Stewart Jackson is the Member of Parliament for Peterborough and was Shadow Regeneration Minister 2008-10. Follow Stewart on Twitter.
Superficially, it is good news that figures
released this week show that the number of planning approvals for new homes
granted in the final quarter of last year was 62% higher than the year before,
according to the Home Builders Federation's latest Housing Pipeline report.
In the three month period to December 2012,
local authorities granted approvals for 45,041 new homes in England, 33%
up on the previous quarter and the highest quarterly number since Quarter 1 in 2008. However, the Home Builders Federation says
that the number is still short of the 60,000 required each quarter but the
increase is significant as it points to potential improvement in the planning
system since the introduction of the National Planning Policy Framework in
March 2012, which I strongly supported.
The Localism Act 2011 has had a positive
impact on the housing market supply side: Clearly, the liberalisation of the
planning regime, via policies such as the abolition of regional spatial
strategies and regional planning targets, encouraging developers to renegotiate
Section 106 planning gain obligations, neighbourhood development plans and the
New Homes Bonus have all made a positive contribution. The mortgage market
seems also to be more responsive, with new products for intermediate as well as
outright sale and the number of weekly reservations under the government’s
NewBuy scheme doubling to 130 so far this year.
The Home Builders Federation policy
conference has called in its Budget submission for robust monitoring of Local
Plans; an extension to mortgage schemes such as NewBuy; government reduction in
red tape; and an increase in business finance for SMEs.
Perhaps, however, it’s time to look at the
difficult and seemingly intractable issue of developers’ land banking. Large
residential housing developers tend to blame “instability” and “uncertainty” in
the planning system (as well of course of the difficulty in acquiring finance
investment and a paucity of affordable and flexible mortgage products) as a
reason why they’re sitting on thousands of acres of undeveloped land, with many
thousands of homes unbuilt, despite having received planning permission. In
this, they do have a point.
Other issues arise: Problems with brownfield
remediation, local authorities’ bureaucracy, overly prescriptive European Union
procurement rules and of course, greater crested newts!
Unimplemented planning applications present a
significant problem in terms of housing market dysfunction, not least because
one only has to peruse the financial pages of a good newspaper to observe that
many developers are now in healthy profit, with rising share prices and
dividends and are cash rich. They have land and money to invest and local
communities and government need homes – but the building industry is simply not
responding to the challenge of delivering new homes which is integral to
In 2011/12, there were 118,190 housing
completions, compared to over 170,000 in 2007/8 – a decrease of 31% from
admittedly an unsustainable highpoint before the financial crisis and
recession. A survey in September last year by the Local
Government Association revealed a building backlog of almost 400,000 new homes
which have planning permission but are unimplemented (as at December 2011), a
backlog which would take three and a half years to clear. The average time
taken by a developer to progress to completion having obtained planning
permission has increased from 20 months in 2007/8 to 25 months in 2011/12.
It’s also noteworthy that the Labour Party
runs the bulk of local authorities where this backlog is most acute – whilst
simultaneously attacking the Coalition Government’s record on house building
and homelessness. So Birmingham City Council had (in the middle of last year)
5281 housing units in unimplemented planning applications, Manchester City
Council 7175, Leeds City Council 8081, Telford and Wrekin Borough Council 3221,
Greenwich Borough Council 5125 Hackney Borough Council 7744 and Tower Hamlets
Borough Council 12525.
So in a period of fiscal consolidation, where
the government needs to maximise tax revenue and also has house building as an
economic and financial imperative, is it time to tax this wasted capital asset? My colleague Anne Main MP and I have pondered
was to whether a land tax on unimplemented planning application sites might act
as a catalyst for speeding up development and bringing in an income stream into
the bargain as well as discouraging land banking for speculative purposes? How might this work?
A new tax might commence a year after the granting
of full detailed (but not outline) planning permission. It would be a graduated
tax with higher rates the longer the land is undeveloped. The tax burden would
be based on the developed value of the land rather than the units for which
planning permission is given as this would avoid issues arising over the
valuation of each unit say, for example, distortions might be caused by a
larger number of flats and starter homes relative to executive and prestige
homes. The tax assessment would be made at the time the full planning
permission was granted.
The proceeds from this land tax could be
remitted to the local authority, to offset officer time in (say) the
preparation of a supplementary planning document or various pre assessment
documents, with an element perhaps ring fenced to assist with developing brown
field derelict land in the council area? I accept that the building industry is very
cyclical and subject to economic turbulence and clearly, any new tax would need
to be reviewed on a regular basis. That said, it’s maybe time to see if we can
apply a market mechanism via fiscal incentives to tackle the broken housing
market model and get building the homes our constituents desperately need. It is food for thought for the Chancellor as
he prepares next week’s Budget.