Land tax ‘will stifle housing supply’

Amanda Jarvis

April 25, 2006

The laudable intention behind the proposed Planning Gain Supplement (PGS) is that revenue from uplift in land value is collected by the state and used to pay for infrastructure and housing where it is most needed.

In reality, the lack of political consensus means that landowners will hold back potential development land in the belief that the next government will overturn the new tax. It will impose a tax on business expansion and take the means of delivering local development priorities away from local government.

RICS chief executive Louis Armstrong, said: “Due to the long term nature of the planning cycle, landowners can afford to sit on land until it is most advantageous to develop it. PGS is a disincentive to bringing land forward for development and the timing couldn’t be worse.”

“The affordability crisis facing many people today can only be improved by increasing the supply of housing. With the best intentions, the Government is setting out to increase the flow of land available for development but, because of a fundamental misunderstanding of how the development process operates, its proposals are likely to achieve the opposite result.”

BPF chief executive Liz Peace, said: “The current planning system ensures developers and local planners work together for the benefit of their local communities. The PGS proposal removes this vital link between the provision and the local benefit, will discourage development, and will see money disappear into a central pot, rather than being raised and used locally to meet local infrastructure needs.”

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