Sunday, March 21, 2004
Window of opportunity for housebuilders
Posted by David Smith at 09:00 AM
Category: David Smith's other articles

Britain’s housebuilders are unaccustomed to being at the centre of Gordon Brown’s budget thinking. More used to hikes in stamp duty, they had feared that the chancellor would hit homebuyers again in an attempt to cool an overheated housing market.

The fears were unfounded and, if Brown follows the recommendations of economist Kate Barker’s review of the housing supply, builders look set for good times. The Treasury has already accepted Barker’s conclusion that between 70,000 and 120,000 extra new homes will be needed annually to meet demand and slow permanently the pace of house-price inflation.

Another review recommendation, to set up American-style real estate investment trusts (Reits), was also accepted. But property experts say the main impact of these tax-transparent funds, available to small investors, will be on commercial property.

Builders were thrilled with Barker’s recommendation that the planning system should become more responsive to housing demand. For firms frustrated by local planners, this should signal a new era.

“For too long the anti-development Nimby (not in my back yard) lobby has held sway,” said the House Builders Federation (HBF). “These invariably well-housed individuals are denying others that same right.”

David Pretty, group chief executive at Barratt, agreed. “Reforms are urgently needed to allow Barratt and others to increase housing provision,” he said. “The planning system needs to be simplified and speeded up.”

After a warning from the Campaign to Protect Rural England that Barker’s recommendations would pose a grave threat to the countryside, the builders are keen to stress their environmental credentials. Barratt points out that nearly 80% of its houses are built on brownfield sites — the government’s target is 60%. The HBF says new houses help the environment because they are more energy-efficient.

What happens next is less clear. While Brown welcomed the Barker review’s findings, the government seems anxious to avoid a big battle with local councils or voters in key marginal constituencies before the general election. The chancellor, in his response, spoke of developing a “shared approach” to more affordable housing. The industry worries that there will be a lack of follow-through.

There is another fear. The review recommended a new tax on development gains, redistributing to local communities and councils some of the windfall gains that arise when land is approved for building. That could hit builders directly in their “land banks” — plots acquired for future development — although this was not the aim of the proposal. Some experts say it could even have the opposite effect to the one intended.

“A windfall tax on the sale of land will do little to deliver extra housing and is more likely to eat into the viability of schemes,” said James Thomas, head of residential development and investment at Jones Lang LaSalle, the estate agent.

From The Sunday Times, March 21 2004