Corporate Public Policy

October 31, 2018

Budget 2018 Housing Policy – a trick or treat?

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property housing budget 2018

Billed as the budget which would signal the end of austerity, the Chancellor’s focus in Monday’s budget was to show the public that good things were coming. After years of public service cuts and ‘all being in it together’, we were led to believe that there would be more treats than tricks and that the Government was listening and making changes where they matter most.

And in some areas they demonstrated they had heard us. The Chancellor raised the income tax personal allowance level to £12,500 a year early, stood up to tech giants by implementing a digital sales tax and froze fuel duty and beer, cider and spirits duties for another year (whereas the duty on wine was sadly increased to rise in line with inflation).

But on the housing front, things were decidedly underwhelming and in fact two of the most important announcements were left out of his speech entirely and could be found only by sifting through the Red Book.

The extension of stamp duty cuts to first time buyers purchasing shared ownership properties was a welcome fix after they had been forgotten about in the 2017 budget, while further investment into the Housing Infrastructure Fund and news that it will be easier for neighbourhoods to build more homes were also positively received. Acknowledging the role which easily accessible and cheap finance can play in bringing more homes to market more quickly, the Chancellor also announced a new scheme for SME housebuilders which will provide financial guarantees on funding through the British Business Bank.

But buried in the detail was news that the Government will publish a consultation in January 2019 on a further stamp duty surcharge of 1% for non UK residents buying residential property. While the 1% is considerably less than the previously mooted 3%, it’s still on top of the current 3% surcharge buy to let investors and second home property owners already pay and sends a message in the lead up to Brexit that the international community is not welcome in the UK. If the Chancellor really wanted to encourage greater revenues for the treasury, you might assume that it would be more healthy to stimulate the market by cutting stamp duty for downsizers and investors and thereby encourage a greater number of transactions.

Also hidden within the red book were fundamental changes to the Government’s successful Help to Buy scheme. While on the surface the news seems to provide clarity and a positive extension of the scheme up to 2023, the regional caps call into question issues of a postcode lottery and how boundaries will be decided for first time buyers. At least it does offer Government, the housebuilding community and lenders time to plan ahead for the end of the scheme.

A summary of the major housing changes announced can be found below, while the budget Red Book can be viewed here.

Housing

  • Consultation on Stamp Duty Land Tax charge for non-residents – The government will publish a consultation in January 2019 on a SDLT surcharge of 1% for non-residents buying residential property in England and Northern Ireland.
  • Extension of Stamp Duty cuts to first-time buyers purchasing shared ownership properties – Philip Hammond says he will extend the cancellation of stamp duty for first time buyers on properties up to £300,000 to first-time buyers of shared ownership properties valued at up to £500,000. This measure will be retrospective, so any first-time buyer who has made a purchase since the Nov 2017 Budget will benefit.
  • Housing Infrastructure Fund – The Chancellor also announced a further £500m for the Housing Infrastructure Fund, to help get a further 650,000 homes built. He also committed to making it easier for neighbourhoods to allocate or permission land for housing.
  • Planning reform – The government has already revised the National Planning Policy Framework, implementing 85 of the proposals set out in the Housing White Paper and Autumn Budget 2017, ensuring that more land in the right places is available for housing. The government has also launched a consultation on new permitted development rights to allow upwards extensions above commercial premises and residential properties, including blocks of flats, and to allow commercial buildings to be demolished and replaced with homes.
  • Help to Buy Equity Loan – To ensure future support is targeted at those who need the most help into homeownership, the Budget announced that from April 2021, a new Help to Buy Equity Loan scheme will run for 2 years before closing in March 2023. The new scheme will be available for first-time buyers only, and for houses with a market value up to new regional property price caps. The government does not intend to introduce a further Help to Buy Equity Loan scheme after March 2023.
  • British Business Bank – will deliver a new scheme providing guarantees to support up to £1 billion of lending to SME housebuilders.
  • Housing Revenue Account cap – will be abolished from 29 October 2018 in England, enabling councils to increase house building to around 10,000 homes per year.
  • Capital Gains Tax – From April 2020, the government will limit lettings relief to properties where the owner is in shared occupancy with the tenant.
  • Delivering Housing Investment – Government has pledged to provide £653 million in 2021-22 for strategic partnerships with nine housing associations to deliver over 13,000 homes.
  • Neighbourhoods – Funding to empower 500 neighbourhoods to allocate local homes to local people in perpetuity.

Infrastructure

  • National Productivity Investment Fund (NPIF) – Being expanded to 2023-24 with an extra £37 billion allocated.
  • National Roads Fund – The Fund will be £28.8 billion between 2020-25. The Fund will provide long-term certainty for roads investment, including the new major roads network and large local major roads schemes, such as the North Devon Link Road.
  • Local Roads – The government will allocate £420 million to local authorities in 2018‑19 to tackle potholes, repair damaged roads, and invest in keeping bridges open and safe.
  • Transforming Cities Fund extension – As part of the NPIF, the government is extending the Transforming Cities Fund by a year to 2022-23. This will provide an extra £240 million to the six metro mayors for significant transport investment in their areas.
  • Northern Powerhouse Rail – The Budget announced up to a further £37 million to support the development of Northern Powerhouse Rail, building on £300 million already committed to ensure HS2 infrastructure can accommodate future potential Northern Powerhouse Rail and Midlands Engine Rail services.

Skills

  • Apprenticeship Levy – The government will make up to £450 million available to enable levy paying employers to transfer up to 25% of their funds to pay for apprenticeship training in their supply chains. The levy has also been halved to 5% for smaller businesses from April 2019.
  • National Retraining Scheme – The government will work with employers to give workers the opportunity to upskill or retrain. The Budget allocates £100 million for the first phase of the National Retraining Scheme (NRS).
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