Developers will have been watching last the Autumn budget with a keen eye and will by now have had a chance to digest its implications. Whilst the Chancellor offered a number of incentives for development, there are doubts that these alone will be effective in kickstarting development and tackling the housing crisis.
The budget was heralded as particularly important, as it presented an opportunity for the UK to show the rest of the world that, in spite of Brexit, we are still open for business. How the Chancellor, Philip Hammond, was to achieve this drew demands for greater public spending from Labour and for fiscal caution from the Office for Budget Responsibility. However, as BBC political editor Laura Kuenssberg predicted, a chancellor with no majority, no money, and an aversion to borrowing was unlikely to take many risks.
The most eye-catching announcement was the stamp duty concession for first time buyers. From midnight last Wednesday, stamp duty is longer payable on purchases up to a value of £300,000. The concession will also be available on the first £300,000 of the purchase price of properties up to a value of £500,000. This appears to be part of a concerted effort by the Government to woo young people, after a poor showing in the general election.
The Chancellor also announced that he wished to accelerate the speed of house building to 300,000 new homes a year, up from the 217,350 built last year. To achieve this, he committed to setting aside £44bn for housing through capital funding, loans and guarantees.
A couple of other interesting complementary issues were announced. Councils are to be given powers to charge 100% council tax premium on empty properties. Additionally, following an urgent review to examine the gap between planning permissions granted and houses built, compulsory purchase powers may be extended to target land banked by developers “for financial reasons”.
Could do better
The stamp duty concession was met with cheers from the Government’s back benchers. Here was a policy likely to benefit 95% of all first-time buyers, with 80% not paying stamp duty at all. Surely this would make home ownership a more realistic ambition for a generation of people, and provide a market ripe for development? Not according to the Office for Budget Responsibility, who declared that it would simply lead to a spike in house prices and may only result in just 3,500 more people buying a home than otherwise. They claimed that “it would be literally cheaper” to buy these people a house. It is perhaps also worth noting that the wider complaints in the property industry that stamp duty is inhibiting the market were not addressed.
As to the 300,000 new homes a year, the ultimate aim of this is to make homes more affordable. Whilst many industry experts believe that 300,000 new homes a year will meet demand, Christine Whitehead, professor of housing economics at the London School of Economics, stated that “most economic models suggest that even this level would be unlikely to improve affordability much”. Further scrutiny exposed that the Chancellor’s promise of £44bn for housing only equated to £15bn of new funding, while the rest had already been allocated. Moreover, whilst offering guarantees to developers is undoubtedly useful there were no measures in the budget that actually guarantee that any houses will be built. Almost every government in recent years has set targets for house building, which have proved singularly ineffective in delivering large numbers of new houses. As the leader of the opposition, Jeremy Corbyn, put it: “The Government promised 200,000 starter homes three years ago and not a single one has been built” and also expressed his disappointment that there would be no large-scale publicly-funded housebuilding programme.
It will be interesting to see more details about the potential compulsory purchase powers intended to prise land away from developers, whom the Government seems to blame for delaying development. This rhetoric will not come as a surprise to many in the property industry, and smacks of a deflection tactic. The reality is that that developers wish to develop their land and realise a profit on it as soon as they can. If the Government refuses to build housing itself then they must at least create the conditions to enable developers to do so.
Many people, not just developers, will have been waiting for something significant to really give housebuilding the kickstart it so desperately needs. As the dust settles on this year’s Budget, this may be seen as nothing more than a missed opportunity.