‘Golden brick’ reforms will specifically help for-profit providers, says MP

Mr Reader is campaigning for this VAT relief to be given earlier in the development process, which he said will “get capital moving through the system quicker” and speed up social housebuilding.

If a council has already sold a specific plot of land for social housing, “why can’t you realise the VAT relief earlier?”, he asked.

The MP said the sector needs both non-profits and for-profit providers to deliver new homes as quickly as possible. He added that speeding up VAT relief would also help registered providers who are taking on homes built by a house builder under a Section 106 agreement.

Housing associations often delay their land purchase until construction reaches ‘golden brick’ to ensure the sale is VAT-free. As well as delaying cashflow for the house builder, this has implications for housing associations because many grants and loans cannot be drawn down until the association owns the land.

House builders, registered providers and Octopus Energy have all backed Mr Reader’s campaign to reform the ‘golden brick’ policy, which the MP said comes at “zero cost” to the Treasury.

Alongside the Autumn Statement, the Treasury confirmed it would consult on reforms to the policy. It is launching a consultation this month, Mr Reader said.

“[The] Treasury is supportive but they want to make sure there is the broadest support from the industry,” including smaller developers, he said.

Officials will also call for evidence that moving the mechanism will genuinely speed up housebuilding, especially for SME builders. The Treasury also wants to explore where in the development process the VAT relief could be brought forward to. 

This could be at the point when land is sold, or in the planning process. “Land sale seems too easy,” Mr Reader said. “I think you can do it at planning gain,” he added, although the Treasury is concerned about changes of use when a site is switched to a different tenure. 

“The chances of fraud are extremely low”, Mr Reader said, and councils could notify government if a change of use takes place. The speed and cashflow benefits would outweigh any “bad eggs”, he added.

“What’s really important is we get cash moving through the system to build social and affordable homes quicker,” the MP said.

In fact, changing the policy might give developers less room to “argue down” the proportion of affordable homes on their schemes on viability grounds, thereby ensuring more social homes are built.

Mr Reader admitted that there is “not much, if any benefit” in reforming the policy for local authorities, which have a different tax regime. But developers and for-profit registered providers will get a significant proportion of land value back earlier to reinvest, he added.

Last month, the director of Homes England said that changes to grant funding rules will give for-profit registered providers another “welcome boost”.

The government has also announced time-limited plans to convert unsold Section 106 homes into private sale or rent when developers have not been able to find a registered provider to buy the affordable homes.