivise landowners to be active partners, not reluctant participants engaged in long legal disputes.

 

BNG and costs: constraint or opportunity

Biodiversity net gain sits alongside these issues. A mandatory minimum 10 per cent uplift – with some authorities already expecting more can constrain the quantum of developable land and increase upfront costs.

However, on larger, strategic sites, BNG does not need to be a pure cost. At LRG we see schemes where well planned green infrastructure, woodland, SANG provision and high quality open space have contributed to stronger values and faster absorption. Masterplanning that treats nature as core infrastructure creates long-term value, but it requires careful thought at the outset and a realistic understanding of how much the residual land value can absorb.

If BNG expectations sit on top of already stretched affordable housing and infrastructure requirements, with little flexibility to adjust in lower value markets, then once again it will be land value that gives way.

 

Land value capture: how much is too much?

The concept of capturing value from developing land  is not new. Section 106, CIL, affordable housing provision, capital gains tax and stamp duty already capture a significant share of uplift for the public purse. The current debate is about how far that can and should go in a new towns context.

There is a spectrum of options, from relatively modest reform of local levies to more radical land value taxation. What matters for landowners is certainty and proportionality. A model that replaces CIL and much of Section 106 with a clear, locally calibrated levy, aligned to evidence on values and viability, could give both landowners and developers more clarity. A poorly designed tax, layered on top of existing obligations, would simply delay land sales.

Previous attempts to run flat-rate levies shows how hard it is to account for the huge variation in land values between, say, the South East and parts of the North and Midlands. If the new towns programme is to depend on enhanced land value capture, it must also recognise that, in some locations, land values cannot carry both high taxation and high policy expectations without undermining deliverability.  Sensible phasing is also fundamental if a scheme is going to deliver.

 

Planning ahead: how landowners can protect value

This is not to say that, for landowners, there is no upside in the new towns programme. Quite the opposite. Where land is well located relative to the emerging new town locations, the combination of strategic planning focus, improved infrastructure and policy priority can create real opportunity though extracting value today is unlikely given the typical timeframes for delivery. 

The key is to plan ahead. That means taking tax advice early, making full use of available reliefs and considering the right ownership structures. It means working with experienced strategic land teams and developers that understand how to structure promotion or option agreements so that value can be maximised over a long timescale, rather than crystallised in a rush. Also understanding how to use tenure mix, BTR, employment land and energy and environmental solutions to strengthen the value of a proposition before disposal.

In my experience, landowners who have a clear understanding, are realistic in their expectations and whom engage early with planning policy, understand the likely trajectory of a location and are realistic about the balance between public benefit and private return are still able to secure strong outcomes, even in a more demanding policy environment.

 

A programme that needs landowners on side

So will the twelve new towns provide an opportunity for landowners or penalise them further? At present, there is a risk that the combined effect of higher affordable housing expectations, broader use of compulsory purchase, enhanced BNG and emerging land value capture mechanisms could threaten the delivery of new towns.

For the new towns to succeed, the government will need think carefully about the application of these tools. As we have seen in London, over-onerous affordable housing targets can stall development completely: to deliver more affordable housing, sometimes it’s necessary to ask for less.

New towns will only move from concept to construction when landowners, promoters, developers and the public sector share a clear view that the balance is fair. Landowners do not expect to capture all of the uplift from development, but they do need sufficient incentive to bring land forward.