Too many obstacles to providing affordable homes
Writing for City Matters, BKL property partner Jason Appel urges the UK Government to give more incentive to property developers.
There are more than 179,000 people homeless in London, a fact recognised by property developers keen to create social housing. But the headwinds they face to meeting this huge need remain formidable. This is due to a combination of absent tax breaks, high land values, and rent affordability.
Meanwhile, local authorities are spending £1billion a year housing the homeless, often in unsafe and sub-standard accommodation. And that particular problem is getting worse.
The number of people without a roof over their heads is projected to rise by 12% a year in the Capital. There are ways the immediate housing problem could be eased, and they start with taxes.
The lack of government support through the tax system to encourage housing that meets a socially desirable need is striking, particularly when compared to the support given to other areas of the economy.
Tax breaks are vital if the crisis is to be eased, because even thinking about providing socially valuable housing as part of commercial developments in a city where land values are very high is problematic.
It is often simply uneconomic to put forward a proposal in London that has more than the minimum affordable homes component. In fact, land values are so high that it is hard to see how London Mayor Sadiq Khan will come close to meeting his ambition for half the properties in new residential developments to be affordable.
Tax breaks would be transformative, and not providing them is a short-sighted saving. Support could not just encourage developments for the homeless, but also for particular types of socially useful accommodation, perhaps sometimes with on-site welfare and medical services.
It makes sense for the wider economy to develop homes where people can live longer, independent lives.
The issue of affordable housing is not one that can be ignored for much longer. The next decade is expected to see, even require, £44billion to be spent on housing as the population ages, grows and separates.
For example, 1.5m Britons over the age of 50 now live alone, a figure projected to rise to two million within six years. Now is the time to act as these societal pressures rise, not after they arrive.
In this context of what is predicted alone, the lack of socially useful tax support to encourage investment in construction and development is surprising.
There are some important steps the government could take, such as relaxing rules surrounding the Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS). It is a puzzling anomaly that has left property development excluded from the benefits of both tax breaks.
The rules on VAT could also be changed to allow all the VAT costs relating to the creation or conversion of dwellings for the rental market to be reclaimed.
There is no Treasury magic bullet, of course. But many of the problems with the supply of housing in London could be eased considerably by an imaginative use of the tax system to encourage developers and the construction industry.
As it stands, the sad and very visible reality of homelessness, or the changing shape of housing needs in London and elsewhere, is not going to be relieved any time soon without dramatic and direct action from central government.
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