Prologue to the Reeves Tale

There is a wholesome logic in the suggestion that a housing development should first be undertaken in built up areas. In built up areas there is greater demand, more facilities, more availability of services and better public transport. Density of development can be greater too.

The issue is that sites for housing in built up areas are very often small, involving demolition of an existing building in order to develop at a higher density. Such sites carry a high Existing Use Value (EUV) and while they may be ideal for development of housing, the value of such sites does not exceed EUV. This means simply that the developer’s ‘bid’ for the site is too low to entice a sale. This issue has been made worse by the imposition of the SDLT surcharge and Community Infrastructure Levy making it impossible for the development ‘bid to exceed EUV.

SME developers are those who take on small sites in urban areas. They are the ‘carrion’ of the industry who feed on obsolete and derelict buildings. They are adept at sourcing potential sites in their local areas. They often build to a higher quality than national housebuilders and small sites are so much quicker to complete. Their developments are designed to ‘fit in’ with existing architecture.

While SME housebuilders might build between one and twenty houses on any site, there are potentially many SME housebuilders. Policies designed to promote these SMEs would make a significant impact on the development of new homes in built up areas.

It is no good eliminating SDLT for first time buyers. This would have the effect of increasing the price of housing to first time buyers. The better policy would be to eliminate the SDLT surcharge to SME developers. This would be a supply side stimulant allowing SME developers a better chance to increase their ‘bids’ for sites above EUV and to acquire sites in built up areas. In addition erasing Community Infrastructure Levy for small redevelopment sites would allow SME developers to increase their ‘bids’.

Housebuilding is a wonderful accelerator of the economy. If these changes are made, any shortfall in tax would soon be made up by increased economic activity.