A relative sent me a link to a newspaper article on property development today.
“If we have a new tax, it must be this” writes Liam Halligan in The Telegraph.
He favours a “supply side” tax on developers to increase house building.
“What would you say to this?” my relative asked. Well, now I’ve fixed a plaster to stem the bleeding caused by banging my head against a wall, I’ll tell her – and you.
For those who can’t be bothered to google the article or would rather eat your own hand than read The Telegraph (not me, I read it), I’ll summarise his article first.
- Despite the predicted slow-down in the housing market, house prices remain high (compared to wages, for example). Home ownership is falling. The best way to decrease prices is to increase supply.
- Help To Buy didn’t work and if anything helped increase prices and disproportionately helped larger developers.
- Small developers are losing market share to large developers (down to just 10 per cent). Smaller developers deliver sites as soon as they get planning as they don’t “land bank” sites to wait for values to increase.
- “Planning gains” (a rise in the value of land when planning permission is granted) are made on agricultural land in particular. Developers should be taxed on this, splitting it 50:50 with local councils to be spent on infrastructure (a “supply side” tax like those on energy companies).
- This would increase housing and lead to a building boom.
There is a lot here to agree with but I’m afraid the conclusion in particular is hopeless nonsense.
In my book, if you are going to deal with a problem, the first rule is to correctly identify that problem and the second is to take action to directly solve it.
Sounds simple, yes? If you’re unblocking a sink, finding the blockage and removing it is simple.
But if you’re trying to solve the housing crisis, it requires a bit more than an hour of swearing and the cunning use of a metal coat hanger.
And the more people who have an opinion, the harder it is to find the right one.
So, what is the real problem here? House prices are high because we don’t build enough houses to cope with demand. In the main, this is true. There are other factors, but we can leave that for another day.
In short, Mr Halligan is right, we do need to increase supply. He is also correct to say Help to Buy didn’t work and that the monopoly of large house builders controlling the market is a negative (although land-banking is something between a complete myth and a massive misunderstanding of the system).
Now we have identified the nub of the problem (not enough new houses and too many being built by the wrong people), how do we solve it?
His answer – to tax developers – is just playing to the public, I’m afraid. Now I know everyone loves a bit of developer bashing but let’s think this through.
If we decide we don’t have enough new drugs for cancer, it makes no sense to say – every time a pharmaceutical company invents a new one – that we should tax the hell out of them for doing so. It doesn’t seem like a great encouragement to succeed, does it.
I also really don’t understand the argument that half the money should be given to local councils to spend on infrastructure.
When planning permission is granted for major sites, developers have to pay huge amounts towards that already – and millions more is available through government programmes such as the Towns Fund. How would this new tax directly lead to more houses being built?
The tax appears to be for small and large developers alike – so how does that reduce the monopoly of the bigger firms?
It is also targeted at housing on agricultural land because housing in cities doesn’t work like that. On brownfield sites, viability is already an issue and adding extra cost (tax) will reduce housing supply, not increase it. Existing land values won’t greatly decrease just because taxes rise – the two aren’t related at all.
At a council Planning Committee meeting that I attended not that long ago, a lady asked what the council was doing about the high house prices in the area.
The reply was that the council was trying to work with developers to get approvals through as efficiently as possible.
When our planning application that followed was then refused for completely nonsensical reasons, the lady and her friends applauded and cheered approvingly. No one seemed to spot the irony.
And so, let’s face reality. The blockage is the planning system. It is increasingly difficult to get new houses approved – too many rules, too many unnecessary reports, far too much power in the hands of “Nimby” (not in my back yard) objectors, committees and planning officers at odds – the problems have long been the same.
Myself and others were asked by Brighton and Hove planners this month how to help improve things locally.
We came up with a long list and I’ll let you know how that goes – but funnily enough laying on extra taxes, like some kind of negative bonus system, deployed every time we delivered the very thing that we’re being asked for … that wasn’t something anyone suggested.
We need to make targeted positive changes, not more negative ones to please the court of public opinion and little else.
Ed Deedman is a director of Cayuga Homes.
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