Is development tax a reason for increasing house prices?
The average price of a home in England and Wales has now surpassed £300,000 for the first time ever and Richard believes there are two main factors for this:
Demand outweighing supply
On the first point, he doesn’t understand the government’s current process. Developers are charged large amounts of CIL and s106 by local planning authorities which means that the price of the finished product is increased.
The government has therefore had to introduce a number of Help to Buy schemes to help first time buyers, using money funded by development tax!
Poole-based property developer wants clarification on CIL and s106 payments
Carr believes developers are put off by high taxes involved on developments
A relaxation in taxes would be beneficial for the industry and help the housing shortfall
Community Infrastructure Levy (CIL) and s106 payments are no longer viable property taxes according to Poole-based property developer Richard Carr.
Carr, who has worked in the industry for over 30 years, believes the taxes are seriously affecting the industry and are a factor in the current housing shortage that the country is battling with.
Expanding on the point, he said: “I’m very much for paying taxes and have done all my business life – and I believe property taxes can work and help projects such as social housing and community infrastructure if they are used correctly, however my problem is that I don’t believe they are.
“Community Infrastructure Levy is an outdated tax that developers have become disillusioned with. The line between CIL and s106 payments has become faded and clarification is need from the government to explain why they are in place.”
Currently, ministers are debating new proposals for development property tax and how it will be applied. Planning Minister Brandon Lewis is considering an overhaul of S106 payments and CIL.
Carr added: “I believe they should be abolished for 24 months on condition that the development is started within 12 months from grant; it should only be implemented on Greenfield sites that are inherently cheaper to develop.
“How can it be correct for a developer to pay £385 planning fees on a 500 square foot flat and the same for an 18,000 square foot house?”
The association explained that it would like to see the present, outdated policy be replaced with “a more robust and transparent local viability assessment process”.
In the LGA’s submission to the government, they argued that a simplifying of CIL regulations and guidance and the removal of the restriction on pooling s106 contributions for strategic sites identified in local plans.