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News & opinion

7 NOV 2018

Budget 2018: Residential Development moving in the right direction

Abdul Choudhury RICS

Abdul Choudhury

London Policy Officer

London, UK

RICS

There were a number of announcements in the Budget affecting the UK’s residential sector. The policies set out by government don’t, in and of themselves, represent a substantial enough effort to address the systemic issues in the housing sector. However, the new five-year strategic business plan for Homes England is certainly a step in the right direction and shows that government have been listening to what industry has been saying on housebuilding.

Focusing on this year’s Budget, there is an extension of support for existing policies and funds to promote existing policies without doing anything dramatically new.  

Support for house builders

The Government is conscious effort to diversify housebuilders more with additional support for SMEs, Housing Associations and Local Authorities to build.

The most noticeable step, which was a shift recommended by RICS, was the lifting of the Housing Revenue Account borrowing cap. This should provide local authorities more room to borrow for housebuilding; however, with the Right-to-Buy still in play, and the lack of skills and capacity in local authorities to pursue ambitious housebuilding projects, much more needs to be done to enable government to build again. Further measures include:

  • The Housing Revenue Account cap that controls local authority borrowing for house building will be abolished from 29 October 2018 in England,
  • The British Business Bank will deliver a new scheme providing guarantees to support up to £1 billion of lending to SME housebuilders
  • £653 million will be provided to 2021-22 for strategic partnerships with nine housing associations to deliver over 13,000 homes
  • The government will make £10 million capacity funding available to support ambitious housing deals with authorities in areas of high housing demand to deliver above their Local Housing Need.

Infrastructure and housing

Government are also allocating infrastructure spending to support housebuilding which is a prudent move. However, considering the rhetoric around devolution and the capacity for local authorities to better identify opportunities in their own region, government should seek to provide a framework to empower local authorities to identify and act upon these opportunities themselves.

  • £291 million from the Housing Infrastructure Fund, funded by the NPIF, to unlock 18,000 new homes in East London through improvements to the Docklands Light Railway 
  • £75 million from the Home Building Fund for St Modwen plc, to fund infrastructure to build over 13,000 new homes 
  • The Housing Infrastructure Fund, funded by the NPIF, will increase by £500 million to a total £5.5 billion, unlocking up to 650,000 new homes

Supporting first time buyers

The Government’s flagship policy to support first time buyers into home ownership, the Help to Buy, is coming to an end. The policy which also helped to maintain the housing market and sustained a level of construction activity could have a negative impact on new housing starts. However, should government step up to fill the gap through Homes England’s activities, the potential impacts could be negated.

  • From April 2021, a new Help to Buy Equity Loan scheme will run for two 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 set at 1½ times the current forecast regional average first-time buyer price, up to a maximum of £600,000 in London. The government does not intend to introduce a further Help to Buy Equity Loan scheme after March 2023. Whilst the cessation of this scheme may not be conducive to overall housing development, the clear end date will assist allow planning by developers.
  • To support homeownership further, the government is launching a call for evidence inviting proposals from investors willing to collaborate with government to deliver a new wave of shared ownership homes.


Residential taxes

Yet again, government is tempering around the edges of SDLT without fully reviewing the suit of taxes that impact on the housing market, as RICS has recommended. This is to a degree an implicit recognition of the fact that such taxes do not encourage the types of market behaviours government would want to see. The changes proposed are relatively minor.

  • Stamp Duty Land Tax (SDLT) and first-time buyers relief –extend first-time buyers relief in England and Northern Ireland to all qualifying shared ownership property purchasers, whether the purchaser elects to pay SDLT on the market value of the property. 
  • Consultation on SDLT charge for non-residents –consultation in January 2019 on a SDLT surcharge of 1% for non-residents buying residential property in England and Northern Ireland.

Related Residential Property news

Abdul Choudhury RICS

Abdul Choudhury

London Policy Officer

London, UK

RICS

Abdul is a member of the UK’s policy and external affair team. He works to promote RICS to its various stakeholders and contributes to the development of policy. With access industry experts and professional groups, he not only helps to shape internal policy positions but also contributes to government policy development.

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