Reform two: Cut the VAT

House Beautiful online 04.03.2008

VAT on refurbishments to be reduced from 17.5 per cent to five per cent

Edwardian house There are 840,000 empty houses in Britain. Each year thousands of well-built but neglected Victorian properties are demolished to make way for new housing, partly because VAT on refurbishments is 17.5 per cent, while on new builds it's zero.

A survey by the Halifax, published in December 2007, found people feel that having a vacant house near them has a negative effect on the value of their homes, and one in five believes that empty homes attract crime. But it doesn't have to be like this. Old can be made into new, as shown in Chimney Pot Park in Salford, Greater Manchester. There, a community of more than 300 declining Edwardian terraced houses has been regenerated to provide modern homes.

Yet even with this successful project, the developer was forced to demolish more of each house than planned, so that the scheme qualified for zero VAT as a new build, therefore saving £2.8million.

VAT doesn't just affect large developments. Any work you do to improve your home is also charged at 17.5 per cent. It's no wonder the highest number of complaints to the Office of Fair Trading is about the construction industry, as more of us turn to builders and tradesmen willing to waive VAT.Chief Secretary to the Treasury Yvette Cooper says: ‘On January 1 2008 VAT was reduced to five per cent on houses that have been empty for two years to encourage empty properties back into use. However, it would be extremely expensive if we reduced VAT

Brian Berry, Director of External Affairs at the Federation of Master Builders, believes that cutting the VAT to five per cent would not only encourage developers to take on more refurbishments, but would help individual home-owners afford improvements to their houses. He says that by 2050 an estimated two thirds of us will be living in homes that already exist today, so they need to be looked after if they're going to last. Any energy-saving improvements would also go a long way to meeting the Government's target of reducing carbon emissions by 60 per cent by 2050. ‘To save 80 per cent of the energy used to heat and run our existing homes would only cost around £20,000 per home,' says Brian. ‘This is much cheaper than building new homes.'

What's more, research from the Empty Homes Agency shows that building new houses produces about six times as much carbon dioxide as refurbishing existing properties, while the rubble from demolitions accounts for 17 per cent of the UK's waste. Brian is backed up by Simon McWhirter, Director of the World Wildlife Fund's One Planet Homes campaign, who says: ‘We support House Beautiful's call to stop the situation whereby it makes better economic sense to tear down a house and build a new one, rather than renovating what we have.'

Read more about why playgrounds and brownfield sites need to be protected, too, in our third and fourth reforms.

To read more about the House Beautiful Built to Last campaign, click here...