We now move to the second short debate, and I call on Vikki Howells to talk about the subject that she has chosen.

Thank you, acting Presiding Officer.

For my short debate, I want to consider the problems caused by land banking. I will explore how the Welsh Government’s proposals for a vacant land tax could tackle these, and I will use examples from my constituency to illustrate what may seem like elevated principles of land ownership and finance. I'll also be giving a minute of my time to David Melding.

What is land banking? One definition of land banking is the practice of buying land as an investment, holding it for future use and making no specific plans for its development. The Cambridge Dictionary suggests the motivation behind this. Its definition describes land banking as a way of making a profit by buying land. It is then sold at a much higher price for development. A leading property development website notes that land banking is a

'strategy used by many professional property developers'.

Sites are banked so developers ensure

'they have a sufficient stock of land for future property developments'.

Stockpiling land in this way

'has helped many developers make big profits in a rising market'.

On a smaller scale, brownfield sites and buildings in a dilapidated condition are held by other developers for the same purpose of speculative profit. 

Land banking can indeed be profitable to those individuals and companies who can afford it, but its wider impact on society is negative in the extreme. For a start, there is the basic principle of land that could be used for beneficial purposes being hoarded. For example, housing. We've had many well-rehearsed debates in this Assembly on the housing shortages we face as a nation. We know we may need as many as 12,000 new homes each year. The Welsh Government has allocated £1.3 billion over this Assembly term to support the delivery of 20,000 affordable homes. Social housing is increasing, although nowhere near fast enough to address demand, and land that is being banked is land that is not being used to meet this need. 

The Welsh Government has suggested that 25 per cent of land identified in LDPs for housing actually has no activity taking place on it. The WLGA notes that nearly 11,000 homes across Wales that have been given planning permission are not being built. Figures from the Office of Fair Trading suggest that 82 per cent of land held by developers lacks planning permission. These are staggering figures, but, moreover, ones with very human consequences, in terms of people living in inadequate or unsuitable housing, or even lacking a home altogether. 

Land banking can also prevent land being used for economic development, or for our public services, or for leisure and recreational opportunities. In addition, we must recognise the impact on the lives of those living alongside land banked areas. This is particularly the case where we are referring to derelict brownfield sites that can be in a truly abysmal condition.

I hosted an event for the Land Trust recently, and they explored some of the effects on a community of living next to these derelict urban sites where the owner simply cannot be bothered. Living next to a derelict site can affect well-being. It can cause mental and physical ill health. It can stimulate anti-social activities and nurture problem behaviour. In addition to being an eyesore, it can, at its most dramatic, fuel community break down.

I have seen the impact of land banking first-hand in parts of the Cynon Valley, the constituency I grew up in and now represent. I would like to quote one of my constituents, living next to such a site:

'After 11 years of hell from a land owner next to my property I am horrified to discover that there is no protection for those who have to endure endless problems that affect quality of life, health, damage to property and the effect on the value of surrounding properties.'

To highlight the point I am making, I would now like to show a brief film containing footage of four such sites in my constituency.

An audio-visual presentation was shown. 

My thanks to Clixx Photography of Aberdare for their work in putting the film together. The first site, and in many ways the most prominent site, is the Phurnacite site. Located in Abercwmboi, this is spread over a huge 168 acres. The sharp-eyed amongst you may have noticed the football pitch on the right hand side of the screen a few seconds in. I think that usefully shows the scale of the land we are talking about. It is also literally in the heart of my constituency, a doughnut-like hole in the centre of Cynon.

For 50 years, until its closure and demolition in 1991, the Phurnacite produced smokeless fuel in the form of briquettes. At its peak, it was producing over a million of these annually. Changes in consumption saw the closure of the Phurnacite, but not before it had inflicted intolerable damage on the health of its workforce and neighbours, and on the local environment. Yet, reclamation works in the last decade mean it is now a key strategic site for Rhondda Cynon Taf. Ambitious proposals for housing, recreational facilities and infrastructure have been discussed. But, 27 years on, this privately owned site remains unused and unappreciated.

The second site in the footage is the former workmen's hall and institute in Abercynon. Belonging to the golden age of workmen's clubs, this was opened in 1905. Locally designed and constructed, its four-storeyed frontage once towered over the local skyline. The building was demolished, like many of its era, after a fire in the 1990s. Two decades later, its footprint remains at the centre of a network of Valleys terraced streets, as the video showed. Yet it's owned by an absentee landlord, who, unlike local residents, doesn't have to live next to this derelict site, day after day, year after year.

A similar situation is found in the third clip, where disused land also lies like a chalk outline at a crime scene. It is right in the centre of Mountain Ash on Oxford Street, adjacent to the focal point statue of Guto Nyth Brân. A derelict eyesore building was pulled down there around a decade ago, but the disused site remains. The local authority has even had to install railings around the plot for safety reasons. However, the owner refuses to sell the site, despite appeals from RCT.

The final site in my video is the former Aberdare hospital. This opened in 1917 and in due course treated thousands of patients each year. The old hospital site was handed over for demolition in 2012, its services replaced by the state-of-the-art Ysbyty Cwm Cynon. Despite the land being allocated for housing in the LDP and bought by a developer who said they intended to use it as such, you may have noticed it is currently home to a flock of sheep, which I think is quite symbolic.

I think these sites also highlight some of the problems caused by land banking that I mentioned earlier. I'm going to focus on the first site, the former Phurnacite site, to illustrate this. Firstly, the site being kept in its present condition stops it being redeveloped. That means that 500 new homes cannot be built. This means that plans to develop land for economic purposes and to provide a new primary school cannot be pursued. This means the vision of new recreational facilities, including reclaimed lakes, cannot be realised. But the poor condition of the site is also having very real impacts on the well-being of the local community. I am indebted to local ward councillor Tina Williams who told me about some of these. There are public health issues from vermin, there are infrastructure challenges on back lanes, there are antisocial issues, with fly-tipping and trespassing on the site—all impacting on the well-being of local residents.

Having sketched out some of the problems of land banking, I now want to turn to solutions. In Germany, the value of land is frozen after planning authorities specify an area for residential construction. Public or community land banks that acquire land at existing values can achieve similar outcomes. But I want to suggest today that the Welsh Government’s proposals for a vacant land tax offer the solution that we need.

This is incredibly exciting. These plans will, firstly, allow us to test our new tax-raising powers, to devise new, innovative made-in-Wales taxes to develop the problems that our communities are facing—not just to raise money, which will always be welcome to invest in our cherished public services, but to change behaviour and build a better Wales. Secondly, the vacant land tax should work to remedy exactly those problems I have described. As the Cabinet Secretary for Finance said:

'We can all of us imagine what it must be like to be left living somewhere where, all around you, buildings are not occupied, where fly-tipping is taking place, and where there is no sense at all that the place that you lived in is loved or has a positive future.'

Tackling urban dereliction and making it right for local communities is something this tax could achieve. Moreover, it would diminish the incentives to buy land for speculative purposes, making it more expensive to hoard and encourage efficient land use instead. The Welsh Government’s proposals are straightforward. Planning authorities would establish a register of vacant land. After a year's registration, a levy will apply. Collected annually by local planning authorities, it will be set as a percentage of the value of the site. The first-year levy will be 3 per cent, rising to 7 per cent in the second year. The scheme will be cost neutral and money left over will be channelled into regeneration to address some of the issues land banking has caused. Quite simply, the land tax will make it more expensive to hold on to land that has been identified as suitable for development.

I know that the Welsh Government's position is that the definition of vacant land will be key to both the operation of the tax and achieving the policy effect. Efforts are being made to avoid unintended consequences and further work will need to be undertaken to define vacant land in the Welsh context. Thought will also need to be given to those cases where barriers prevent developers taking forward their plans. I know the Cabinet Secretary for Finance has responded to this point in a previous Plenary session. As he said, the vacant land tax will apply when no effort is being made to bring land into purposeful use. It will not be used to penalise people who are working hard to make use of the permissions that have been granted. At this point, although the Cabinet Secretary cannot be with us today, I want to pay tribute to his vision and that of his team in taking this forward.

One of the strengths of the vacant land tax is that we would not be the first nation to use this as a solution. I know the example of the Republic of Ireland is often cited, though I do note comments from Fianna Fáil that the Irish rate should be doubled. We must make sure that any tax is set at the appropriate level to achieve the change we want. The UK Government has also spoken of going to war with land bankers, and there have been talks around 'use it or lose it’ powers in London specifically.

With a powerful consensus emerging behind the idea of a vacant land tax, it is clear that it could offer a workable solution to land banking, which would in turn meet our commitments on this area as set out in the 2016 Welsh Labour manifesto and deliver benefits for the Cynon Valley and for communities across Wales.

Can I thank Vikki Howells for such an excellent use of the short debate? This is exactly what we should be discussing, and made more vivid still by that excellent film. This is a really important issue, Cabinet Secretary. There is cross-party consensus. We need to build more, as Vikki outlined. And can I just say that I think there is a mood across the UK, and just remind you that yesterday the Chancellor in his spring statement did report on Sir Oliver Letwin's work to look at the building rate in the housing market? Whilst Oliver Letwin has identified a range of issues—a web of commercial and industrial constraints, as he put it, including the availability of skilled labour, the limited availability of capital, sometimes, and local transport infrastructure and other reasons—he did say none of these appears to be primary. We have a really fundamental issue about land supply and we need to take more control of this ourselves. A tax mechanism may be the way; I'm open to considerations. But, when land is identified to be built on, it should be built quickly, with the huge social need for housing and, as Vikki so ably demonstrated, it has a big impact on communities. Twenty five, 30 years we'll be waiting with some of these sites, when there could be wonderful family homes or a range of homes in great sites in the Cynon Valley. I really think we need action, and I do welcome the intention of the Welsh Government to act in this area.  

Thank you. I call on the leader of the house to reply to the debate. 

Diolch. I very much want to thank Vikki Howells for bringing this debate forward today, and for David Melding's contribution, with which I completely agree. Holding land for no reason other than to profit from rising land values is clearly unacceptable given a shortage of good land for housing and a number of other beneficial uses that Members have pointed out. The debate today has highlighted some of the consequences of land that could be put to productive use being left idle. Not only does it deny us realising the opportunity the land could fulfil to provide much-needed housing or to contribute to economic prosperity, but it can, as Vikki's film ably demonstrated, further blight communities, contributing to anti-social behaviour as well as mental and physical ill health for those who live nearby. 

The problem we have debated today is not unique to Wales, as everyone's pointed out. This is an issue across the UK, and earlier this month the Prime Minister announced changes to the English planning system in order to improve the supply of housing. The UK proposals stop short of additional specific mechanisms, but we'll be monitoring developments to take full account of any potential cross-border effects. The Chancellor did actually elaborate a little yesterday in some of the things that he said as well. 

In Wales, the Cabinet Secretary for Energy, Planning and Rural Affairs is currently consulting on a revised draft of national planning policy, which aims to ensure viability and deliverability issues are more effectively incorporated into the beginning of the local development plan process, something that recent research has identified as a critical factor in sites coming forward for development. But we are also going further in looking at levers beyond planning policy to address this issue. The devolution of tax powers provides a real opportunity for us to think innovatively about how tax can be used to help us achieve our objectives for Wales. This can be through change in behaviours, raising revenue to invest in public services, or both. Taxation is an important lever, and it's right we now consider how to make the best use of our new powers over taxation. 

With the first Welsh taxes being collected from April, we've given a lot of time and consideration to ensuring these taxes meet the needs and priorities of Wales. As we develop our taxation system, we need to look beyond the opportunities these first devolved taxes provide. That is why, last year, the Cabinet Secretary for Finance started a conversation with the Welsh public about new taxes in Wales. Since beginning that conversation with a debate in this Chamber, we've been encouraged by how widely the people of Wales have engaged, and the number of new ideas for new taxes that have come forward.

One of those ideas was a vacant land tax, and, last month, the Cabinet Secretary for Finance announced he would be taking forward this idea to test the Wales Act 2017 mechanism for devolving new taxes, and I know he's had a number of conversations with you, Vikki, about that as well. By increasing the cost of holding on to land that is suitable for development, a vacant land tax could help change the balance of incentives to encourage development. The purpose of a vacant land tax would be to drive behaviour change, rather than to generate additional revenue. In seeking to bring forward development on vacant land, it is right we explore all the levers available to us, including tax.

As Vikki pointed out, the Republic of Ireland has recently introduced a vacant sites levy to address the issues we also want to address in Wales, and provides a useful reference point for how a vacant land tax might work in Wales. Under this model, once an eligible site has been vacant for one year, it's registered by the relevant local authority. If no meaningful development is then undertaken within a further 12 months, the levy is applied and collected annually in respect of the previous year until development begins. In the case of the republic, the vacant sites levy applies to land identified as suitable for development for housing and regeneration. In developing a vacant land tax for Wales, we will want to explore how it could help to deliver both housing and regeneration objectives. Indeed, Vikki, I think you mentioned leisure and tourism objectives as well, which we definitely want to look at.

We are not looking to penalise those who are actively developing within the timescales of the normal process, nor those who are prevented from development by issues such as contamination. We are specifically looking to address the issue we've discussed today of landowners relying on the market to increase prices and cash in on the unearned increase in land value. To achieve our policy aims, we'll need to carefully consider how such a tax would be set and structured, and we're working with stakeholders to design an approach to taxation that will de-incentivise the behaviours we don't want without unintended consequences.

However, we can't consider introducing the vacant land tax without the powers first being transferred to the Assembly. The Wales Act process is, quite rightly, not quick or easy. Now the Cabinet Secretary for Finance has agreed with the Chief Secretary to the Treasury—lots of secretaries here—how this process will work in practice. So, he will be writing to the Financial Secretary to the Treasury to begin that process. Once competence for a vacant land tax has been devolved, the Cabinet Secretary for Finance will then continue to work with stakeholders to develop detailed policy proposals for scrutiny by this Assembly.

Not all land-banking behaviour relates to vacant sites. The Cabinet Secretary for Finance is embarking on a wider debate about land value tax and whether this way of raising revenue could be applied to existing property taxes in Wales—for example, local taxes. A number of other countries have experimented with local taxes based on some measure of land value, but the administrative implications have in the past prevented progress. 

I have to say that in my own constituency of Swansea it's not often that the land is actually vacant, but it's occupied by buildings that have been allowed to decay to past the point of renovation and are absolute eyesores and have all of the same problems as actual vacant land but have a number of other issues. So, we have a large number of private investors who've invested in old and sometimes historic buildings who then just sit on them, and one such is right in the middle of Swansea city centre and has been for a number of years completely derelict, with all stuff growing out of it, and the investor refuses to sell on the basis that, eventually, it will gain value. So, I have a particular constituency interest in seeing how we can extend that into bringing derelict buildings back into beneficial use as well.

So, over the course of the Assembly, the Cabinet Secretary for Finance is going to test the feasibility of a land value tax as a potential replacement for non-domestic rates. The Cabinet Secretary will look to publish an assessment of this to inform the wider debate ahead of and beyond the next Assembly. It is, as David Melding said, debates such as this that really get these ideas out onto the floor where we can really have a look at them well. Diolch.

Thank you very much, and that brings today's proceedings to a close.

The meeting ended at 18:28.