In the Spring Statement, the Government pledged £39 billion to support the building of around 300,000 new social and affordable homes over the next decade. Fast forward to the Autumn Budget, and we now have a clearer picture of how tax changes could help make this ambition a reality. One of the most significant proposals is a reform to VAT rules on land earmarked for social housing.
The Current Position – The “Golden Brick” Rule
Right now, buying bare land usually comes with a 20% VAT charge. For housing associations and other registered providers of social housing, this is a problem: they often cannot reclaim that VAT, making land purchases expensive and unattractive.
To get around this, the system relies on what’s known as the “Golden Brick” rule. Under this rule, if construction has already started (literally, once the first bricks are laid), the sale of the land becomes zero-rated. As a result, housing providers typically wait until building work has begun before buying land. While this workaround helps, it adds complexity and delays to the process.
The New Proposals
The government plans to consult in early 2026 on whether land intended for social housing would be zero-rated for VAT. This means sellers could reclaim any VAT they have paid, and buyers (housing associations) would not have to pay VAT at all. Crucially, providers could buy bare land upfront, without waiting for the Golden Brick stage.
Why This Matters
This reform could be a game-changer for affordable housing. Here’s how:
- Simpler deals: No need for complex contracts or timing land purchases around construction milestones.
- Faster access to funding: Housing providers could secure land earlier, speeding up the development process.
- Lower costs: Removing VAT from land purchases reduces financial barriers, making more projects viable.
- Boosting supply: By cutting red tape and costs, the reform supports the government’s target of 1.5 million new homes before the end of the current parliament and around 300,000 new social and affordable homes over the next decade.
Looking Ahead
While the consultation is still to come, the direction of travel is clear: the government wants to make it easier and cheaper to deliver social housing. If implemented, this VAT reform could help unlock land for development, accelerate building timelines, and ultimately bring more affordable homes to the people who need them most.