Stuart Law comments on today’s budget.
Stuart Law, CEO of Assetz Capital shares his views on the announcements from today’s budget that will impact the housing sector.
Stamp Duty Land Tax
The higher SDLT rate on second home purchases and buy to let properties will increase immediately from 3% up to 5%. This rate increase is expected to further suppress the acquisition of new buy to let properties and to help throttle supply to this much needed housing sector, creating further upward pressure on already unaffordable rents.
Capital Gains Tax
The changes in Capital Gains tax was nowhere near the worst fears prior to the budget, with property taxes on buy to let and other residential property actually remaining at 18% and 24% for basic and additional rate tax payers. We expect that this clarity will support the increasing wish of landlords to sell their buy to let property. Whilst this could release further rental properties to now be purchased, we also expect the ongoing wider attacks on landlords to push down supply of rental properties and push up rents.
Planning Permissions
Forthcoming changes to the planning system expected soon were mentioned extremely briefly, but no detail was provided. This is disappointing as it is not necessarily a Budget heading but is certainly a key crisis that needs to be solved urgently and will require further funding than available at present.
Budget Announcements on Housing
As a criticised pre-announcement to the budget on the 26th of October, the UK Government’s new housing initiatives promise 5,000 affordable social homes with £500 million in additional funding and a goal to deliver 1.5 million homes. However, while these announcements make grand promises, they may fall short of addressing the core housing challenges facing the UK. This was mostly reiterated in the Budget. A £5bn figure was mentioned briefly in the Budget speech.
£500m for the Affordable Homes Programme
The allocation of £500 million to the Affordable Homes Programme is an underwhelming commitment in the face of an overwhelming housing shortage. The promised 5,000 homes represent a fraction of the demand for affordable housing across the UK, where hundreds of thousands of families struggle with unstable housing or face impossible rent hikes. Such limited funding barely scratches the surface of the crisis at hand.
New 5 Year Social Housing Rent Settlement
Additionally, the focus on a new five-year social housing rent settlement, while a step towards certainty for social housing providers, does not go far enough. Without a longer-term, robust settlement, councils and housing associations may lack the financial stability to plan and build at the scale required to genuinely impact the housing shortage. What a 1% increase in rents above CPI for the next 5 years does do, is permit local authorities to offer more realistic purchase prices for council housing from developers which in turn could mean greater numbers of new council houses. This is good but we need more long-term plans for that social rental income in order to have the biggest impact.
Right to Buy Discounts
Furthermore, although the government stated intent to reduce Right to Buy discounts and allow councils to retain 100% of sales receipts, this alone will not offset the yearly depletion of the social housing stock under the scheme due to the discounts available to those buyers. Reinvesting in social housing to counterbalance these losses will require significantly more resources and a more radical overhaul of Right to Buy. Building far more council houses would more flexibly permit greater number to be safely sold on.
£128m to Unlock Housing Sites
The £128 million allocated to unlock housing projects on brownfield sites, tackle river pollution, and fund 3,000 energy-efficient homes is commendable but insufficient. These projects are limited in scope and will not provide meaningful relief to the housing crisis at a national scale. While projects in North Liverpool and other areas may revitalize local economies, they represent a fraction of what is needed across the UK.
SME House builders
£3bn of support in guarantees to boost the supply of homes were mentioned fleetingly, but with no detail provided of what that consisted of and we assume this is part of the wider £5bn figure for housing more generally.
Overall Comment in Respect of Housing
Overall, these housing initiatives in today’s Budget, while containing both positive and negative elements, lack the ambition, funding, and long-term strategy required to provide sustainable solutions to the UK’s housing crisis. The Government must urgently consider a more comprehensive approach to ensure housing affordability and security for all UK residents. We look forward to the conclusion of the NPPF consultation on the implementation of a number of hopefully dramatic improvements to the U.K.’s planning process that could mark the beginning of the real increase in supply of all property types that in turn will help address the U.K.’s housing crisis.
Stuart Law, CEO of Assetz Capital added, “Today’s announcements are a step in the right direction, but fail to meet the scale and urgency of the housing crisis facing our nation. The Government’s piecemeal approach lacks the bold vision as well as detail required to transform our housing system. We urge the Government to adopt a more substantial, long-term housing strategy that genuinely prioritizes affordable and social housing for those who need it most, as well as supporting SME house builders who can build smaller sites where people really want to live. We trust that this will get delivered, in part, in the major National Planning Policy Framework (NPPF) review concluding shortly, and that should begin to deliver bigger changes to the planning system in 2025 onwards.
SME house builders and their major funders, such as Assetz Capital, stand ready to help build us out of the longstanding housing crisis. The question is whether the Government will urgently improve the planning regime and provide other support that could allow those much needed houses to actually be delivered.”
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