Builders fear land bank tax
A tax on land banks is understood to be one of the ideas under consideration as part of the pre-Budget report.The housing supply review by economist Kate Barker is next week expected to explore the idea of a tax on land banks as a possible addition to the Treasury's armoury of measures designed to improve housing supply.The Treasury wants to assess the extent of the practice of land banking and its impact on overall supply. In his submission to the review John Muellbauer, professor of economics at Nuffield College, said a land bank tax would help reduce supply volatility.‘Holding land banks is clearly part of the legitimate business strategy of house builders,' he said, ‘Value taxes on land, even at a modest level, can play a useful role in anchoring prices.'He told the Barker review that ‘one possibility worth serious exploration is a land value tax not on occupied residential property but on all other sites', adding that the beneficial effects for the economy ‘should be obvious'.Sarah Webb, director of policy at the Chartered Institute of Housing, said that the Treasury would have to consult widely on the issue.‘There's only so far you can go in understanding this at a purely macro-economic level,' said Ms Webb.She said rumours that the review would also attempt to bolster institutional investment in private sector renting were at odds with the Home Ownership Task Force, which suggested that the vast majority of the population wanted to own their own home.House builders reacted sceptically to the idea of a new tax, saying it ran contrary to indications they had received from Ms Barker herself.Pierre Williams, spokesperson for the House Builders' Federation, said: ‘To our mind it does not make good sense. Even if you do have land holdings you have a tortuous section 106 process and simply taxing developers on land is going to have a negative effect.'A land bank tax would be a double-edged sword for housing associations hoping to play a greater role in developing housing. London & Quadrant and Peabody Trust are among a growing number of housing associations opting to bank land which could be hit by any future tax. Michael Chambers, director of policy at the Royal Institution of Chartered Surveyors, said a tax would be difficult to operate in practice.‘What does it achieve?' he asked. ‘And how will it apply? Would you tax land held for more than a certain period of time? Would it be retrospective or would it be on future land? It's awfully difficult to see how it would work.'No one at the Treasury was available to comment at the time of going to press but it is understood that Ms Barker's report will give a detailed account of housing supply but will not make specific recommendations."