Taxing housing and development is an odd way to promote growth
When will we wake up to the fact that house builders cannot provide the new homes we need? Residential development should be free of all planning gain, affordable housing and other taxes on delivery, writes Paul Finch
The Community Infrastructure Levy started with the best of intentions, invented as an alternative to ‘supplementary planning gain’, a way of increasing the benefits generated by the existing system of licensed extortion, the Section 106 agreement.
Our last government thought the CIL was a good idea: we need infrastructure, so where’s the problem? This was, supposedly, not a tax, though the word levy might have told us otherwise. It was not supposed to be an arm of policy, but a locally-set way of contributing to roads, stations, and so on.
Alas, the dreaded word ‘viability’ crept in: what would be the appropriate level of charge per square metre, and for what building types should it be charged? Mention viability and you know you have entered the realm of taxation. What would the market be able to pay being the operative question, rather than what funding do we need for what infrastructure.
It is a betterment tax by another name.
We now have a situation in which, outside London, the vast majority of local authorities have yet to set a CIL level. Since it is not compulsory, there is only pressure to act if you think it will be of benefit. Since viability is suspect in respect of almost any development in much of the country, it won’t be a surprise if many authorities continue to rely on Section 106 if and when they think they can extract some cash from applicants (assuming there is any left after they have paid uncapped planning fees).
In richer areas, the introduction of CIL supposedly means that other planning gain demands vanish. Tell it to the marines. Once councils think they can extract more, they will try to do so, provided it makes sense in terms of their general planning policies.
But isn’t CIL absolutely not about policy? Tell it to some more marines.
Practical examples given at a Planning in London conference this week: Croydon’s CIL charge for a small apartment in its central area is £0. In Nine Elms it is £34,500 for the same size of unit. A 1,500m2 supermarket in Camden will cost you £37,500; in Hillingdon it will be £322,500.
Incidentally, while CIL encourages the creation of ever smaller units by housebuilders, Mayor Boris Johnson is still flying the flag for larger units in his London Plan supplementary guidance on housing.
He is also still charging another form of CIL, that is to say, his Crossrail levy.
The property sector is trying to fight some of the levels being set. The Greater Norwich Development Partnership, after a battle in front of an assessor, has reduced its per square metre charge for homes from £160 to £115. That will save housebuilders about £4,000 per home - an enormous sum. By contrast, rich people extending their homes in prosperous boroughs in the capital will pay nothing at all, because extensions are exempt. Presumably this is because they are thought to be voters.
When will we wake up to the fact that housebuilders absolutely cannot provide the quantum of new homes we need in London for the foreseeable future? The least we can do is remove burdens from them, and I believe residential development should be free of all planning gain, affordable housing and other taxes on delivery as soon as is practical.
The AJ’s campaign, More Homes, Better Homes, should support housing providers in this matter. Too many people kick them every time they try to build. Meanwhile, the government should think again about how to provide affordable housing - and plenty of it.