Boost for small builders

Midlands set to benefit from the government change to section 106 contributions.

Birmingham’s leading residential property agent, Knight Frank has welcomed news from the Department for Communities and Local Government that it is to cut taxes for small housebuilders – a move which the agent believes could reignite development across the scores of small sites that have lain dormant for over six years.

The Government’s autumn statement confirms that national planning policy will be changed to exempt developments of ten homes or less from planning obligations imposing contributions towards section 106 affordable housing.

Section 106, part of the town and country planning act, is primarily aimed at securing ‘developer contributions’, usually towards affordable housing. Although the financial benefits have greatly aided local authority’s budgets, the obligations hamstrung many small and medium size housebuilders by increasing the cost of building a new home by up to £140,000.
Announced by Eric Pickles as a move to “boost the country’s small housebuilders”, it is hoped the tax cut will help restore the sector which was heavily hit in the 2008 economic crash and saw the number of small and medium sized housebuilders registered in the UK halve from 6,167 in 1997 to 2,382 by 2012, according to figures from National Housebuilding Council.

David Fenton, Head of Regional Land at Knight Frank, said: “Smaller regional housebuilders became an endangered species in recent years. Certainly our client base had over 20 private independent housebuilders on our books pre-2007 and one by one we saw them go to the wall, until now just a handful remain. The industry – and certainly most of the government’s efforts in rejuvenating it – is now largely made up of the main PLC housebuilders alongside privately owned housebuilding groups such as Bloor Homes. Entrepreneurial builders were decimated.

“Of course, the knock on effect to our towns and cities is scores of sites which aren’t large enough to be of interest to these major players but which cause blight to our landscape. We’ve become accustomed to these plots with their tired hoardings and heras fencing. This announcement, which has been under consultation for several months, will trigger development to start again on this land and is welcome news for the entrepreneurial builders across the country.”

The national housebuilding industry has been a source of encouragement for the coalition. NHBC figures show that the volume of new homes registered in the West Midlands with NHBC was up 37 per cent in 2013 from 2012 – the highest number since the beginning of the downturn with 10,535 homes registered. This has been largely attributed to Government schemes such as Help to Buy, a scheme which primarily helps the PLC housebuilders rather than the beleaguered small enterprises.

With these NHBC figures still a long way from pre-recession levels, Knight Frank believes this latest announcement could be the final step to restore the market and could have an immediate impact on the industry, with speculators who have been holding their breath on sites across the Midlands now willing to sell or build them out again.