HBF warns Kate Barker against ‘rigging’ the land market in favour of office developers or housing associations
The HBF has gone on the offensive. In its second submission to the Barker Review it has warned the government not to “rig the market” in favour of competitors such as commercial developers and social housing providers.

Housebuilders are worried that Barker will suggest giving incentives to commercial developers and RSLs to enter the market. In its submission, the HBF says it doesn’t mind the prospect of more competition, “as long as it is on a level playing field”.

The HBF wants potential new competitors to be subjected to the same planning system, building regulations and tax legislation that its members face.

The federation takes issue with Barker’s suggestion that RSLs could take a greater development role especially if it can provide all the tenures. It is scathing of Barker’s assumption that RSLs may be better able to create mixed communities than housebuilders. “No one has a monopoly of wisdom in planning large communities,” says the HBF submission. “Housebuilders would not claim expertise in the social rented sector, but nor could most housing associations claim expertise in market housing.

The question of brownfield land is also a vexing one. The Barker interim report, published in December, mentions housebuilders’ “aversion” to brownfield development. The HBF has responded by saying that there are good reasons why its members won’t develop every square inch of urban land. It says that there is often little local demand and that brownfield land is costly to develop.

It also points out that under current planning rules there is not enough brownfield stocks to maintain the level of housing the government requires. Unless the planning rules are modified to make brownfield development more attractive, the HBF argues, local authorities will have to release more greenfield land for housing targets to be met.

The HBF is particularly critical of the government’s policy of encouraging housebuilding in rundown northern inner cities by restricting the supply of greenfield sites in buoyant areas. The HBF says this will lead to an inevitable shortfall in housing as the complex nature of brownfield development means that it will take years to make up the shortfall created by the reduction of greenfield sites.

Barker’s comments on tax have also worried the housebuilders. Her interim report states that it would be desirable to tax uplift in land values arising from planning permission. The HBF argues that its members already have to pay VAT – usually 4% – when they buy land. Landfill tax, aggregates levy and the climate change levy and section 106 demands are also cited as further government-imposed costs that come out of land value. The HBF says that gains from planning permissions are not a “tax-free windfall”.

The Barker report suggests that VAT on new homes should be equalised with repair, maintenance and improvement – another measure opposed by the HBF. It says that VAT on new homes would have a catastrophic effect on housing supply. It also disagrees with Barker’s notion that there could be different rates of VAT for greenfield and brownfield development. It says that deciding what was and wasn’t brownfield would be too difficult, as sites are often a mixture of the two. It also claims that complex greenfield sites often have potentially higher infrastructure costs than brownfield sites, and so it would be wrong to put higher VAT on greenfield sites.

The HBF has also responded to Barker’s accusation that developers deliberately hold back housing supply to keep prices high. The interim report stated that housing on large sites was “trickled out to the market over extended time periods.” The HBF says that such an approach is not in the housebuilders’ interest because of the City’s focus on return on capital. If a housebuilder sat on a large stock of undeveloped land, the return on capital would be diluted and the company’s share price would suffer as a result.

The HBF does, however, admit that a housebuilder may hold back new housing on individual developments. It argues that the local housing market would be in danger of collapsing if a developer were to release all its new properties on to the market at the same time.

It will be interesting to see how much effect the HBF’s lobbying will have on Barker’s final report, which is due in the spring. What is clear is that the HBF continues to be one of the most vociferous trade associations in the construction industry.