Pay land banking tax say town planners

Developers that are slow to build homes and shops on land for which they have already gained planning permission should be taxed to discourage them from manipulating the property market, according to the Royal Town Planning Institute (RTPI).
The RTPI believes a ‘Land Banking Levy’ is needed to discourage developers, particularly in the housing and retail sectors, from putting off building.

It is warning that the credit crunch and subsequent cooling of the housing market could lead to housing developers - some of which have enough plots with planning permission on their books for more than four years of construction – delaying construction projects while they wait for market conditions which promise fatter margins and bigger profits.

A recent report by the RTPI revealed that house builders have banks of land with planning permission of close to 14,000 acres, enough for 225,000 new homes.

However, despite having this resource at their disposal, in January the number of homes being started by developers fell by 39 percent year-on-year.

The RTPI believes the Government must step in to reverse the slide or face the prospect of failing to meet its housing targets.

Similarly, the Competition Commission recently expressed concern that land holding by some retail developers was restricting retail competition.

At present only very blunt tools such as compulsory purchase can be used against developers who fail to utilise their planning permission in an appropriate time-frame, which is why the RTPI is today (Monday) calling on Chancellor Alistair Darling to introduce a ‘Land Banking Levy’ to act as a new weapon with which to discourage developers from deliberately putting off construction for their own financial benefit.

Under the Levy developers with planning permission on large scale housing or retail sites would have to enter a covenant with the local authority which obliges the developer to complete a pre-determined number of homes or a proportion of overall construction by an agreed date.

The target set for completion would be calculated as a percentage of either the total number of homes to be built at the site or as a percentage of the overall value of the project.

Failure to meet the target would mean the developer would have to pay a ‘Land Banking Levy’ to the local authority.

The size of the Levy would be calculated as a percentage of the projected final value of the development.

RTPI Secretary General Robert Upton said: “A number of developers are sitting on vast tracts of land for which they’ve already gained planning approval and we believe they should be strongly encouraged to use it.

“There is a rapidly growing need for housing in the UK which will not be met if housing developers feel they can withhold land until the market heats up again and their margins fatten.

“Introducing a ‘Land Banking Levy’, which would penalise the companies that fail to use their resources in a timely fashion, would go some way to preventing developers from cynically manipulating the housing market and would give more people the opportunity to get a foothold on the property ladder.

“It would also discourage anti-competitive practices between retailers.”