The Chancellor of the Exchequer Philip Hammond delivered his Autumn Budget with a package of measures intended to address what he said was the “challenge of the housing market.”
A key measure in his speech was cutting stamp duty for all house purchases up to £300,000, and for the first £300,000 of properties valued at up to £500,000. Commentators have questioned whether this will simply have the effect of raising prices rather than the intention of helping first-time buyers.
Hammond announced £44bn of capital funding, loans and guarantees for housing over the next five years, with a further £8bn of financial guarantees in place to support private housebuilders and the purpose-built private rent sector. As well as £1.5bn targeted at SMEs via extending the Home Builders Fund, £1.1 bn will be allocated to “unlocking” strategic sites, including new settlements and urban regeneration schemes. These would be developments “where most people want to live, and where jobs are created.” He said this was the “best use of land” and would avoid building on the green belt.
The Chancellor also committed to reform planning, “to make the best use of urban land, and continue the strong protection of the Green Belt.” He announced a review, chaired by MP Oliver Letwin, which will identify reasons for the “gap between planning permissions and housing starts”.
The powers of the Homes and Communities Agency will be expanded within a rebranded agency called Homes England, “bringing together money, expertise, planning and purchase powers to facilitate sustained affordability.” This will include powers to compulsory purchase sites which already have planning permission but which have not been built on.
The Chancellor announced that a further £10bn of Help to Buy loans would be provided, and that the Housing Infrastructure Fund would be increased by over 50 per cent, to £2.7bn.
£28m will be allocated to those affected by the Grenfell Tower disaster, including funds for mental health aid and counselling, and a new community space.
Hammond urged all local authorities to carry out any identified, necessary safety work as soon as possible. If they can’t afford it, “They should contact us immediately. We will not allow financial constraints to get in the way of any essential fire safety work.”
Speaking on empty homes, Hammond said, “it cannot be right to leave property empty, when so many are desperate for a place to live.”
He therefore announced that councils will have the power to charge a 100 per cent council tax premium on empty properties.
A total of £28m will be allocated to three new housing pilots and a homelessness taskforce, as part of the Government’s commitment to half rough sleeping by 2022, and eliminate it by 2027.
The construction industry provided generally welcoming reactions to Hammond’s speech. Many lauded the ‘long-awaited’ attention to housing, but some criticised its ‘predictability’ and noted key elements that were absent.
Brian Berry Chief Executive of the FMB, while keeping a few reservations, was pleased to see SMEs in the Budget:
“The Government has set itself a new target of building 300,000 new homes a year by the mid-2020s. And today the Chancellor has put small and medium-sized builders at the heart of ambitious plans to tackle the growing housing crisis. The Chancellor appears to be putting his money where his mouth is with the announcement of £44bn of capital funding, loans and guarantees. In particular, a further £1.bn for the Home Building Fund to be targeted specifically at SME housebuilders can play a significant role in channelling crucial funding to this sector. A £63m fund to prepare small sites for development and proposals to require councils to deliver more new housing supply from faster-to-build smaller sites will provide opportunities to boost small scale development.”
“A second major challenge to getting new homes built is the skills crisis we face. In the long run, the only real solution to chronic skills shortages will be a major increase in the training of new entrants into our industry. We are therefore pleased to hear the Chancellor has today committed extra resourcing to training for construction skills. With Brexit round the corner the next few years will bring unprecedented challenges to the construction sector. The Government will need to make sure that the sector continues to have access to skilled EU workers, but we are pleased that the Chancellor has today listened to the needs of SME builders.”
Rob Desbruslais, Director of Desbruslais Chartered Surveyors, commented that the stamp duty cut would be:
“Little more than a gimmick, and does little to solve the housing crisis. If anything, it will simply increase short-term demand without bolstering supply, inflating house prices even more. In addition, the savings people make trying to get on the housing ladder are actually quite minimal. To achieve the maximum £5,000 saving, first-time buyers need to spend £300,000 but Halifax’s First Time Buyer review states that 74 per cent of homes sold last year cost under £250,000”.
“The Government needs to reduce demand and actual house prices. This can only be achieved with taxes and increased supply.”
Bjorn Conway, CEO at ilke homes, welcomed the:
“Commitment to invest £44bn in housing and to build 300,000 new homes a year by the mid-2020s. It is hugely important that councils and housing associations across the UK adopt innovative construction techniques in order to ensure these targets are met. While there is no ‘silver bullet’, the use of precision manufacturing processes will go a long way towards delivering affordable new homes quickly and at a low cost.
“Modular homes can be manufactured off-site and installed in a matter of hours. As such, modular construction techniques will maximise the number of homes that councils can deliver within restrained budgets. Modular homes specialists can install 10 homes on site a day, using precision manufacturing processes to create durable, high-quality affordable homes which are fully approved by the NHBC. We believe the Chancellor’s Budget is a positive step forward towards addressing the UK’s chronic housing shortage, and we look forward to working with the Government to ensure that providing homes for the people who need it most remains a priority.”
Henry Fordham of Bellis Homes welcomed the abolishment of stamp duty for first time buyers, but thought Hammond could have gone further.
“We are pleased to see widespread reform and investment in the UK housing market. Although abolishing stamp duty for first time buyers is a positive step, it being limited to £300,000 means its impact is minimised in many areas where many young professionals are required to work and live, such as London and linked commuting areas.
“I feel the Chancellor should have committed to his consideration of a temporary stamp duty holiday. Such a measure would have ensured the most immediate catalyst across the market and country as a whole to the benefit of the economy.
“As this would have supported total market transactions and had the greatest impact on the housing market, professionals within it and home owners looking to move, up or downsize. Meaning a large proportion of the market is still restricted which could have been supported to the benefit of the economy.”
Ben Kite, managing director of ecological consultancy, EPR, criticised the lack of reform regarding the Green Belt:
“Perhaps contrary to popular belief, the Autumn Budget’s apparent neglect to consider providing means to revisit the extent of land included within the Green Belt is a blow for ecologists as much as for developers. The budget should have set aside funds to assist with the implementation of sensitive housing development projects on carefully selected sites within the Green Belt. Such projects, incorporating generous Green Infrastructure, would have provided not only social, but environmental benefits.
Much of the current Green Belt is brownfield or intensively farmed agricultural land with little in the way of ecological value, and often little in the way of public access provision. Carefully planned and controlled development in limited areas of the Green Belt could have changed this, by delivering or helping to fund environmental enhancement projects. The Budget marks the failure to grasp another tantalising opportunity to improve biodiversity by using development to create new wildlife habitats, which would have benefitted the environment as well as encouraging communities to reconnect with nature.”
James Roberts, Knight Frank chief economist, said:
“The Chancellor’s Budget speech has given the property industry lots to think about. The OBR’s forecast that 600,000 jobs will be created by 2022 suggests the property market has reason to feel confident about future demand; as a high level of employment is the bedrock beneath a strong real estate market. Nevertheless, the downwards revision of the GDP forecast is a concern, and will dampen business confidence at a time when there is already a lot of Brexit gloom circulating.
“The rise in the national living wage, and increases in the thresholds for income tax, should put more money in consumers’ pockets, which will ultimately benefit the markets for retail property and warehouses, given the rise of e-shopping. The government’s push to support digital industries will also drive activity in the office market where, in both London and the regions, the technology, media and telecoms (TMT) sector is overtaking finance as the main source of demand.
“The boost for housebuilding and abolishing stamp duty tax for some first time buyers had an element of political survival about it, but this will bring a lot of change to the market. Targeting urban areas, not the green belt, for future housebuilding makes sense, as people now want the short commuting times and 24/7 lifestyle that comes with living in a city. The Chancellor’s promise to speed up and improve the planning process will need to be delivered on if we are to see anything like 300,000 homes built each year.”
Lewis Johnston, RICS parliamentary and public affairs manager, believes Hammond hasn’t quite lived up to expectations:
“In the run-up to the budget Phillip Hammond suggested he would be leading a concerted Government effort to deliver 300,000 home a year. While some industry concerns have been taken into account, overall today’s announcements don’t match up to that ambition.
“The pledged £44 billion package of housing support seems positive, but it does not represent the kind of comprehensive strategy we need, nor is it clear how much of this figure is made up of previously announced policies. Most of the announced measures are also only due to come in in 2019/2020 instead of having an immediate impact, and the Chancellor stated that we would not be building the 300,000 new homes a year until the mid 2020s, leaving the country to wait at least eight years.
“While the Chancellor is right to say there is ‘no single magic bullet’ to increase housing supply, it requires a lot more than the proposals he has put forward, which amount to a series of marginal and delayed ‘nudges’ at a time when housing supply needs an almighty immediate shove.
“Breaking it down, scrapping Stamp Duty for first-time buyers may stimulate activity at a time when the market is subdued, but this does not tackle the underlying problem and is something of a distraction from the need to increase supply.
“There are certainly some positive aspects to today’s housing proposals, however. We are pleased the Government has acted on our recommendation to lift the local authority borrowing cap for housebuilding and we hope this will herald a new era of well built, affordable council homes delivered at some scale. As far as they go, measures to provide extra support for small building firms (£1.5bn) and to speed up developments where planning permission has been granted are also welcome. Nevertheless, they are too small to make a real dent in the challenge we face.
“If the Chancellor really wants to increase supply to a degree that will transform UK housing, he should implement a comprehensive housebuilding programme incorporating direct commissioning by central and local government. There should also be a more fundamental review of the planning system than was announced today, including a policy of green belt swaps so that appropriate sites on the urban edge can be considered for housing supply.
“Last but not least we have had 14 Housing Ministers in the last 19 years but in future the UK’s housing must have a representative at Secretary of State level in the Cabinet to tackle what has become the country’s No 1 problem.”