The cost of complying with government regulations and taxes can push up the cost of a new home in London by 57%, according to new research.
A report by the The Centre for Policy Studies (CPS), Easing the Burdens: How government policy blocks new homes, evaluates the minimum viable price of a new home within a housing development and the costs that go into building it.
The researchers behind the report, investment professional Edward Donovan, and CPS’s head of housing and infrastructure, Ben Hopkinson, say it highlights the failure of recent governments to address the regulations and taxes making house building uneconomical.
It contains a model of a brownfield apartment scheme in London which suggests that taxes, obligations and mandated requirements account for 57% of the price a new flat must achieve before anyone will build it. For a greenfield housing scheme in the Home Counties, the figure is 42%.
The report suggests that a 100-unit scheme of 700sq ft two-bed flats built on brownfield in Inner London, must currently be priced for around £775,000, but without any government intervention, it claims the market clearing price could be less than half that, at £333,000 per flat.
The report suggests the additional £442,000 difference is composed of affordable housing obligations, mandated build additions, such as a balcony, dual-aspect, second staircase, and biodiversity net gain requirements, corporation tax, stamp duty, and the Residential Property Developer Tax, other taxes/levies, including the Community Infrastructure Levy and landfill tax, and planning costs.
The model also suggests that a Chelmsford greenfield development of 100 three-bed houses must sell for around £535,000 to be viable, but without government inventions it could be £311,000.
Shadow Housing Secretary Katie Lam MP said: “In far too many cases, it simply isn’t financially viable to build the homes that we need in the places where people want to live. As the figures in this excellent report show, this isn’t because we’ve forgotten how to build – it’s because of the endless taxes and regulations which have been piled on by the government.
“We should all want to live in a country where people can afford to move house, whether that’s people getting onto the housing ladder, scaling up, or downsizing later in life. To get there, we need to make building viable again, including by scrapping Stamp Duty, and cutting ideological net zero regulations, which impose expensive add-ons to every new house.”
Separate research, published this week, accuses the government of “geographical inequality” with regard to the price caps for the Your First Home scheme.
