Why are we here? Housing nobody can afford, wages that never catch up, debt everywhere, towns that thrive while others are left behind. It all looks like a tangle of problems far too big to fix. But really it comes down to one thing. We sold the land forever. Land was never ours to sell for good. It's a gift we share and pass on, and selling it off for all time goes against nature and against God. Almost everything else follows from that one mistake.
There is a remedy, and nobody has to be forced into it: the elective Location Value Covenant. Anyone who wants it can take it, and anyone who doesn't can keep the title they've got. If people decide against it, then so be it. We'll simply have chosen to keep struggling.
A follow-on to The Earth Sold Forever. The full policy detail is at locationvaluecovenants.org.uk.
So here's the idea in a nutshell. We don't have to take anyone's freehold away to stop selling the earth forever. We just make people an offer. If switching to a Location Value Covenant works better for you, you take it. If it doesn't, you keep exactly what you've got. Because nobody's forced, the last big roadblock, the fierce resistance of people who already hold title, simply isn't there.
Last time I said the permanent sale of land was a choice, and that we could choose differently. Fair enough, you might say, but how? Every time someone suggests a land value tax, homeowners hear "they're coming for my house", and honestly, who can blame them? You bought your home with money you'd already paid tax on, you've got a mortgage, maybe the kids are counting on it one day. A new compulsory bill on top of all that feels like a raid. And it's not just households. Banks have lent against those titles, pension funds hold the debt, and councils depend on the current set-up. Pull at one thread and the whole jumper starts to unravel.
So I don't pull at it. I leave the jumper alone and offer a better one to anyone who wants it.
It works like this. Say you're buying a house, or your mortgage is crushing you, or you're retired and could use some income. Government offers to put in a chunk of capital: towards the purchase, to pay down the mortgage, whatever it is. That money isn't a loan. There's no interest and nothing to pay back. In return, your property carries a continuing payment to the public purse that tracks local location value rather than interest rates. That's the covenant. You get something valuable now, and the community gets a share of the location value it creates, for good.
Here's the clever bit, if I can call it that. You'd only sign if it made you better off. Someone who'd rather keep a conventional mortgage just does. Nobody gets a surprise bill and nobody's land gets valued without their say. But each covenant that's signed moves a little bit of location value back to the community, one willing household at a time. That's the transition. No revolution. Just a better deal sitting on the table until enough people take it.
Right, let me fill in the detail.
How the Location Value Covenant works
A Location Value Covenant (LVC) is a voluntary contract between a property owner and government. In exchange for reducing or replacing mortgage debt, settling another property-related liability, or providing some other public value, the owner accepts a continuing payment attached to the property.
There are three things to grasp:
- The opening payment is agreed in the deal. It's set from the public contribution as part of the transaction. It doesn't need anyone to value the individual plot, or to split the house from the land.
- After that, it moves with local location value. Each year the payment is adjusted using a published local index of comparative location rental value. The policy site proposes a National Location Value Register that does this postcode by postcode. Simply put, the new payment is the original payment multiplied by how much that location's index has moved.
- It stays with the property. A future buyer sees the covenant before they buy, pays a correspondingly lower price, and takes on the payments. They're choosing too.
The payments go to public purposes rather than to a commercial bank as interest. As take-up grows, that revenue can be used to cut other taxes, especially taxes on work, enterprise and building.
Why it has to be elective
This is the heart of it. A land value tax starts with compulsion: the state assesses your land and sends you a bill. An LVC starts with consent: government offers something of value, and you decide whether the exchange is worth it.
That one difference changes the politics completely. Existing title holders aren't threatened, so they've no reason to fight. Nobody loses a windfall they were counting on, and nobody has to pay a charge they never agreed to. People who don't take part are left exactly where they were. The only thing that changes for them is that there's one more option on the table.
It's also why I think we can stop arguing about whether perpetual title is just. We don't have to settle that argument before we start. We only have to offer a better arrangement and let people pick it.
What happens to existing owners, mortgages and lenders
If you do nothing, nothing happens. Your freehold, your mortgage and your bank relationship all carry on as before.
If you opt in when you buy, the public contribution replaces part of the mortgage you'd otherwise need. The policy site's illustrative example is a £300,000 house bought with a £60,000 deposit. Instead of a £240,000 bank loan, the buyer takes a £120,000 loan and a £120,000 public contribution. Their combined monthly outgoings come out lower, even after the covenant payment. The bank does the paperwork, government pays its contribution through the bank on completion, and the covenant is registered.
If you're struggling with your mortgage, a rescue version settles an agreed part of the debt with the lender in exchange for a covenant. That cuts monthly payments and can clear negative equity, which means fewer repossessions and forced sales.
Lenders keep the customer. They lend less, but at a lower loan-to-value, with less risk of default and negative equity. The site is honest about the trade-off: banks earn interest on a smaller loan. What they get back is a safer book and fewer losses.
The wider system isn't shocked. Adoption happens deal by deal and is designed to fit existing property and banking processes, so there's no overnight change for banks, borrowers or the property market. If the public contributions are funded from existing long-term savings, for example through gilts bought by pension funds and insurers, the LVC replaces bank-created mortgage credit instead of adding to it. That means less household leverage, and a gentle brake on property-driven inflation rather than more fuel for it.
Why opting in can be better for the holder
Look at it from the kitchen table. With an LVC you need a smaller mortgage, your monthly costs are lower, and your payments track local rental value instead of whatever the Bank of England does next month. You're far less exposed to interest-rate shocks, negative equity and repossession.
There's a price, of course, and I'd rather be straight about it. Because the next buyer takes on the covenant, your property sells for less, and you share less in any rise in land prices. So the LVC suits people who value lower costs and resilience now more than a speculative gain later. For a lot of families that's an easy call. For some it isn't, and that's exactly why it's a choice.
The same idea stretches well beyond buying a home. The policy site sets out uses including equity release for a retirement income, settling inheritance tax without a forced sale, keeping family farms whole, funding new-build homes so the builder is paid in full, and financing improvements, brownfield remediation and empty homes. Each one is an offer to someone who has a real problem to solve.
How it spreads over time
Think of it as a ratchet that only turns one way, and only when someone chooses to turn it. Every covenant that gets signed brings a bit more location value back into public hands. And because covenants pass to future buyers, they last. Property changes hands all the time, so the number of covenants can keep growing steadily without anyone being pushed.
As the revenue builds up, it can pay for cuts in taxes on productive activity. The site's national model suggests this starts from the bottom up: places on the margin, where taxes currently tip viable work into a loss, become workable first. That eases the squeeze on the expensive centres and gives people real alternatives to them. It brings us back to everything I described last time: housing costs falling relative to wages, public investment that pays its way, and less of a fight over who belongs where.
What about councils? Today they rely on the existing tax base, and they keep it. The Property Tax Substitution application proposes a single location-linked payment that could replace several property-related taxes for those who opt in. In the register's annual process, council officers review flagged locations before anything is published. Exactly how covenant revenue would be shared between national and local government is a design question for implementation. But councils don't lose their current income on day one, because nobody is forced to switch.
Objections and answers
"It's a land value tax by the back door." No. A tax is compulsory and an LVC is a contract you're free to turn down. And because the payment follows a location index, the extension you build or the boiler you replace doesn't raise it.
"It's permanent. Isn't that a trap?" Yes, it's a real, ongoing obligation, and it has to be disclosed and reflected in the price. That's precisely why it should only ever be entered by consent, with the trade-off spelt out.
"What if I can't pay?" On the blog I've argued that it must never become a back door to dispossession. For owner-occupiers hit by job loss, illness or bereavement, payments should be reduced, suspended or deferred and settled on sale, not used to force anyone out.
"Won't it just pump up house prices?" Not if it's designed properly. The public contribution has to replace mortgage borrowing pound for pound, not add to the buyer's budget. Done that way, it means less new credit chasing the same homes, not more.
"Why would government give money away?" It isn't giving anything away. Unlike a grant, it gets a continuing, index-linked revenue asset in return, and that's where the money for cutting other taxes comes from.
"Who would start it?" Anyone the offer suits: a first-time buyer, a family in negative equity, a pensioner needing income, a farmer facing inheritance tax. That's the point. We don't need a majority to agree on a theory of land. We need some willing households, and a better offer.
The roadblock removed
In the last post I said that making the permanent sale of the earth visible as a choice was the opportunity. This is how we take it. We don't confiscate anything, we don't send anyone a bill, and nobody has to win a vote on the philosophy of property. We leave every existing title alone and put a better deal next to it. Those who prefer the old arrangement keep it. Those who'd be better off switch. And over time, without anyone having to lose, the value the community creates starts to come back to the community.
All the detail, worked examples and the national model are at locationvaluecovenants.org.uk. Figures quoted here are the site's illustrations of the mechanism, not financial advice.