UK Chancellor of the Exchequer Gordon Brown has firmed up government plans on a number of property issues that had been hanging in the balance.

In December’s pre-budget report, he announced that:

- a consultation will be carried out on the introduction of a planning gain supplement - a tax on the uplift in land values after planning permission has been granted.

- residential property will not, after all, be allowed to be included in self-invested pension plans (SIPPs) from April 2006.

- real estate investment trusts (REITs) will be included in the forthcoming Finance Bill and are likely to be introduced this year; they will provide a way for people to invest in residential property via pension funds despite the u-turn on SIPPs.

- shared ownership schemes will be expanded.

- local authorities will be obliged to accelerate planning consent for housing on brownfield sites.

The RICS says that while the idea of harnessing some of the uplift in land values to fund local services and infrastructure is laudable and viable, a simple tariff would be much more practical than the proposed planning gain supplement. The RICS wanted a range of options to be consulted on and feels that the current plans show a fundamental misunderstanding of how land markets work.

The CBI also voiced concerns about a planning gain supplement. Director-general Sir Dibgy Jones said “Any new land development tax, however the proceeds are spent, could undermine the aim of increasing the supply of housing, and could make some developments uneconomic.

In particular, a planning gain supplement would make development of more complex or more risky sites, such as larger brownfield sites, less attractive to developers. Areas of low prosperity most in need of renewal could be made less viable for development.”

In relation to the governments shared-ownership plans, the RICS believes that the scheme is too small to have any real effect. While it will help a small fraction of first-time buyers, the scheme will account for less than 0.5% of transactions each year, benefiting only 20,000 buyers over a period of five years.

Instead the RICS suggests that the government should be looking to drastically increase housebuilding, through both public and private sector provision. The organisation cites the decline in government-sponsored housing over the last 20 years as the more important factor in the affordability crisis for those most in need.

Source : RICS Business - Jan 06 issue