Is this the start of taxing “land banking”? – Owl
Developers who hoard land face a new tax to help pay for the cost of the cladding crisis. Rishi Sunak is to announce a levy on housebuilders with profits over £25 million in his autumn budget.
Melissa York www.thetimes.co.uk
The chancellor’s tax is expected to raise at least £2 billion over the next decade to pay for the removal of flammable cladding from high-rise buildings. MPs have estimated that the cost of fixing the crisis could total £15 billion.
Yesterday the government published draft legislation for the Residential Property Developer Tax. It shows that ministers want to tax profits made on land that has secured planning permission even if no homes have actually been built. There are 1.1 million homes awarded planning permission that have not been built, according to the Local Government Association.
Critics have accused housebuilders of stockpiling planning permissions to restrict supply and keep prices high. However, a government review on land-banking from 2018 concluded that the problem was overstated.
The draft legislation was published days after Michael Gove was appointed housing secretary with a directive from Boris Johnson to break the deadlock on cladding. Gove replaced Robert Jenrick, who drew fury from leaseholders when he announced a £5 billion package to remove cladding from buildings over 18 metres tall this year.
Flat owners in buildings under 18 metres have only been offered loans to remove cladding. High-rise buildings with other fire-safety flaws such as wooden balconies and missing fire barriers are not eligible for support.
The profits on high-end rental flats in Build to Rent developments could be taxed to fix unsafe buildings. Goldman Sachs and John Lewis have recently invested in the sector.
Builders of student housing will not have to pay the tax if students live there for less than 165 days a year.
However, developers of retirement homes will have to pay unless they also provide “personal care”, the consultation suggests.
Affordable housing is within the scope of the tax but most developers build this at cost or with charitable housing associations, who are exempt.
A Treasury spokesman said: “We want to ensure the biggest residential property developers help fund the removal of unsafe cladding, and obtaining planning permission is a key part of the development process. We are consulting extensively on this tax.”