Two new property taxes announced by Housing Secretary

The government has given details of two new taxes to provide funds to address the cladding problem on high rise tower blocks and lower sized apartment blocks.

Firstly there will be a so-called Gateway 2 developer levy. This will be targeted and apply when developers seek permission to develop certain high-rise buildings in England; the Ministry of Housing Communities and Local Government has not yet specified the criteria of buildings to which this levy will apply.

Secondly there will be a new tax for the entire UK residential property development sector - that is, volume housebuilders. This will raise at least £2 billion over a decade to help pay for cladding remediation costs. 

An MHCLG statement says: “The tax will ensure that the largest property developers make a fair contribution to the remediation programme, reflecting the benefit they will derive from restoring confidence to the UK housing market. The government will consult on the policy design in due course.”

The government says it will also “protect future generations from similar mistakes” in the design and cladding of tower blocks by bringing forward legislation this year to tighten the regulation of building safety and to review the construction products regime “to prevent malpractice arising again.”

These taxes and laws come on top of the proposed £3.5 billion added to an existing £1.6 billion of public money put aside to address cladding problems in tower blocks over 18 metres in height. 

Controversially, Housing Secretary Robert Jenrick says funding to address cladding issues in lower rise blocks will be in the form of loans to existing leaseholders - these will be repaid by the leaseholders with a government pledge that they will be capped at £50 per month.

Jenrick says: “Remedying the failures of building safety cannot just be a responsibility for taxpayers. That is why we will also be introducing a levy and tax on developers to contribute to righting the wrongs of the past.

“These measures will provide certainty to residents and lenders, boosting the housing market, reinstating the value of properties and getting buying and selling homes back on track. We are working with lenders and surveyors to make this happen.

“Our landmark intervention will make homes safer and free those who did the right thing – saving for years to get on the property ladder – to enjoy the homes in which they have invested so much.”

But at least one developer has given the tax proposals short shrift.

Andrew Southern, chairman of property development firm Southern Grove, says: “Taxing developers, most of whom weren’t responsible for the cladding crisis, is just laughable. 

“Why should a company that has never installed dangerous cladding, and perhaps never built high rise blocks in the past, be tarred with the same brush and penalised when they’re no more responsible for this scandal than those in other sectors building cars, running our hospitals and educating our children?

“This sort of regressive tax will only stagnate housebuilding, which is the exact opposite of what the UK needs. By applying it only to the largest developers building the tallest buildings, it will also disincentivise creation of housing in the high density areas that are badly in need of new stock.”