November 28, 2017
The “Housing Budget”: did it do what it said on the tin?Contact
Written by Jamie Till, Senior Account Manager, Property, Health and Higher Education, Corporate and Capital Markets
It was billed as a “Housing Budget” but amidst the political posturing, the jury is still out on whether Philip Hammond actually delivered a budget that will solve the nation’s housing woes.
It can be very difficult to unravel the various monetary commitments: which are new and which are just rehashed promises we have seen before? It is worth noting that only £15.3 billion of Chancellor Philip Hammond’s £44 billion housing package is actually new money – so there is some clout behind the rhetoric, but much of what we heard is not backed by new funding.
First-time buyers will have been pleased to see stamp duty land tax abolished on purchases up to £300,000 in value, with some relief on homes up to £500,000 for those living in more expensive areas of the country. This was the Chancellor’s surprise closing flourish, but The Office for Budget Responsibility was quick to point out that the overall effect would be to increase house prices and therefore mitigate the benefits of this reform for first-time buyers.
While first-time buyers on the cusp of purchasing their first home will be whooping for joy, it does nothing to help long term affordability. And it doesn’t get us away from the fact that house prices are rising much faster than stagnating wages – this is the rub, not copious portions of avocado on toast.
There was also no mention of the Government’s position on the Help to Buy scheme past 2021, which allows all buyers of new build homes to purchase with a 5% deposit, supported by a 20% equity loan from Government. The lack of clarity will be disappointing both for housebuilders who sell homes via the scheme, as well as buyers, who rely highly on the scheme to purchase homes.
Beyond this, there is a clear divide between the approach taken towards small and large housebuilders. SME housebuilders have been promised further support through a £1.5 billion funding package of loans and housing guarantees, which will help them plug the housing shortfall. In contrast the Government has launched a review of ‘land-banking’ – the accusation being that large housebuilders needlessly sit on plots of land hoping to benefit from land appreciation whilst deliberately failing to build vital homes. Many of the volume housebuilders will welcome the review – hoping that once and for all the accusations will be refuted by fact and that the Government will finally unlock the planning system.
The focus on boosting construction skills (and £204 million worth of funding) is very welcome, particularly in light of Brexit-related EU worker concerns but with news the day after the Budget that apprenticeship starts have fallen 59% since the Government’s levy scheme began, more must be done to attract and retain talent. The sector needs certainty on the status of the pipeline of talent from the continent, on which it relies heavily, alongside a strong uptick in youngsters embarking on careers in construction.
What the country continues to lack is a long term, cross-party housing strategy. Until we have this, meeting the Government’s target of 300,000 new homes per year seems a big challenge and even if it is met, the figure needs to be sustained on an ongoing basis spanning decades, not just years. Housing policy now needs to transcend politics.