Commercial
development
British Property Federation - New Windfall Tax Shows Treasury's 'Fundamental Lack of Understanding
Gordon Brown's proposals for a windfall tax
on the uplift in land value show a fundamental lack of
understanding of the development process, claims the British
Property Federation (BPF) today.
Schools, roads and community centres currently paid for by
contributions from developers, made under section 106
agreements, would lose funding, with these local benefits taken
over by central government. Land for development could be help
back and house prices would rise further.
In yesterday's response to a government consultation on a
planning gain-supplement (PGS), the voice of UK property states
that the levy shows a basic misunderstanding of the ways in
which value is calculated in commercial development.
A PGS would be applied on the change in land value once planning
permission is received. It would have numerous negative effects
that could harm regeneration and restrict the supply of land for
development, holding up vital work and threatening major
developments.
Liz Peace, BPF chief executive, said: "The BPF has maintained
all along that PGS is not just unworkable but that it would
negatively affect the economy. Our opposition is not based upon
a reluctance of the property industry to pay its fair share for
the provision of infrastructure, simply that we do not see PGS
as a viable solution, due to the numerous negative consequences
outlined in today's response.
"At a time where ministers are setting out numerous targets
to improve the supply of housing and encourage sustainable
development, it seems inconceivable that so much public money
can be wasted consulting on a tax which successive Labour
governments have tried and failed to introduce because of its
impracticality."
The BPF's highlighted key reasons why PGS will not work:
Brownfield development (previously developed sites)
While it may be easy to apply PGS when a greenfield site is sold
for housing development (as originally suggested by Kate
Barker), PGS will discourage re-development within existing
property ownership.
Delivering infrastructure
PGS would be centrally collected and redistributed back to local
and regional areas. This creates two problems. Firstly, the
vital link between a developer and the community is eroded.
Secondly, developers and communities will have no certainty that
development-critical infrastructure, currently provided by
developers, will be delivered on time. Planning permission could
be appealed against if supporting infrastructure detailed in an
application fails to materialise. This would lead to higher
costs and further delays.
Paying for infrastructure
There is no empirical evidence to show that PGS would provide
the revenue required to finance development-critical
infrastructure. Developers could be forced to pay twice for
infrastructure simply in order to make their development viable.
Delays over valuation
Delays arising from disputes over self-assessment of PGS
liability will delay regeneration projects across the country.
Extra financial burdens will be placed on developers. Valuing
land is not a precise science; this is likely to result in
protracted legal proceedings challenging PGS valuations.
Crude valuation mechanism
PGS is designed to capture a proportion of land value uplift
that occurs at the grant of full planning permission. But for
some types of development, this is not the sole catalyst for the
creation of value. The nature of the market means that land
value can increase even before planning permission has been
sought. However, due to the crude valuation mechanism which PGS
will use, it is assumed
that the value uplift in land is solely created by planning
permission.
Email:
ateacher@bpf.org.uk