Natalie Elphicke: Taxpayer’s HomeBuild – time to unlock the housebuilder in all of us

Natalie Elphicke is a non-executive director of a leading building society and a published policy writer on housing and housing finance with Policy Exchange and the Centre for Policy Studies. She was the first national director of the new Conservative Policy Forum.

 It must be a frustrating time for the Treasury. The most extensive support of housing, home ownership and housebuilding in a generation - and yet the number of new homes being built remains obstinately low and home ownership rates have declined. First-Buy, new Right-to-Buy, Community Right-to-Build and Self-Build, a £10billion housebuilding guarantee scheme, new Help-to-Buy and NewBuy, the Build to Rent Fund, the affordable rent guarantee and the affordable homes programme, Funding for Lending, the law changed to allow a new presumption for development, the planned release of thousands of hectares of public land for housebuilding, some on a ‘build now, pay later’ basis...and the New Homes Bonus for Councils.  Some clever people have dreamt up some complex and whizzy schemes, and made fit-for-purpose some old favourites. Yet Britain still isn’t building. Perhaps it is time for something simple, something tax-free, just to tip the balance. Perhaps it is time to unlock the housebuilder in all of us.

The Taxpayer’s Homebuild

Why not allow every taxpayer to build one house for sale, tax-free - provided that they do it between now and 2016, and provided that the house is sold for no more than £250,000? The Taxpayer’s Homebuild could be aimed at private homes for first time entrants, for a local homeless community, for older people, for your son or your granddaughter, or anyone.  The choice of who you want to build for, what you want to build and who you want to sell to is yours.

We are a nation of homeowners and home improvers. Home ownership matters. Many homeowners have built second homes abroad, in Spain or France or Florida. Let’s harness that culture and that experience and confidence in property with its equity and available cash. The opportunity to earn on average £50,000 or £75,000 tax free.  That’s got to be a good incentive to get on with building.

How would it work?

Taxpayer’s HomeBuild could work as follows:

The taxpayer takes all the private sector risks of development – site, design, planning, finance, build and sale. Once built, and sold, the taxpayer pockets the profit, tax-free, provided the house has a sale value of less than £250,000. Stamp duty is paid in the usual way by the purchaser. One house per taxpayer, with a value up to £250,000.

We have thousands of hectares of public land. The availability of that land to support the Taxpayer’s Homebuild programme would help to prevent a land purchase bubble. In addition, you could expect commercial sites to be sub-divided to provide opportunities for people to deliver Taxpayer’s Homebuild quickly.

This could be more than just for individuals or couples. Friends & Family HomeBuild Building Clubs using up to five individual allowances could work like the earlier forms of building societies. Imagine if you could use money to invest in your grandchildren’s new home, and that, sitting here now in May or June, you could all be celebrating Christmas together in a brand new family home.  Imagine in your local church group if you used your one person allowance together to put together attractive housing for older people in your community.

How much would Taxpayer’s Homebuild and Homebuild Building Clubs cost the Treasury?

The average cost of tax foregone on capital gains tax is likely to be around £15,000 tax per home built.  It could be as low as £10,000 per home. This makes this a very tax attractive scheme compared to many others already launched.

If 100,000 homes were built under the scheme, at an average sale price of £200,000, the GDP stimulus would be around £20billion or 1⅓ % GDP.  The tax cost would be a notional cost of around £1billion - £1.5billion of tax foregone, which is in line with, even a little more cost effective than, the other schemes already announced for a similar sized stimulus. 

In practice the Treasury would benefit from the other taxes on the extra economic activity. It is said that each £ spent on housebuilding generates another £2 spend in the High Street.   

The key advantage of the scheme is that it works with Britons at their best - harnessing the home improving nation. Creating more starter homes and home ownership. You get the tax benefit only by delivering what is needed, and only by harnessing your own skills, money and time to make it happen. If we can be generous in our tax breaks for Star Wars, why not be generous to the hard-pressed British taxpayer?