23 July 2019
Words by Rico Wojtulewicz:
"The Institute of Economic Affairs (IEA) report, titled ‘Raising the Roof’, is thankfully not claiming to be the silver bullet to solve the housing crisis but, instead, earnestly builds on industry proposals.
Penned by Jacob Rees-Mogg MP and Radomir Tylecote, the report focusses on enabling a more competitive house building industry through more appropriate taxation and supply mechanisms.
Taxation is a problem for the industry. The IEA’s recommendations to more easily use corporation tax relief to clean up derelict or contaminated land are welcomed, but silent and unfair taxes charged through the development process must also be reformed.
House builders pay many fees and taxes, two of them being the Community Infrastructure Levy (CIL), a standardised development charge, and Section 106, an affordable housing contribution assessed on expected profits. CIL was initially introduced to replace the complex and delay-ridden Section 106. Yet, in practice, developers are paying both.
An assessment of tax is therefore desperately needed but, before considering any changes to stamp duty, the likelihood is that further exemptions will push house prices up further and discourage councils from granting more permissions, even if the tax is regionalised with more money going directly to local authorities.
This is because councils already have a similar growth mechanism through the new homes bonus, a grant paid by central government to incentivise more homes. Many councils have not used this mechanism to increase revenues and, instead, have preferred to err on the side of localism or, as is it is more commonly known, NIMBYism.
It is highly unlikely that personal tax reductions will increase supply and, while lowering corporation tax and reforming of other levies will help make smaller house builders more resilient to the broken planning process, it will not physically increase supply.
To stimulate supply, the IEA has made four key suggestions:
- Build It Yourself (BIY) policy, operating under the presumption that people can build their own homes;
- granting permitted development rights to ‘build and beautify’, even at very local levels such as individual streets;
- reassessing the greenbelt and its appropriate release, such as when it is brownfield or land near train stations;
- reverse compulsory purchase orders
BIY is absolutely necessary, because councils have barely delivered any homes through their self-build registers and certainly not in England’s most expensive regions. However, this policy should favour those who truly need housing, not just those who can afford land or the build risk.
Councils can already release or reassess greenbelt, but they are not doing it. Neither are they using local policies to speed up permissions when new homes meet local need or build expectations.
The reverse compulsory purchase orders are perhaps the most interesting recommendation, as they place localism at the heart of decision making by allowing local people to force public land to be released. This would certainly enable more true localism, especially with the growth of community land trusts.
The IEA therefore makes some very sound planning reform recommendations, which will help increase supply and encourage culture change. However, many work on the premise that more local control is the answer, defining it as ‘choice not bureaucracy’. This is despite councils already having powers that they are not using successfully enough, such as being in control of their local plan site allocations, running a self-build register, or properly assessing housing need.
Unfortunately, when there are great challenges, localism often stifles success. The housing crisis is one strong example of this but if we take another national crisis, renewable energy, we can see that the Government’s ambition to let councils decide where commercial onshore wind and solar farms are built has resulted in councils rejecting them almost out of hand.
Localism has had such an impact that even Green Party councils have been dissuaded from implementing renewable energy solutions.
Industry has beseeched the Government to work with them to analyse and understand how the supply of the right housing is actually delivered. It is therefore positive to see many of those discussions making their way into this report and further highlighting that house builders are not to blame for the shortfall of housing."