Andrew White, Head of Public Affairs at Berkeley Group, discusses the need for tax reform to unlock investment for New brownfield housing and tackle the UK housing crisis.

Few can doubt that Britain is not building enough homes. With an ever-growing generation of young people locked out of home ownership, paying escalating rent, or joining the long waiting list for an affordable home, the housing crisis facing the UK demands bold and decisive action. 

The crisis is particularly severe in our most vibrant towns and cities, where economic productivity is highest, where existing infrastructure can be leveraged to greatest effect, and where there is the most brownfield land. Solving the brownfield challenge therefore serves the most urgent housing need, as well as solving many of the nation’s economic challenges.

While many solutions seek to addresses the supply of land, skilled workers, or demand, needed to build new homes, often overlooked is the need to unlock the many billions of pounds of investment needed to bring these new homes to life. To build an extra 50,000 brownfield homes each year, around £60 billion of new working capital must be invested into the delivery of these homes. 

The biggest and boldest step the government could take to unlock this investment, would be to treat it as the investment it is, and allow full expensing of all brownfield build costs. This would boost investment, by finishing the recent reforms to the corporate tax system and bring investment in the built environment in line with other forms of capital investment. 

The corporate tax reforms in question sought to incentivise investment and drive economic growth by increasing Corporation Tax whilst introducing ‘full expensing’ of investment costs. This made it cheaper to invest, by recognising the cost of investment against tax in the year they are incurred, thus making it cheaper to invest in exchange for higher taxes later.

These incentives were not extended to investment into the built environment however, despite little economic difference between investment in machinery to be used for 10 years, and into a transformative brownfield project that takes 10 years to build. Indeed after 10 years, the machinery would be scrapped, and the homes contribute to long-term prosperity for many decades.  

This reform is tax neutral as it only changes when tax is paid not how much, is strongly pro-growth and targeted, as it only provides a benefit when money is invested into building new homes, makes marginal developments economically viable without needing to provide more grant or give up affordable housing. 

This reform is therefore a compelling answer to many of the Government’s challenges as it uses the balance sheet credibility of the UK to leverage private investment in support its core priorities, building new homes, driving investment and economic growth, whilst not making claims on the long-term fiscal position of the UK or compromising on its wider housing objectives. 

There is an unusually broad cross-party consensus for both the need to drive investment into new brownfield housing, and on the principle of full expensing of investment costs: 

Full expensing of investment in machinery led to record numbers of new manufacturing robots installed in British factories, increasing by more than 50%. The Government should repeat this success for brownfield homes and spark a renaissance for urban investment, to drive economic growth and deliver the brownfield homes we all want to see.