Developer tax incentives could stimulate house building, says lender

The government could stimulate the provision of new homes by reducing the tax payable by housing developers, one development finance lender has said.

Alex Moss, operations manager at Zorin Finance has suggested that the government use tax incentives to solve the UK’s chronic housing shortage, addressing issues such as developers mothballing sites and not building.

His comments follow the publication of a report by the Home Builders Federation (HBF), which revealed that the number of SME builders has fallen by 80% over the past 25 years.

The report found that a number of barriers such as finance, planning and red tape have restricted SME builder activity, preventing them from developing the homes that are currently needed in the UK.

It was highlighted by HBF that if the government was to remove these barriers and give SME builders the support enjoyed by SMEs in other industries, they could play a significant role in helping to tackle the housing crisis.

Similarly, last February the Federation of Master Builders claimed that councils were unfairly charging housebuilders – demanding taxes on homes that were deemed to be ‘complete’ long before they had become inhabitable. This too is said to hinder developments.

Stating that less taxes would mean less income for the Treasury, Alex Moss said:

“However, with property, the concern must first and foremost be to incentivise developers to develop, as the government will struggle to accrue tax revenue on properties which are never built.

“Reducing tax on property development schemes will increase developer profit margins, while simultaneously stimulating the supply of new homes.

“The result: more homes that cost less to build in addition to a subsequent stamp duty land tax windfall when the homes eventually sell.”

Supporting Moss, Rico Wojtulewicz, policy advisor at the National Federation of Builders said that housing developers play their part in supporting the labour market by providing a wide range of career opportunities.

“They are a vital tool in delivering the positive change that tax incentives often try to facilitate.

“For example, if the ‘green deal’ focused on SME developers as well as consumers, the energy efficiency industry would have been further driven to innovate, reduce costs and deliver apprentices.

“Leaving developers out has had a negative impact on cementing an industry-quality standard.”

Explaining how the government could use tax incentives to address the issue of developers sitting on sites and stalling building works, Moss added:

“For instance, the government could stimulate the provision of new homes by reducing the amount of stamp duty land tax that developers pay on land purchases in return for a promise from the developers to commence building out the site quickly.

“The same approach could also be implemented on the corporation and capital gains tax payable on the profits from such developments.”

Moss goes as far as to suggest that the government could introduce tax incentives for people wanting to invest in property to secure their financial futures, helping to lessen the burden on the welfare state.

“On a more domestic scale, property development has long been a popular way in which individuals and families have augmented their pensions and secured their financial future.

“Much as the successful Isa scheme allows people to benefit from investments in both savings accounts and stocks and shares without paying tax, during a period of almost subterranean interest rates and a housing supply crisis, there is little reason for the government not to also enable people to invest in developing second homes in a tax-efficient manner.”

 

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