Tax breaks to boost supply of homes

In his Budget speech on Wednesday, the chancellor launched a consultation on low-tax investment vehicles that could provide housing associations with extra money to invest in rented housing at market prices.

The Barker Report also backed the property investment trusts.

Under one model, the trusts do not pay tax on their profits as long as they distribute 90% of them back to their investors.

Ian Fletcher, director of residential property at the British Property Federation, said this model would work for homes rented at market rates, but would need help through the planning system to boost the supply of low-cost homes.

The consultation ends on 16 July.

Barker also recommended financial incentives for councils to encourage housebuilding.

Councils could gain £125m a year through one measure.

Under this plan, council tax from new homes would be ignored by central government when calculating councils' grants.

Grants are normally reduced if council tax income goes up.

A second proposal would peg grants to future housebuilding levels rather than the existing number of homes, to cover the services needed by the occupants of the new homes.