February 2018

Plans For A Tax On Undeveloped Land ‘Absolutely Bonkers’

The Welsh Government says the aim of its new tax is to make sure idle land is put to use.

A proposal to tax undeveloped residential land has been described as “absolutely bonkers” by a property consultant.

Stephen Wade, director of property consultancy Legat Owen, said it was “ridiculous” to believe that developers pay for land and then deliberately hold back from developing it.

Mr Wade was reacting to a Welsh Government announcement that it would bring forward a vacant land tax as the first of a possible four new taxes being considered under its new tax powers.

Finance Secretary Mark Drakeford said the aim of the new tax was to prevent land banking and make sure idle land was brought into use within a reasonable timescale.

But Mr Wade said the rate of house building in Wales was already falling behind England and the new tax would only act to deter developers from investing in Wales.

He said:

There may be the occasional case where for commercial or market led reasons that a scheme stalls but in most cases it’s down to delays with planning or utility connections. Ask any house builder and they will tell you that utility connections are a nightmare. This is where Welsh Government should be targeting improvements.

If the Welsh Government are really serious about increasing house building in Wales then they need to start to listen to the people building the houses. This tax won’t help the case it will make it worse by deterring more developers from looking in the first place.

Stephen Wade, Director, Legat Owen

Mr Wade’s words were echoed by Chris Sutton, lead director of property agency JLL in Cardiff. He said he wasn’t aware of any largescale examples of speculative land banking.

Mr Sutton pointed to the length of time it has taken to bring the area adjacent to Dumballs Road, south of Cardiff Central station, into development and questioned whether a vacant land tax would have made any difference.

He added:

Vacant land tax seeks to encourage development by penalising under-use but does not improve development viability. I believe it would be unpopular and seen as an increase in taxation rather than a shift in the base of tax.

There are other ways to incentivise new development – a longer period of exemption from business rates for new development, reduced stamp duty (soon to be land transactions tax), simplified planning, reduced planning gain etc.

Chris Sutton, Land Director, JLL

A Welsh Government spokesman said:

This is the very start of the process of developing a new tax.

The policy objective of a vacant land tax would be to bring idle land into productive use – this could include land which already has permissions associated with it or is within the local development plan, but is not being developed.

The idea is not primarily focused on revenue raising. Rather, it would focus on incentivising more timely development by making it more expensive to hold on to vacant land, which has been identified as suitable for development.

Welsh Government Spokesman