Thursday 12 January 2012

Psst! Two 149-acre farms with planning for sale, going cheap!

From yesterday's FT, more HS2 tomfoolery:

The Department for Transport estimates 338 homes will have to be demolished to create the line, about two-thirds of which are in Euston...

Right, so they are going to have to displace 225 households in north/central London, pay up, move on.

Meanwhile, Knight Frank, the property services group, estimates that more than 800 houses – 250 of which are in the top bracket for council tax – along the 140-mile stretch of railway will suffer some kind of adverse impact. James Del Mar, head of Knight Frank’s HS2 team, says it is impossible to quantify the impact the project will have on property values along the route, as compensation for land affected will not be granted until 2015...

Somebody somewhere is missing a right old trick here.

Ninety-five per cent of the route is through open countryside, which is why there are only 113 houses which will have to be demolished and 800 which will "suffer an adverse impact". Let's say the houses were worth £600,000 and halve in value to £300,000. The government could bung them all £600,000 compo, total cost £548 million, about two per cent of the total cost of HS2 (before inevitable cost over-runs) and tell them to lump it.

Or The Man From The Ministry could wise up and realise that what's being affected here is purely the location value of those houses, and, seeing as those houses are in The Hallowed Green Belt, the scarcity value - it is nigh impossible to get planning for a new house in the affected areas. So the £600,000 value consisted of £150,000 rebuild cost/value of the building and £450,000 location/scarcity value of the planning permission (which has now fallen by two-thirds).

Therefore, the correct strategy from the point of view of the government (on behalf of the taxpayer as well as on behalf of those affected) would be to grant each and every single affected owner the personal right to build a carbon copy of their house anywhere they wish within a 2-mile radius of their old home. Once they have tracked down farmers who'll sell them the required bits of agricultural land for a few thousand quid (land without planning permission is dirt cheap), the government can then build a carbon copy of their old house for £150,000 and do a straight swap, old-for-new. They can even chuck in a free removal service and get the local Lord Mayor to bring them some champagne and flowers.

The total cost of this exercise is thus £137 million (913 x £150,000). The income from this exercise is the value of the 800 houses which the government gets in exchange and which are "affected" but don't have to be demolished. At depressed price of £300,000 each, that's still £240 million, which is more than enough to cover the cost of building the carbon copies, with £103 million left over as net profit!

Now, see if you can apply the same logic to sorting out Farmer John:

But at the far end of the line from Euston, in the rolling open countryside around Lichfield, John Barnes is preparing for his family’s 300-acre arable and sheep farm to be sliced in two.

“The railway will literally [sic] cut us in half. We’ll end up with the farm shop on one side of the track and a grain store on the other. Everything in the middle, including our home, will be wiped out,” he says. Mr Barnes, who also puts on weddings and runs a farm shop, says he fears for his children. “Whatever happens, it is blighted now and is unsaleable. But it is the next generation I am worried about; this place has been in my family for 100 years and it is their future that will be affected.”


Additional information: the average English farm is surprisingly small, somewhere in the region of 100 - 150 acres.

6 comments:

Sobers said...

"the average English farm is surprisingly small, somewhere in the region of 100 - 150 acres."

It depends on your definition of 'farm' really. The average land holding per owner may only be that size, but the size of holding required to be commercially viable is considerably bigger. The average is depressed by the large numbers of people who buy an old farmhouse and a bit of land to go with it, and usually rent the land out to a neighbouring 'real' farmer to manage, and by the large numbers of elderly farmers who still own their small farms but usually just rent them out on a short term basis to bigger farmers.

In England I'd be surprised if the average farm business farms less than 500 acres.

Mark Wadsworth said...

S, ta for extra info.

On a purely practical level, to maintain the value of his farm as a single whole, how many crossing points (i.e. tunnels under the railway) would he need? 300 acres would be a square with side 1,200 yards. Would two tunnels be enough?

Alternatively, what's to stop him renting off the western half to one farmer and the eastern half to another? I fail to see how the value of the land has been reduced by more than 1% (i.e. the 12-yard wide strip missing down the middle).

Sobers said...

One crossing point on 300 acres would be sufficient unless his farm was a very funny shape, and a bit of compensation to pay for new farm track to be installed, but thats peanuts compared to the cost of a bridge. If the line is on an embankment across his land, its much cheaper to put in tunnels when you're building it, so a 2 or 3 would be good.

The value as a farm has been reduced though - a 150 acre farm only appeals to the leisure /lifestyle type buyer - City money who wants a 'little place in the county'. As such you need a nice house and buildings to go with it. A commercial farmer wouldn't buy 150 acres unless it was very close to his existing holding. So your potential buyers has been reduced significantly.

To be honest the cheapest solution to compensate such a person would be to give him planning permission for a nice big house away from the railway line on each plot and not give him a bridge. Then he's got two lifestyle farms to sell, plus his original house (which may be blighted itself by being close to the line). Total cost to the taxpayer - zero.

Mark Wadsworth said...

S: "To be honest the cheapest solution... would be to give him planning permission for a nice big house away from the railway line on each plot and not give him a bridge. Then he's got two lifestyle farms to sell, plus his original house (which may be blighted itself by being close to the line). Total cost to the taxpayer - zero."

Well, apart from the fact his original house is to be demolished, that's exactly what I was thinking, hence the post title.

PS, he can still rent off chunks of the two halves to the farmers next door, surely?

Sobers said...

It all depends on the access. If he ends up with a block of land that has no road access, and can only be reached via someone else's land then the cut off section is pretty much worthless without a bridge or tunnel. The only potential buyers would be the neighbours, as they have a ransom over access for any third party buyer, and the only people he can rent it out to are the same neighbours. They have him over a barrel - without their permission he can't even access his own block of land.

If on the other hand both sections of land have road frontage, then the simplest solution is the planning one, plus compensation for his lost house.

Bayard said...

A friend of mine's father owned two farms, which he rented out. Both were sliced in half by the M5. He took the enhanced compensation from the MOT for not having any accommodation tunnels built and then simply redrew the boundaries of the two farms so that there was one each side of the motorway.