Sept. 6 (Bloomberg) -- Prime Minister David Cameron’s government will loosen requirements on homebuilders to allow them to build projects that at present would be unprofitable, in an effort to boost the U.K. economy.
People wanting to extend homes and businesses will also be able to do so without planning permission for a limited time. The premier, along with his Liberal Democrat deputy, Nick Clegg, announced a temporary lifting of requirements today to get a permit for work including building out from the back of a house by as much as 8 meters (26 feet). Shops will be able to add 100 square meters (1,080 square feet) and industrial units 200 square meters to their premises without formal permission.
Removing requirements on building projects to include social housing and “affordable” homes will spur work on more sites, the government said. New home completions dropped last year to the lowest during peacetime since 1924.
“There are people watching this program in their 30s living at home with Mum and Dad desperate for that starter flat or starter house,” Cameron told ITV’s ‘Daybreak” show. “It is about confidence. We’re talking today about 140,000 jobs provided by building an extra 70,000 houses.”
Clegg told BBC Radio 4 that “those developers who can show they are sitting on entirely commercially unviable sites” as a result of current planning requirements will be able to “re-negotiate those bits of the contracts they have got with planners. Let’s undo that knot at an early stage.”
The Bloomberg EMEA Home Builders Index rose 1.8 percent today, with Taylor Wimpey Plc, the second-largest U.K. homebuilder by volume, gaining 2.9 percent.
The government introduced a bill today offering guarantees on as much as 40 billion pounds ($64 billion) of new infrastructure projects, including 10 billion pounds on new homes. It also offers 300 million pounds of direct funding for cheaper housing.
Cameron told lawmakers yesterday that a reorganization of his ministerial team this week is aimed at getting the country out of recession.
“I want every single department to be about the economy,” he said. “I want the Transport Department building roads, I want the Communities Department building houses.”
The government “Firstbuy” project, which offers support to first-time buyers, will also be extended by 280 million pounds. Small builders will be helped by loosening the rules on home extensions. According to the government, there are 400,000 applications for planning permission a year, half of them residential. Extensions will still have to comply with other rules to ensure they’re proportionate to the original building.
The opposition Labour Party said that government plans don’t go far enough. “A one-year holiday from the rules on planning for a conservatory extension of up to 8 metres into a garden does not represent an economic plan,” leader Ed Miliband said in a speech in London. Treasury spokesman Ed Balls described it as “a mouse, when we needed a lion to roar.”
Daniel Farrand, head of planning at law firm Mishcon de Reya, said the proposals might even dampen demand.
“Yet another planning shakeup risks having exactly the opposite of the intended effect by creating more uncertainty,” he said. “Freeing up viability of a few stuck projects and allowing bigger conservatories will not meet the housing demand.”
Miliband offered clues today to what he would do in power if he wins the 2015 election, saying tighter finances mean the party won’t be able to return to “governing as we did before.”
In his speech, Miliband said the party needs to challenge the idea that low inflation and low interest rates will automatically deliver growth. Instead, he and Balls called for a cut in sales tax and the speeding up of large infrastructure projects, as well as a levy on bank bonuses to pay for housebuilding and youth training.
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