Pre-Budget Report 2005: Housing and planning gain

30 November 2005

1. The Government is expected to make some crucial announcements next week (Monday 5 December) on planning, housing and infrastructure funding as part of the Pre-Budget Report. These decisions will have profound implications for the future of our environment, our towns, cities and countryside. See also our separate: news briefing on transport and climate change.

2. The Chancellor is expected to announce the Government's response to the report by economist Kate Barker it commissioned last year on the supply of housing. Her report suggested there needs to be as much as a near-doubling in the building of new homes for sale in England in order to reduce the rate of house price inflation.

3. The Government faces a choice. It can persist in its attempt — based on scant evidence — somehow to bring market housing within the grasp of the nation's poorer households by a vast increase in housebuilding for sale along the lines proposed by Barker, with all the environmental and infrastructural costs that would bring. Or it can act on the evidence that such an approach would not work, and target financial, policy and technical tools on providing desperately needed affordable housing for those who most need it in ways that rebuild our decayed urban infrastructure and also meet the needs of rural areas.

4. As part of this announcement, draft revised national policy on planning for housing is expected to be published for consultation. This follows an earlier consultation paper this summer, Planning for housing provision. This was widely criticised by organisations involved in planning and housing for its proposal to make market demand a dominant factor in planning for housing.

5. Current Government policy on planning and housing has secured some major successes in recent years. Land is being used more efficiently and the proportion of new housing using previously developed land and buildings ('brownfield' sites) has risen to 70%. The recent report of Lord Rogers's reconvened Urban Task Force highlights how, despite this progress, much remains to be done. The continuing scandal of VAT, charged at full rate for much repair and renewal of existing buildings but zero-rated for new housing, remains a serious obstacle to achieving the full social, economic and environmental benefits of urban regeneration.

Planning gain — but how?

6. The Chancellor is also expected to make an announcement about Government proposals for securing greater contributions from landowners and developers to pay for infrastructure needed to support new development. This could be some form of tariff on individual developments or a planning gain supplement, designed to tax the land value premium from planning permission, as proposed by Barker. A paper consulting on various options is expected.

7. The amount an owner or developer can afford to pay towards planning gain is determined by the residual value of a site — its value after all acquisition and development costs are taken into account. The greater complications and costs often involved in redeveloping brownfield sites are reflected in lower (or sometimes negative) residual values. There is a real danger that the higher potential planning gain contribution from greenfield sites could create a perverse incentive for local authorities and communities to favour such development, especially if the money were retained locally.

Pre-Budget Report — the acid tests

• Will the Government publish the findings of its research into the environmental implications of hugely increased housebuilding?
• Will the Government's proposals for planning and housing show clear evidence of having taken full account of those findings?
• Will the Government announce that it will remove or radically reduce VAT on repair and renovation and impose the same or a higher rate on greenfield development?
• Will the Government radically boost public investment in providing affordable housing available in perpetuity to those who most need it, and by how much?
• What, if any, measures will the Government take to address the demand-side pressures pushing up house prices?
• Will any measures the Government proposes to secure greater contributions from landowners and developers to pay for infrastructure include effective safeguards against encouraging greenfield development over brownfield regeneration?

---

Press releases, papers and documents published on this page are the intellectual property of an organisation unrelated to Central Lobby. We promote their parliamentary and political campaigning activities as they are subscribers to the Central Lobby service.

As such, Central Lobby does not edit, endorse, or attempt to balance the opinions expressed on this page. The content of press releases and other such types of content are the responsibility of the originating organisation.