News: New homes plan jeopardised by political games

The government’s proposals for a new land tax could jeopardise efforts to build more affordable homes, experts have warned.

The Treasury is set to bring in the planning gain supplement (PGS) in a bid to release some of the increased value from land when it is sold for development.

The laudable intention behind PGS is that revenue from uplift in land value is collected by the state and used to pay for infrastructure and housing where it is most needed.

In reality, the lack of political consensus means that landowners will hold back potential development land in the belief that the next government will overturn the new tax. It will impose a tax on business expansion and take the means of delivering local development priorities away from local government, said the experts.

The views were presented by the British Property Federation and the Royal Institution of Chartered Surveyors at a Office of the Deputy Prime Minister Select Committee Inquiry into the PGS, held this week.

"With the best intentions, the government is setting out to increase the flow of land available for development but, because of a fundamental misunderstanding of how the development process operates, its proposals are likely to achieve the opposite result," said Louis Armstrong, chief executive of the Royal Institute of Chartered Surveyors (RICS).

"The current planning system ensures developers and local planners work together for the benefit of their local communities," said British Property Federation (BPF) chief executive Liz Peace. "The PGS proposal removes this vital link."

Other witnesses also expressed concerns that PGS, if collected centrally, would remove the ability of councils to demand on-site affordable housing.

Prof. John Hennebury, professor of property development studies at the University of Sheffield said: "Local authorities overwhelmingly like to see an on-site contribution.

"If they get an off-site contribution they are bidding against local house builders who have already bought most of the land."

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