PN 4 - The Government’s Response to Kate Barker’s Review of Housing Supply

5 December 2005

The Government today signalled its commitment to build more homes for future generations by bringing forward an ambitious package of measures to reform the planning system and deliver increased investment in infrastructure to support sustainable housing growth.

The housing boost was set out in the Government’s response to Kate Barker's independent review of housing supply, which was commissioned jointly by the Chancellor and Deputy Prime Minister in April 2003, and which showed that more and more people are locked out of the housing market and unable to find a home to meet their needs

The Chancellor, Gordon Brown said:

“In the last eight years, low inflation and low interest rates have given homebuyers the lowest mortgage rate for 40 years, creating over 1 million new homeowners since 1997. To extend home ownership to another million people in the next five years and take the UK towards the Government’s aspiration of 75 per cent home ownership, Britain must – as Kate Barker recommended – put in place long-term reforms to planning and to the mechanisms by which new housing and infrastructure is financed and delivered in both the private and public sector.”

The Deputy Prime Minister, John Prescott said:

“This ambitious package of measures aims to provide more homes for the next generation so that young families can afford a home of their own and people on lower incomes have access to decent social housing. But building more homes at more affordable prices must also mean building to high design and environmental standards, supported by the right infrastructure - transport, hospitals, schools, parks and leisure facilities. We are in the business of creating sustainable communities -
not just bricks and mortar.”

The Government’s response to the Barker Review sets out its ambition over the next decade to increase new housing supply in England to 200,000 net additions per year, compared to around 150,000 now. Achieving this ambition will bridge the gap with current projections of household formation and improve long-term affordability.

The speed at which this increase in new homes can be achieved will be determined by progress in implementing the Government’s ambitious proposals, which include:

    • reforms to the planning system, with the publication of a new draft Planning Policy Statement for Housing (PPS3) to ensure that local and regional plans are more responsive to housing markets and prepare and release more land to meet future housing requirements. The PPS3 also encourages local authorities to use design codes to accelerate the delivery of high quality
      development;
    • the merger of regional housing and planning functions by September 2006, to ensure regions take a strategic approach to integrating housing and infrastructure requirements;
    • a new and independent National Advice Unit, to be established by autumn 2006, to strengthen the evidence and analysis available to regional planning bodies through the regional planning process, including on incorporating the Government’s long-term objectives for improved affordability;
    • a cross-cutting review into supporting housing growth, in the run-up to the Comprehensive Spending Review 2007 (CSR07), to effectively co-ordinate across departments the strategic delivery of local and regional infrastructure necessary to support additional housing;
    • consultation on the Government’s response to Kate Barker’s recommendation for a Planning-gain Supplement (PGS), to help finance the infrastructure needed to secure proposed housing growth, and ensure that local authorities better share in the benefits that growth brings;
    • a commitment at CSR07 to set out ambitious plans for increasing social housing supply. This will build on the increased funding provided through Spending Review 2004 to help deliver an additional 10,000 new homes a year by 2007-08 compared with 2004-05 ? a 50 per cent increase;
    • consultation in 2006 on local housing and planning incentives into the next spending review period, to ensure appropriate support for those areas delivering high numbers of new homes; and
    • further measures to maximise the environmental sustainability of new housing, including publication of a new Code for Sustainable Homes covering energy, water and materials; consultation on new draft planning policies to help manage flood risk (PPS25); and a new Greenbelt Direction to reinforce Greenbelt protection and prevent urban sprawl.

Housing and Planning Minister, Yvette Cooper said:

"For years the nation has failed to build enough homes to meet our housing needs. Our ageing and growing population means that we need more private as well as social housing. However, the level of new homes we are proposing today still falls far below post-war building rates up to the 1980s.

"The evidence is clear - if we fail to increase the number of new homes, then within 20 years, less than a third of thirty-something couples will be able to afford to buy a home of their home or one in three of today's 10 year olds."

"We have provided a clear framework of action to help ensure that future generations have the opportunity to live in a decent home they choose to buy or rent. But Government alone cannot be responsible for providing high quality homes in sustainable communities. The challenge is for all of us - housing developers, local authorities, architects, planners, and local communities - to ensure we deliver a housing legacy to be proud of.”

UK Real Estate Investment Trusts (UK-REITs)

Following Kate Barker’s recommendation, the Pre-Budget Report announces that the Government will bring forward draft legislation to establish UK-REITs for inclusion in the 2006 Finance Bill. Details of the tax proposals will be published by HM Revenue and Customs before the end of 2005 and will include the following key features:

    • the regime will be open to companies, resident in the UK, that are publicly listed on a Recognised Stock Exchange;
    • companies or groups that meet the UK-REIT eligibility criteria as set out in legislation will not pay corporation tax on qualifying property rental income or qualifying chargeable gains; and
    • a requirement to distribute at least 95 per cent of net taxable profits on rental income to investors, who will then pay tax at their marginal rate.

The Government remains committed to ensuring no overall loss of revenue from the introduction of UK-REIT legislation and will announce at Budget 2006 final details of the conversion charge applying to companies joining the regime.