The new government won the election with a pitch for “change”. So, indeed, has change occurred. Higher costs and taxes on business, lowering the threshold for employers’ National Insurance contributions, an increase in the minimum wage, means testing winter fuel payments, and farmers’ inheritance tax among other things.
But a manifesto pledge to build one and a half million new homes is quite the commitment. How can that be achieved?
Changes in housing policy
The new Chancellor has promised there will be no more tax increases in this Parliament. Time will tell how realistic that is. In the meantime, there’s scope for real change in how to stimulate the creation of much-needed new housing, be it affordable or not.
That means a strategy for a constructive approach to planning and development to encourage building companies to contribute to the necessity for new housing. Developers are about as popular as parking enforcement officers, but had builders not existed in the early part of the 20th century, vast suburban areas as they exist today simply would not be there. Thousands of 3-bedroom semis wouldn’t have been built on green land in Surrey, Kent and almost everywhere else in the UK.
But in those days, there was no official Green Belt, just land owned through inheritance of the very wealthy by selling bits off or by being acquired by speculative individuals who became substantial landowners. However rich the developers at that time became, the eventual result was housing for millions of working people.
Changes to Planning
Most conurbations in the South East include ‘trading estates’ with small factory units and modest warehousing buildings. Some of these estates have small retail outlets, either privately owned or run by larger companies such as the Co-op, Tesco, or Sainsbury’s among other small items of urban infrastructure. Mains utilities including water, drainage, electricity, gas and telecoms already exist. But to travel around these estates reveals many empty buildings, with To Let or For Sale signs which seem to stand unused for years on end.
These are the sites for businesses which have moved on or are no longer viable, resulting in reduced revenues for councils eager to collect business rates and no longer providing local employment or commerce, all of which are crucial components for growth as promised by the new government.
Action taken by local councils
Garden villages and towns sprang up in the post-World War Two years as there was a desperate need for new homes; Welwyn Garden City and Milton Keynes, for example. New houses, shops, schools, surgeries, clinics, community centres and small parks with playgrounds were also built.
Now the desperate need is here again, seven decades later. Councils and the government talk about new housing but planning restrictions inhibit the acquisition and development of sites such as the rundown trading estates. The many empty properties are often owned by investors or prospective developers who seem to have little incentive to create anything constructive.
If councils are not empowered to engage in the compulsory purchase of wasted properties nor indeed have the capital reserves to do so, then incentives might surely be offered to stimulate home-building. This can only really be achieved by developers who can create new (and some affordable) homes and, therefore, new small communities supported by an existing or improved infrastructure.
As Bill Clinton so aptly put it: “It’s the economy, stupid!”
Changes to Construction Finance
Large companies will pay 25% on gross profits of more than £250,000. Smaller companies will pay 19% on lesser profits from April 2025.
Large-scale construction needs time – overbearing, bureaucratic planning eats time and costs. Five-year plans, once the favourite policies of the Soviet Union, may not sound politically appealing to some but are probably necessary even though they may not mature within this current government’s term.
But a fiscal policy which could be applied now might just make a difference.
Here are some ideas for our new Chancellor:
- Reduce the large company tax rate for new builders to zero for five years.
- Allow the annual audited profits accumulated over that time to be rolled over and taxed at 19% at the end of five years, less an audited allowance of the costs officially attributed to formal, approved apprenticeships for training in construction techniques, electrical and other utilities work and civil engineering and/or professional surveying.
- A deferred tax but with constructive investment allowances to fuel new homes, skills and employment.
- Abandon the randomness of local council levies for affordable housing (for rental or purchase) and allow for a reduction in overall corporation tax for every property constructed for sale or rental at a discount of 30% based on verifiable local market sale and rental values as recorded by organisations such as the Land Registry.
Simplicity must be the key consideration.
A major tax incentive – an encouragement for professional artisanal training and a much more constructive approach to planning and development – could just be the catalysts for real change in housing policy while providing a partial solution to the need for new homes, a better-trained workforce and economic growth through improved employment prospects (ie – more income earners who pay tax, even at the lowest rates).
The cost to the Exchequer is potentially large initially but the medium-term gain for the economy is far greater than the current stagnation and lack of real action to solve our housing crisis. This is infrastructure finance which could be included in long-term government debt financed by Treasury Bonds, rather than annual tax revenues.
It’s only my opinion but perhaps it may serve as food for thought.
