Big developers could pay dramatically less for land under plans to ensure firms contribute more funding towards affordable homes and local services.
Ministers have drawn up proposals which would effectively cap the payments that builders can make for large sites earmarked for new homes.
The move follows warnings that some large developers have been “over-paying” for land in order to duck agreed contributions towards affordable housing and local services.
But the proposals have put the Government on a collision course with major developers, and risk a backlash from some Conservative MPs.
In a letter seen by The Sunday Telegraph, the Home Builders Federation (HBF), the industry body whose members build 80 per cent of new housing in England and Wales, warns ministers that the plans amount to land taxes “disguised as planning policy”.
It says that the move would put landowners off selling their plots, as a result of the significantly lower prices on offer. In a blunt warning to ministers, the HBF claims that the proposal would “exacerbate” rather than solve the housing crisis.
The proposals, contained in a consultation which closed last month, are intended to address local authorities’ insistence that they should be reaping more benefits from the boost that planning permission for new homes gives to the value of a site.
Senior Conservatives, including Ruth Davidson, the leader of the Scottish Tories, and Nick Boles, a former planning minister, have expressed a similar view that the state must “capture” more of the value of land earmarked for development.
However, some Tories are likely to be more sceptical. When Labour announced more radical plans to compulsorily buy land for a price that excludes the potential for future planning consent, Liz Truss, the chief secretary to the Treasury, said that while she agreed that “the system needs to be reformed”, “I don’t support ... imposing state decided prices on landowners or private companies”.
Currently local authorities seek “contributions” from developers buying sites using two mechanisms. The first, section 106 of the 1990 Town and Country Planning Act, allows them to negotiate contributions towards affordable housing.
The second, the community infrastructure levy, is a locally-fixed charge per square metre of new development, intended to act as a contribution towards services such as flood defences, schools and transport.
In both cases, the amount is calculated largely based on the price developers say they could afford once the price of the site, building costs, and a suitable profit, are all taken into account.
The usual price of land in such cases is known as the “hope” value because a significant proportion of the sum usually derives from the boost the site would get from planning permission.
Developers are currently able to argue that they are unable to meet a council’s demands for specific levels of contributions for their site because of the high levels of payment required for the land itself.
But the proposed changes would allow councils to set local rates for contributions based on the “existing use” of land, or its value without any expectation of planning permission – which is likely to be significantly lower. Such a calculation would free up more funds for contributions towards affordable housing and local services.
Developers say that fixed demands will inevitably lead them having to lower the prices they offer to landowners in practice. They highlight government figures showing that they already pay £6 billion per year in contributions.
Responding to the Government’s consultation on the new draft National Planning Policy Framework, the HBF compares the proposals to Harold Wilson’s “betterment tax”, under which landowners paid a 40 per cent levy to contribute to local public services, including housing.
“In all previous cases, the policy has had to be abandoned due to landowners not selling land,” the HBF said in a letter to the Ministry of Housing, Communities & Local Government on May 10.
The industry body predicts that the plans would lead to “a land shortage, a lack of development and subsequent inflation in both land value and property prices, exacerbating rather than solving the current housing crisis.”
A ministry of housing spokesman said the proposed changes “will mean that developers know the contributions expected of them and local communities are clear about the infrastructure they will get alongside new homes. We are currently analysing responses to the consultation and will set out next steps in due course.”
Source: The Telegraph