United Trust Bank: Brown’s housing reforms great news for developers

The new Prime Minister Gordon Brown announced the government’s new housing bill last week, vowing to increase the country’s house-building programme by 20% to create an extra 3m homes by 2020.

Ok, the cynical among us will say, ‘we have heard it all before’ and that increasing the existing target of 200,000 new homes per year by an extra 40,000 is unattainable given the current annual shortfall is estimated at nearly the same figure.

However, there is a glimmer of hope for the sceptics. It seems for the first time that the government may be recognising that simply creating a policy is not enough to remedy the current housing crisis; the key is affordability, and some form of coordinated energetic response.

The government’s apparent move away from plans to tax land owners at the point planning permission is granted is good news for developers. Providing they stand firm on this, developers could increase their profits and see a faster return on their investments.

This announcement is well timed. Rising rates are clearly increasing the risks for developers, and sending up holding costs through the long planning process. While there has generally been lots of money available from banks and building societies, it has been the steadily rising prices of homes for first time buyers and young families that keep young people out of the market.

The government needs to intervene to establish plans for vibrant new communities, which include schools, hospitals and transport. What we need is some joined up thinking and comprehensive regional plans for the long term. If government cannot plan forward 20 years, how can they expect investors in houses or new covered bonds, to want to buy 20 year assets.

And a government that coordinates and plans new communities will get the tax revenue from commercial developers who will buy sites in these new communities.

Brown may have broken with tradition by setting out his plans for the next session, but if these plans don’t turn into action, the price of basic housing throughout the UK will continue to rise beyond the reach of ever more first time buyers.