Task force challenges VAT on housing

16 Jul 98
Calls from housing organisations for a re-think on the way VAT is charged on property refurbishments received a boost this week with support from the chairman of the government's Urban Task Force.

17 July 1998

In a prospectus setting out the group's terms of reference, the eminent architect Lord Rogers said his committee would examine ways of removing disincentives to urban development. As Public Finance went to press, Lord Rogers was also due to tell a conference of the Urban Villages Forum that there should be a shift in the financial 'playing field' from rural areas and towards towns and cities.

The prospectus said: 'The redevelopment of large areas of recycled urban land in English towns and cities provide a significant opportunity to get things right. We must avoid the mistakes of the 1960s and 1970s by working with the inhabitants of our future urban communities.' The belief that building in the country provided better value than consolidating urban neighbourhoods was 'mistaken'.

The National Housing Federation (NHF) has consistently sought a lower VAT rate for refurbishment to social housing. Construction costs for new housing are zero-rated for VAT, while repairs and refurbishment are subject to the full standard VAT rate of 17.5%. The NHF argues that lowering the rate would be consistent with an EU directive which permits lower VAT rates on existing homes 'as part of social policy'.

The issue is central to the debate over how to provide the estimated 4.4 million homes needed by 2016. Housing and environmental groups have argued that the VAT disparity means there is little incentive for existing homes to be refurbished. And the government wants to increase the proportion of homes on brownfield sites from 50% to a minimum of 60%.

Lord Rogers' investigation will also explore different models of procurement and 'innovative' use of the Private Finance Initia-tive and Public Private Partnerships. Ways to help public bodies such as councils, the Housing Corporation, regional government offices and development agencies 'achieve a more strategic approach to allocating res-ources' will also be examined. n

Urban Task Force Prospectus, free from Department of the Environment, Transport and the Regions on 0870 1226236


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