Housebuilders need carrots, not more taxes

COMMENT Have we finally turned the corner on the cladding row? Doing the broadcast round on Sunday morning, levelling up secretary Michael Gove signalled decisively that this is a shared problem for both the housebuilders and the government: that the buildings in question were built in strict accordance to government-approved building regulations at the time. And that felt like a change of tone (even if we really shouldn’t feel the need to celebrate a senior minister merely acknowledging the stark truth). So on Monday, the Department for Levelling Up, Housing and Communities finally published the official “contract” which goes behind the “pledge” announcement which, you may recall, around 50 housebuilders signed last April. The contract has been a long time coming (presumably the “devil was in the detail”, I simply dread to think what the meetings were like). But it was something of a relief to see the delay didn’t stop the more reputable housebuilders from cracking on with their own commitments in line with the pledge. Mr Gove then further grasped the nettle with confirmation of the so-called “responsible actors scheme”.  More than a touch of iron fist in the velvet glove here. Put simply, those companies deemed not be “a responsible actor”- ie those that do not sign the “contract” before 13 March (first day of MIPIM, ha!) – will effectively be put out of business. Bish bash bosh. Mr Gove may have changed his tone – maybe acknowledging it is a shared problem with HMG – but he hasn’t quite given up the red meat yet. Making a commitment Spare a thought for our colleagues grappling with all this. The vast majority of the players in the housing sector would stand firmly by the principle that leaseholders should not have to pay to remediate necessary fire safety or cladding issues on their buildings. And the better companies took early and proactive action in the wake of Grenfell, reviewing all their own buildings and setting aside significant funding to remediate high-rise (above 18m). Those espousing very best practice proactively increased the scope of their commitments to cover all apartment buildings built in the past decade (in some cases two decades) between 11m and 18m. The Home Builders Federation says at least £3bn has already been committed by the UK housebuilding industry to remediate their own buildings in accordance with the pledge. This is hardly insignificant. So far, so good. But this is not all. The pledge commitments by housebuilders to fix their own buildings comes on top of a new residential property development tax (RPDT) which came into effect, also last April. The RPDT is a 4% surcharge tax imposed on UK developer profits over the next 10 years. This is entirely to fund remediation works for “orphan buildings” higher than 18m, that is those not built by housebuilders, but built by overseas developers or where the builder is unknown (and there’s rather more of these than you’d expect). The surcharge goes into the government’s Building Safety Fund. Then on top of this comes the proposed building safety levy, also to be imposed on the UK housebuilders.  This levy runs in addition to the RPDT, plus individual developer provisions, with government seeking to raise another £3bn over the next 10 years from the sector – this time to fund remediation of buildings over 11m (again, those not built by the UK housebuilders). Can you hear the pips begin to squeak? “Perverse outcome” Now, I am firmly on record as having the utmost respect for Mr Gove’s abilities (if not his politics) and – even more so – his extraordinary determination. And I am firmly on record for being something of a critic of volume housebuilders; sometimes to the point of being downright rude. But are we really saying – against a backdrop of the continued housing crisis and the terrifying drop in new starts in 2023, expected to be down by at least 25% – that UK housebuilders, the so-called “responsible actors”, should now be triple-taxed (viz the general increase in corporation tax plus the RPDT plus the building safety levy for buildings they didn’t build) on top of their own significant commitments to remediate their own buildings? Moreover, if the problem is a shared one, what is the government putting into this pot? M’learned friend Peter Bill always characterises Mr Gove – in some awe and admiration – as “Mike the Merciless“.  And his and my default position on volume housebuilders would be to shrug and say “well, they’re big enough and bad enough…” But three taxes? It is simply eye-watering. This can serve only to strangle off the further supply of homes. Something the civil service would drily describe as a “perverse outcome”.  I cannot be alone in thinking we need a bit more carrot with the stick. Deep sigh. The housing crisis deepens. Jackie Sadek is director of Urban Strategy.  She is co-author, with Peter Bill, of Broken Homes. Britain’s Housing Crisis: Faults, Factoids and Fixes