Writing in The Times today, Berkeley Group Executive Chair Rob Perrins sets out three key measures to unleash investment and homebuilding nationwide.
"Andy Burnham takes to the stage of the Labour Conference today on a mission to drive good growth in every postcode. He knows how, having led a prolific development programme across Greater Manchester that delivered homes, jobs and regeneration while many other places stood still.
The development industry has the capacity and capital to help him achieve this nationwide. But there are barriers to remove before investment and delivery can be unleashed.
Homebuilding is being held back by taxes, regulation and wider economic headwinds, none of which are of this Government’s making. And while Ministers have made good progress in unblocking the planning system, that alone will not be enough to unlock growth.
The launch of a new ‘Your First Home’ equity loan scheme is another welcome step that will clearly support traditional greenfield housing developments outside of southern England.
To deliver the best possible outcome we need to make sure it also works in London and across the south, where it will need a significantly higher price cap, higher household income cap and offer larger equity loans. Otherwise, it simply won’t help buyers in postcodes with higher prices and deposit requirements.
But the real growth game changer would be a reduction in stamp duty on new build homes – because this sky-high transaction tax is now the main barrier to housing delivery in urban areas.
A decade ago, George Osborne trebled the maximum rate from 4% to 12%, with a further surcharge for investors. This was done during the unique period of ultra-low interest rates when buyers could absorb the extra cost. Interest rates have now increased to normal levels, but the exceptionally high transaction taxes remain in place and have frozen the market.
Capital intensive urban developments are the worst affected because they rely on off-plan sales to secure funding before construction can begin. Stamp duty surcharges deter precisely the investors who provide that early capital. Without them, nothing happens and the many benefits of regenerating brownfield sites are lost. No homes. No affordable housing. No jobs. No tax receipts. And none of the growth and productivity gains that only city and town centre developments can deliver. Stamp duty blocks it all.
With the OBR set to downgrade its growth forecast in light of falling housing supply, the October Budget is a golden opportunity to remove this barrier and achieve a significant economic dividend. By reducing stamp duty on new-build homes for first-time buyers, downsizers and investors the Government would unlock 60,000 additional homes per year and drive a 1.6% increase in GDP.
Better still, this would drive higher transaction volumes and homebuilding rates which generate £4 billion of additional tax revenue, enough to more than double the national social and affordable homebuilding programme.
Looking beyond the Budget, the Government must tackle over-regulation.
Since 2016, new regulations, taxes and levies have added £150,000 to the cost of delivering a typical two-bedroom apartment in London. This figure excludes material and labour cost inflation and reflects only the additional regulatory burden. Each policy change had positive intent, but collectively they have created an impossible burden. The maths no longer stacks up so London’s new housing starts have fallen from a modest 33,800 in 2015, to just 10,000 in 2026.
The point that’s often lost is that the cost of affordable homebuilding has also soared as regulations multiplied. This means the Government’s £39 billion Social and Affordable Homes Programme will deliver fewer homes than it could.
This can be resolved without impacting high safety and quality standards. The system is rife with overlapping, conflicting and excessive requirements which create appalling inefficiencies that no one intended.
The good news is that the Prime Minister understands what it takes to make growth happen. And all of this can be fixed without new legislation or additional public spending.
First, make sure “Your First Home” works for buyers in every region.
Second, reduce stamp duty on new-build homes to deliver a growth and tax windfall we can’t afford to miss.
Third, tackle the inefficient and excessive regulations that stop homes being built.
Do all three, and there will be good growth in every postcode."