Taxing for Beauty: thoughts on the ‘Living with Beauty’ report from a cross-disciplinary perspective

‘Gentle density’ at Cullinan Studio’s Stonebridge ‘Spring’ – a housing regeneration scheme in north London (credit: Dennis Gilbert)

CaCHE PhD candidate, Philip Graham, reflects on the recently published report, ‘Living with Beauty’, from the Building Better, Building Beautiful Commission, which sets out recommendations to government.

For designers and planners, there will be little in the MHCLG-published ‘Living with Beauty’ (LwB) report to disagree with. Who wouldn’t sign up to a fruit tree for every home or ‘consensual intensification’? Likewise, who wouldn’t nudge local authorities to drop their minimum street width requirements, so that more, tightly-grained, rule-breaking housing like this year’s Stirling Prize Winner, Goldsmith Street in Norwich, can flourish across the UK. Thus, the overarching sentiment of ‘collaboration not confrontation’ and ‘provably popular pattern books’, is unlikely to radically change design opinions.

However, behind the sentiment, there is an underlying political message that says, you can’t have beautiful homes and places without first reforming land and tax rules. By making the case that tax policy could be designed around place-making – not the other way around – the authors have thrust their ‘beauty’ arguments into an area of discourse normally dominated by themes of macroeconomic stability (e.g. Muellbauer, 2018). This is helpful because many fiscal arguments can be technical and complex for non-experts, whilst in contrast, place-making is a more tangible concept that is accessible to most people. It therefore creates an opportunity to re-frame fiscal and land reform in terms of community benefits and the lived experience.

The report’s proposals reach into several important tax areas and, with the right expertise, could have positive, place-making outcomes. The first concerns the well-known problem that the VAT-liable beauty of the old is being demolished to make way for the VAT-exempted ugliness of the new, thereby increasing economic activity but also needlessly consuming embodied carbon. On this basis, the proposal to ‘align tax between existing and new places’ should be widely welcomed, although – staggeringly – this carbon-saving VAT proposal is as close as the 140-page LwB report gets to acknowledging the climate emergency.

The second fiscal proposal is aimed at tackling incentive problems that arise because capital and income are not taxed equally. This creates a conundrum for landowners because those who capture short-term value at the point of sale will be rewarded with a capital gains tax (CGT) bill as low as 10% (20% without reliefs). In contrast, those who invest for long-term quality – and therefore choose to capture value through a patient income – will have their gain taxed as income and therefore at a rate as high as 40%. The third fiscal proposition in the report identifies the increased inheritance tax risk that is borne by landowners who choose to pool their land, thus penalising their ambition to deliver an urban design outcome that is not constrained by land parcels. In summary, each of these tax proposals sets out to deliver place and ‘beauty’ by levelling the fiscal playing field.

Turning to the land, the report identifies the role that uncertainty plays in deterring small builders from entering the market (p50). To mitigate this risk, it proposes that design codes become a condition of planning and that those housing providers with the best development record are rewarded. In the report, this reward is linked to a ‘stewardship kitemark’ to be defined according to criteria around mixed-use, pooled risk, inclusive governance, good place-making and a suitable legal and management approach to the land. On top of these, the report also calls for minimum space standards to be moved into building regulations. Many would welcome this because it could reduce development uncertainty and put an end to the reputational damage being caused by the permitted development loophole, even if ultimately, the extra cost would come out of land values and for this reason, meet resistance.

One oversight in the LwB report however, is that there is no mention of the role that ‘The Compulsory Purchase Act’ (1965) plays in raising both land prices and price volatility. This is unfortunate because if this act were to be reformed, the planning gain in land values would be smaller and more reliably captured, leading to more stable land prices. This stability would lower the burden of risk on more quality-focused, SME builders (and their lenders), as well as user-led housing models such as cohousing and community land trusts. It is unfortunate, then, that such exemplars of ‘good stewardship’ still struggle to gain meaningful market share under the current system. It will therefore be important that future work addresses the barriers to the expansion faced by this sector.

Land and fiscal reform aside however, the LwB report’s ‘stewardship kitemark’ idea stands out because it links quality with incentives such as lower cost and patient capital – just some of the various ways that the market for ‘beauty’ and place-making could be levelled with speculative competitors. This, the report suggests, could create a new investment class in land and infrastructure, designed to link longer-term grant funding to quality rather than price alone. More than funding however, it is the idea of linking a ‘stewardship kitemark’ with new professional skills which should resonate most with CaCHE members. The LwB proposal here is to introduce a specialist MBA or mid-career qualification to up-skill specialist advisers or ‘master developers’, to be drawn from academia, government, quality-led developers and the wider industry.

In summary, the Living with Beauty report has taken a fresh look at some intersections between policy, planning and development process, but from a place-making perspective and to a cross-disciplinary audience. This is welcome and well-timed, coming as it does at a moment when claims of a supply shortage are being questioned, weakening the case for prioritising speed, cost and volume over quality.

To be effective however, future work is needed to address the problem that ‘living with beauty’ will come at a cost. It is not enough to fall back on assumptions like the claim that people would be prepared to pay more for beauty (p50) because any policy proposals that exclude price-constrained households will do little to change the volume housebuilder model. Therefore, a value argument is needed that makes the economic case for more adaptable housing stock, and which considers the tenure implications of keeping such generosity attractive to all parts of the market. However, the first challenge to the sector is to recognise that building better will require visionary enablers or ‘master developers’. These people will take time and training to deliver but the work of nurturing such talent can start now.

Philip Graham is a CaCHE-funded PhD candidate at the University of Reading, as well as a partner and research lead at Cullinan Studio – an employee-owned architectural and masterplanning practice in London.

Views expressed by authors may not represent the views of CaCHE.


Date: February 19, 2020 11:58 am


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