Today’s budget marks a step change in the government’s attitude towards the supply of housing. A commitment to inject £44bn of funding over 5-years, with targeted support for all parts of the supply chain, is a reassuring message that the government understands the scale of the challenge, the threat that the housing shortage poses to the economy and the need for its immediate intervention.
For the first time, the government has acknowledged that the private sector cannot solve the problem independently of state support. Critics of the Conservatives’ “Help to buy” scheme, will have been pleased to hear Philip Hammond’s admission that maintaining their focus on the demand side won’t lead to the required number of new homes being built. Indeed he went as far as to admit that house prices are likely to increase further, if additional supply is not in place to meet demand from an increased number of potential buyers, empowered by government subsidy.
£44bn committed to housebuilding over the next 5 years
£15.3 billion of new funds for house-building has been committed over the next five years – taking the total to £44 billion. The government believe their support can help provide construction resources, improve the planning system, unlock stalled sites, boost the purpose built private rented sector and more effectively incentivise private house builders. Coupled with their continued backing of first time buyers, this end to end involvement is aimed at increasing the supply of new homes to 300,000 per year by the end of this period, compared to the 217,000 achieved in the last financial year, which itself marked a 15% increase on the previous year.
There will be a particular focus on house-building in popular urban areas, near transport hubs, in recognition of the fact that ‘the cost of housing near the most productive centres of employment has become a barrier to productivity growth’. In our view, this is a positive step, so long as the building sites are optimised for density, without compromising the size of the flats or houses themselves. First time buyers have the right to a decent sized home.
Considerable planning reforms are also to be undertaken, including a review into undeveloped plots where planning has been granted, the initial findings of which will be shared in the Spring Budget. The Greenbelt, meanwhile, will continue to be protected.
The private rented sector
With the buy-to-let sector having been a target for tax hikes in previous budgets, investors will be pleased to see the government moving to support the construction of purpose built housing for renting, through an £8bn pot designed to boost private house builders and build to rent. The government is right to acknowledge that good quality, well located, rental accommodation is of critical value to the economy. The tories have too often been guilty of promoting the ideal of home ownership at the expense of other forms of tenure.
Removal of stamp duty for first-time buyers – a feel good headline
Potential first time buyers will welcome the removal of stamp duty on purchases up to £300,000. In reality, this will only enable a small number of individuals on the margin, who couldn’t previously afford to buy, to be able to do so now. With stamp duty already only payable above £125,000, the maximum saving is £5000, equivalent to an additional 1.7% equity towards a deposit on a £300,000 home. Most will simply be empowered to pay a little bit more, which could push up prices further in areas of high demand.
This will undoubtedly give some first time buyers a much needed boost. However, we believe the headline is more impressive than the impact of the policy, which is unlikely to make much difference to the majority among the younger generations, struggling to get on the housing ladder.