Development taxes 'hold back housing market'
The process of building enough homes for old people is stymied by the ongoing imposition of development taxes such as Section 106 and CIL charges, thinktank Demos has claimed.
Research by the body, carried out in response to the government's housing white paper published earlier this year, found that such taxes encourage developers to focus their efforts on producing starter homes, with a corresponding deficit in the number of homes being built for older people.
More of the latter would enable senior citizens to downsize more easily, helping free up larger homes for families to move into as owner-occupiers, thus reducing their reliance on the private rental sector.
The thinktank has suggested that various tax changes could ease the situation. Among these are stamp duty exemptions for older people looking to downsize, as well as more practical help with moving and 'try before you buy' schemes.
Overall, however, it said the supply of new homes for older people is too low, with around 7,200 being built each year when 30,000 are needed. This comes at a time when three million over-65s wish to move into retirement homes, something the majority are not able to do.
This is exacerbated by a lack of new developers coming into the market to build homes for older people, with many smaller firms focusing on using the incentives available for the first-time buyer and help-to-buy sectors.
Studying real-life scenarios in London, Birmingham and Leeds, the study found that when retirement properties are built, it makes a major difference to the supply of family homes. Describing this as a "domino" effect, it noted one case where a complex of 41 homes sparked 92 house moves as older people were able to downsize, which helped oil the wheels of the housing chain for younger people, including families.
Demos director Claudia Wood said: "By tackling local charges, and encouraging developers to build enough to meet demand among older people eager to move, the government will also be helping first-time buyers and families by freeing up property all the way down the housing chain. It’s a win-win situation."