Developers should face land banking tax say planners
Developers that are slow to build homes and shops on land for which they have already gained planning permission should be taxed to discourage them from manipulating the property market, according to the Royal Town Planning Institute (RTPI).
The RTPI believes a ‘land banking levy’ is needed to discourage developers, particularly in the housing and retail sectors, from putting off building. A recent report by the RTPI revealed that house builders have banks of land with planning permission of close to 14,000 acres, enough for 225,000 new homes.
Under the proposed levy developers with planning permission on large scale housing or retail sites would have to enter a covenant with the local authority which obliges the developer to complete a pre-determined number of homes or a proportion of overall construction by an agreed date. The target set for completion would be calculated as a percentage of either the total number of homes to be built at the site or as a percentage of the overall value of the project. Failure to meet the target would mean the developer would have to pay a land banking levy to the local authority. The size of the levy would be calculated as a percentage of the projected final value of the development.
In response, Chris Coates, managing director of Galliford Try Homes, said: “To suggest that developers are delaying construction projects, while they wait for market conditions to improve, in order to ensure ‘fatter margins and bigger profits’ is absurd and represents a grave misunderstanding of the industry by those responsible for delivery of new homes; we do not want to tie up any more capital in land than is absolutely necessary.
“The size of a house builder’s land bank is a reflection of the time it takes to move a development from concept to completion. Contrary to the RTPI’s accusations, in order to maximise our cash flow, we would actually be looking to commence construction as soon as a scheme has a detailed planning consent.
“It is in fact the current arduous planning system has caused the most significant delay to new home starts. House builders are coming under increasing pressure from government, yet there is little support to assist them in meeting new home targets. Instead of looking to penalise developers, efforts should be focused on introducing measures that will speed up the planning process, enabling developers to meet government’s overly ambitious targets of three million new homes by 2020.”