Cllr James Murray; “This figure of £50,000 or £60,000 has not been plucked from thin air.

Published: 26 October, 2012
by ANDREW JOHNSON

ARCHITECTS and developers queued up this week to condemn a £50,000 Town Hall tax on every new home built in the borough, warning it will make house building unviable.

The council’s ruling Labour executive agreed the levy last Thursday, with the money being put in a pot to build affordable homes.

Housing chief Councillor James Murray said the cost was more than affordable for developers, and is designed to shut a loophole which allows them to make no contribution to affordable housing if they build nine flats or less in a single development.

Larger developments have to hand over at least half the homes for affordable housing.
But the borough’s architects and developers said the tax was self-defeating as it would discourage smaller – and so cheaper to buy – developments.

The levy means that a development of nine flats would now cost an extra £450,000. In the south of the borough the levy is £60,000 which would bring the extra cost up to £540,000.

David Gibson, an architect and chairman of the Islington Society, said he welcomed the principle of forcing more contributions to the borough’s chronic shortage of affordable home.

But he added that the blanket £50,000 tax would lead developers to build fewer more expensive homes to offset the cost.
“My objection is that it’s a flat level,” he said. “It’s not a lot of money if you are building flats to sell for £1million. But if you are building flats to sell for £300,000 then it is a lot of money.

“So it is encouraging developers to build fewer more expensive homes, and fewer cheaper flats. The idea behind it is very good. But the council has shot itself in the foot. It’s the wrong thing to do.”

Bill Thomas, a leading architect whose firm Pollard Thomas Edwards, in Graham Street, added: “If you ask me if I like it then I don’t. It represents the entire profit on some developments. I understand entirely what the council is thinking. It’ll make schemes undoable where previously they were doable.”

Islington property developer David Pearl – who appeared as Channel Four’s Secret Millionaire in 2007 – said he hadn’t heard of the plans even though the Town Hall has consulted widely on the proposals.
“I think it’s ludicrous,” he said. “It will kill the bottom end of the market. It’s a joke.”

And developer Spencer Martin added that builders will be hit by a double whammy when the new Community Infrastructure Levy is introduced in 2014. This will be a charge for every new square metre of building space created in a property.

“Fifty or sixty thousand pounds per unit stops the development happening,” he said. “It’s extremely difficult for developers at the moment. We have to give this money upfront, not when the properties are sold. It seems ill-conceived. Social housing is required, and they do need funding for it. But this isn’t the best way of doing it.”

But Islington’s housing chief James Murray vigourously defended the policy. Speaking at the executive meeting last week which agreed the tax, he said: “This figure of £50,000 or £60,000 has not been plucked from thin air.
“There have been lots of studies and it is viable. I’ve been sitting in planning meetings since 2006 and all these plans for nine units slipping from our grasp.

“This is a big step forward. There’s a lot of smaller schemes in Islington and this could raise millions of pounds towards our house building programme.”

He later told the Tribune: “We are saying that all developments in Islington have to contribute to social housing.
“Developers have been building developments of nine units or less and making no contribution. We looked at the viability and it concluded that developers could afford this.”

Lib Dem Leader Terry Stacy said he also supported the proposals. “There has been a consultation and I have never seen anything less controversial,” he said.