We can build for Britain – but taxing us £75,000 per flat isn’t the solution

It is a key aim of this new Labour government to build houses, and as the head of one of Britain’s major housebuilders, Berkeley Group, I welcome that aim. We applaud the newly minted housing policy from the deputy prime minister Angela Rayner to break the deadlock in planning and to make sure more homes are built.

She is not the first or the last to voice such hopes. Shakespeare in Henry IV, Part 2 got there earlier: “When we mean to build, We first survey the plot, then draw the model; And when we see the figure of the house, Then must we rate the cost of the erection.”

And there’s the rub. Just the same as it was in 16th-century England, the cost. And, in one word, what our country needs is investment.

Let me keep it simple. We will need £85bn of additional development investment in building new homes to create the government target of 300,000 homes a year, and even more to achieve the new target of 370,000 that Rayner has promised.

And that amount of money comes from a marketplace that believes there is good business in doing the necessary good. This government wants growth and it needs to unlock huge amounts of cash from the world markets to make this happen. That means altering the financial equation when it comes to infrastructure levies.

At the moment, they don’t help build. Too often, the money is diverted into other areas for the local community. Potholes were the last government’s favoured fund diversion. Not that you might think that from driving on our roads.

We can build more GP surgeries, more affordable housing. To be clear, these changes are not to pay the landowners more or increase developers’ return. But we need a greater partnership and cooperation between government and the private sector for the greater good. Break the mould to break the deadlock.

Everything should be brought together to focus on this imperative – more relaxed, quicker planning, less nimbyism, infrastructure levies that relate to the housebuilding project and benefit it, greater investment from international, giant funds.

A truth that Labour is grasping is that you have a strong, vibrant, profitable market that will also increase the number of homes. Then, as Peter Mandelson, back in the Labour inner circle, once said: “Profit is not a dirty word.” While I would agree with him, I would also say that public-private partnership is a vital concept, being focused on outcomes.

For decades, England has not built enough homes. This has led to a slowly building crisis that will take a generation to solve.

In the recent past, a combination of regulatory change, complications in planning, economic headwinds, and a lack of focus on the overriding need to deliver homes and economic growth has meant that the problem has been getting worse, not better.

The industry is consolidating rather than expanding with the volume builders announcing falls in their build rates, several significant mergers on the table, and the major Australian-based Group Lendlease announcing it is pulling its construction company out of the country entirely while recognising billions in losses.

Meanwhile, hamstrung by a lack of new funds and increasing historic remediation costs (to bring existing homes up to current standards), the G15 group of London’s largest housing associations expect to start 75 per cent fewer homes this year than last.

This is the backdrop against which the new government, supported by a democratic mandate for change, has established its mission to build 1.5 million homes over the next five years. The challenge therefore must not be underestimated – however, we believe that it can be done.

Berkeley strongly supports the government’s objectives, and we welcome the first steps taken this week to begin reform to the planning system to make it a reality.

Crucially, the government has challenged the industry to do more to ensure these homes are built. Berkeley is determined to play its full part in this mission, and in response to the government’s challenge to the industry, I have written to the deputy prime minister and the chancellor to outline Berkeley’s plan to start an additional 10,000 homes over the next five years.

These plans include investing more working capital into existing long-term sites to accelerate delivery; securing deliverable planning and statutory approvals for up to 10 major regeneration projects including Bromley-by-Bow Gasworks, a 23-acre brownfield site in east London, as well as the potentially transformative Ladywood regeneration in Birmingham; investing more than £1bn of fresh capital in a build-to-rent programme for 4,000 new homes; and reopening our new land investment programme, having not bought a significant new site in more than two and a half years.

As with the government’s mission for housing, this plan is ambitious but achievable. For either to be achieved, however, government and industry must work effectively together. This means working in partnership across all levels of government, with key regulators such as the Building Safety Regulator, and with statutory consultees of all kinds, in order to work through the practical and economic challenges of each project to find solutions which serve the local community and get homes built.

Significant challenges are still to be overcome. Many economic headwinds still remain. Higher interest rates and mortgage affordability rules have increased mortgage costs and restricted access for many first-time buyers, 36 per cent of whom now rely on support from family or friends for their deposit. Inflation in building costs has now eased, but the steep rises of recent years are not expected to reverse.

Recent regulations on design, energy efficiency, second staircases, biodiversity and much else are individually justifiable, but collectively add costs that must be accounted for by the planning system.

Housing associations need to be recapitalised. Having been asked to do too much with too little on important areas such as energy efficiency and building safety, they no longer have the financial resilience needed to build or buy new homes.

Reduced funding for local authorities has led to the increased levying of charges such as the Community Infrastructure Levy, which funds services across the wider borough often unconnected to the development that funds it, and which are often not associated with new development at all. These charges have reached £75,000 per flat in some areas of London. Costs of this scale are only faced by residential developers, meaning housing cannot compete on a level playing field with other land uses.

For the brownfield homes in which Berkeley specialises, the collective impact of these factors, when combined with the significant upfront costs of infrastructure and remediation, often creates a very real viability challenge, even when all agree on the principle of development.

Brownfield land is the best and most sustainable way of delivering homes, protecting our precious green spaces, and delivering homes and jobs where they are most needed. It is also essential we are able to demonstrate brownfield urban regeneration is delivering to its full potential in order to build widespread support for the necessity of targeted green belt release.

When industry and government work together as a true strategic partnership, these challenges can be overcome. With a strong political mandate for the delivery of more homes, and brownfield homes in particular, I am confident we can raise our ambitions and re-establish the conditions necessary for growth.

The prize for success is enormous. Our plan for 10,000 additional brownfield homes means revitalising often neglected areas and re-stitching them back into the wider community. It means delivering good green homes where those homes are often in the shortest supply. It means making better use of our existing infrastructure, shortening commute times and driving economic growth. It also means contributing close to £7bn to the UK economy, almost £2bn in tax, and supporting 13,000 jobs.

I am under no illusions that planning reform means giving developers an easy ride, and nor should it. However, by carefully working through the challenges and opportunities of each project, and consistently prioritising the delivery of new homes and the amenities local people most want to see, we can raise our ambitions and strive to make the government’s mission on housing a success.

Rob Perrin is chief executive of property developers Berkeley Group