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Government strives for housebuilding boost under new plans

Housebuilding is set to receive a boost after reports that ministers will next month unveil a package of measures to invigorate the sector.

According to the Financial Times, the plan – being driven by policy chief Oliver Letwin, housing minister Grant Shapps and treasury chief secretary Danny Alexander – is understood to use the government’s balance sheet, and relax section 106 requirements, to boost activity.

Section 106 agreements often require builders to dedicate a proportion of investment to infrastructure and affordable housing.

Reform of section 106 has been high on the agenda for many housebuilders as the sector stagnates. They say the variable requirements across the country create uncertainty for investors.

The Department of Communities and Local Government yesterday announced 10 councils that would serve as pilots for a mediator scheme to help developers negotiate section 106.

In what the FT dubbed “the Letwin plan”, the government will also underwrite housing association bonds housing, slashing borrowing costs, and would encourage private housebuilders to collaborate with associations, while boosting Firstbuy and Newbuy.

The paper also reported that initiatives to provide relief for mortgage interest were no longer being considered.

Federation of Master Builders chief executive Brian Berry said: “It’s really good that the government’s starting to focus on the housing market as a solution to economic growth – full marks there.”

“Review of Section 106 agreements is long overdue – a lot of those agreements were negotiated during the recession, and developers are having to fulfil those obligations in a very different economic climate. What we need is certainty about what is expected.”

Mr. Berry added that making mortgages affordable should also be a priority for government: “We need to build on the NewBuy initiative, we need to make it much easier for first time buyers.”

“It doesn’t matter how many homes we build, there’s got to be demand in the market, and that means making mortgages affordable.”

“And let’s not forget about retrofitting buildings – there’s a lot of empty buildings in city centres that could be renovated for use. We’d like to see the 20 per cent VAT rate here reduced.”

The rumours of the new plan come hot on the heels of the Funding for Lending scheme, which sought to stimulate lending flows from banks to housebuilders.

A DCLG spokesperson told CN the reports were “pure speculation” and that they were “not going to give a running commentary on policy-making”.

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