Friday, 15 July 2016

House of Lords Economic Affairs Committee "Building More Homes"

I wrote the Land Value Tax Campaign's submission to this committee, so they emailed me the link to the final report, which is here.

From their email:

* Council tax should be charged on development that is not completed quickly. The Government’s reliance on private developers to meet its target of new homes is misguided. The private sector house building market is oligopolistic with the eight largest builders building 50% of new homes. Their business model is to restrict the volume of house building to maximise their profit margin. To address this the Committee recommend that local authorities are granted the power to levy council tax on developments that are not completed within a set time period.

Good background info and it's a modest step towards LVT. Hooray.

But then they also propose the equal and opposite measure:

* Local authorities should be given the power to increase planning fees. Local authorities should be able to set and vary planning fees to help fund a more efficient planning system and the upper cap on these charges should be much higher than the current limit.

High planning fees have precisely the opposite effect of a tax on plots with planning permission and mothballed construction sites. They deter and delay construction.

Far better to reduce planning fees to the bare minimum and charge a higher recurring tax on plots with planning etc. Which of the two (planning fees or LVT-lite) raises more revenue is irrelevant, the whole thrust of the report is that in an ideal world more homes would be built (let's take this as a given for now).

So if land bankers home builders end up paying no Council Tax whatsoever on plots with planning because they are feverishly completing as many homes as possible to use up their ten-years' worth of plots with planning, then that is A Good Thing.


Bayard said...

"High planning fees have precisely the opposite effect of a tax on plots with planning permission and mothballed construction sites. They deter and delay construction."

I'd be interested to know the reasoning behind this statement. I can't see how high planning fees would delay construction - you've got your PP, you've paid your fees, now, I would have thought, you'd want to get on and sell/build to get that money back. The only deterrent effect of high fees would that people would be put off from applying, because it is risk money. However it would be more equitable if the fees for a granted application were greater than those for one turned down.

Mark Wadsworth said...

Deter people from applying in the first place.

Bayard said...

It depends on the purpose of the fees, really. Are they there as a money-raising exercise, are they there to deter frivolous applications (unlikely, IMHO) or are they there to cover the cost of processing the application. If the latter then there is no justification for raising them. If it is a mixture of all three, which I suspect, then there is some justification for raising them, but only for successful applications. After all, when a bureaucrat has just handed you a huge windfall capital gain on a plate, it is not unreasonable to ask for some of it back.

Alternatively, if fees were only raised for large applications, say more than ten dwellings, they would have to be raised a very long way before they started to deter the land speculators, sorry, developers.