UK: Land Value Capture – A Potential Solution To Housing And Infrastructure Delivery?

Last Updated: 12 September 2018
Article by Victoria Lane

Following publication of its report at the end of May, the Scottish Land Commission is currently exploring different models of land value capture to finance investment in enabling infrastructure and, in turn, encouraging development particularly in the housing sector.

LVC is a principle, reflecting the idea that increases in land values attributable to society – for example the grant of planning permission, upgrades to infrastructure or external investment – should be shared so as to benefit society as a whole; the belief being that landowners and developers currently benefit from the uplift in value.

The concept of LVC is not exactly new, having featured intermittently in government policy since the end of the Second World War.

Current system – 1) Taxation

At present, land value is already captured indirectly through the various strands of taxation: broadly, capital gains tax and corporation tax apply to increases in value when land is disposed of by individuals and companies respectively; purchasers of land are required to pay land and buildings transaction tax based on the price paid; and occupiers of property are required to pay either council tax or business rates.

Current system – 2) Impact of development

In addition to taxation, the planning system involves developers paying contributions through Section 75 agreements, to off-set the impacts of individual developments, rather than sharing in the increase in the value of the land. It has the disadvantage that the contributions can only be used to fund the infrastructure required to service the development, as illustrated in the Elsick decision and the contributions payable by many developments in Edinburgh towards the tram.

In England and Wales, Community Infrastructure Levy (CIL) has been in force since April 2010. It operates as a tariff system requiring payments to be made towards infrastructure and the impacts of development generally, based on the site and type of development.

There is an infrastructure levy proposal in the Planning (Scotland) Bill. Unfortunately the Scottish Government has side-stepped any real grappling with the issues by including enabling provisions but with no further detail about how such a levy will operate.

Key issues

The concern about delivery of enough sites for housing development is a key issue underpinning the Planning Bill.

The challenge for any LVC system is to ensure that it does not inhibit the supply of sites for development.

Designing a LVC system

The system needs to ensure that:

  • Individual sites from which value is captured remain viable but not "undertaxed";
  • There is still sufficient incentive at a market level for landowners and developers to bring forward sites, rather than sitting tight and waiting for a more favourable political regime; and
  • Calculation and collection mechanisms are accurate enough to be effective but not to the extent that they cost more to operate than is levied.

Local v. National

As land values are subject to great variation geographically, with little or no increased land value to capture in some areas, this points to a need for redistribution at a regional or national level of any value captured.

At the same time, such variation in land values also suggests that the system for calculating the amount of uplift would require to be done locally to avoid the criticisms that have been levelled at CIL, namely that the setting of rates to date has failed to exploit the value in high-end developments but has also excluded lower value developments so that they make no CIL contribution at all.

A fully effective system for LVC is therefore likely to be both expensive to operate and maintain if it is to capture land value accurately and proportionately.

Who's to pay and when

To be fair and effective, a LVC system has to resolve the issue of who pays and when:

  • The landowner at the grant of planning permission?
  • The developer at commencement or completion of development?
  • The seller at each subsequent sale of a property on the second-hand market?
  • The business occupier who extended their premises – should they pay at the point their profits increase from the expansion in their business?
  • New or increased forms of taxation on landowners – based on land area, or with separate regimes for land use and built development, or delayed payments for asset-rich, cash poor landowners?

Acquisition of land at existing use value

An alternative approach being mooted is to allow the compulsory purchase of land by local authorities at existing use value, removing the current requirement to take account of development potential.

The land value capture would then be achieved by the local authority, obtaining planning permission and developing or selling the site. Landowners may then be incentivised to part with sites, rather than waiting for political change and risking being CPO'd in the meantime. However, it could encourage landowners to oppose any CPO, in the hope of achieving a sale to a developer at a higher value. The Compulsory Purchase Association has reservations about such an approach and its significant limitations if there is to be no capture of land value arising from sales on the private market.


It seems, then, that what we are seeking for is a 'Goldilocks' system of LVC: one that captures just the right amount of value, wielding just the right amount of local or central government power and leaving just the right amount of viability to ensure that houses and supporting infrastructure are actually built.

The remit of the Scottish Land Commission is to recommend changes to laws and practices. Whether their proposals for LVC will be taken forward remains to be seen. If such a "system" were to be adopted, lessons must be learned from difficulties experienced with previous schemes of LVC and the limited success of CIL in England and Wales, the margin for error is certainly a small one.

The Commission is "engaging with partners from both the public sector and the development industry to try to identify collaborative approaches that will work. Now is the time to engage and be heard.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions