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Building a Better Future for the Construction Industry

The hidden costs of planning: council tax   26th April 2017

Members of the House Builders Association (HBA) - the house building division of the National Federation of Builders (NFB) - have worked closely with Government to deliver policies ensuring better place-making such as neighbourhood planning. However, the actual cost of the planning process remains an impressive obstacle yet to be tackled in a meaningful manner.

Whilst preparing our reply to the Government’s Housing White Paper, the HBA would like to draw attention to the hidden costs facing house builders when building the homes that the UK desperately needs. In our first instalment, we will be analysing council tax.

Council tax

Three months before a building’s expected completion, local authorities typically serve a council tax notice. Council tax is then levied when dwellings reach their ‘completion date’. Nevertheless, developers regularly find that those charges begin before any fundamental services or utilities are even connected.

In Devon, an HBA member paid £12,142 in council tax charges on a site of 40 units. Although no council services were utilised, council tax charges were levied as soon as roofs were completed. The same developer decided to stop furnishing show homes, after it was billed £20,000 for non-domestic council tax rates.

The same story repeats in other parts of the country. In Suffolk, an HBA member paid £19,821.14 in non-domestic council tax rates, as well as £14,141.98 in council tax bills for unoccupied properties. Such a trend has discouraged this builder from building homes speculatively at a time when house building needs to be encouraged.

Many members have also questioned funding allocation. Despite receiving detailed and fully-compliant plans, local authorities cite underfunding and under-resourcing to explain their inability to decide on planning permissions within the statutory 13-week period. Yet their council tax investigators seem quite capable of tracking sites on a daily basis.

The UK is experiencing the most acute housing crisis since the 1940s. The industry is fully committed to deliver the 821 new homes a day we need to tackle the gap between housing demand and supply, but a realistic approach is required.

Excessive council tax charges prevent SME developers from playing their part. Many SMEs have changed their business model because of them, whilst new entrants struggle to understand how any business is expected to grow or even prosper in such a predatory regime.

Despite the premature and unfair council tax charges, HBA members are still playing their part in addressing the entire housing supply challenge and their contribution should not be underestimated.

Our member in Devon has fostered long-lasting relationships with housing associations and community land trusts with excellent results. Leading in design, in 2016 they completed a site of Passivhaus homes to better understand innovation in the house building sector.

Our member in Suffolk is also no stranger to housing association homes and custom build. However, the cost of planning and the burden of financial risk have become too great for them to deliver their customers’ favourite speculative bungalows.

HBA’s view

Although not all local authorities are equally predatory, the existing system is unfair and disproportionately impacts those very stakeholders who can take the UK out of its current housing crisis. It penalises the delivery of new homes and has a negative impact on their affordability.

Local authorities should be prevented from imposing council tax charges on brand new homes under construction, especially when no direct council services are being provided.

The planning system used to be an administrative process, led by experts in tackling the shortage of housing supply. Unfortunately, in 2017, it is regulatory mountain where only those developers who can afford to absorb huge risks survive.

If we are to deliver the homes that ordinary people need, we must have a planning system that is fair, proportionate and universally accessible. The system ought to favour greater house building and better place-making, rather than creatively taxing those SME developers who are the beating heart of the industry.
  

 

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