Housing was one of the main subjects of Wednesday’s statement. It was in the Conservative Manifesto too and the political focus has not wavered.
“In the end Spending Reviews like this come down to choices about what your priorities are."
"And I am clear: in this Spending Review, we choose to build.”
The statement contained a commitment to build 400,000 new affordable homes by the end of the decade. In fact this is just a repeat of the manifesto commitment which actually offered somewhat more with 275,000 new affordable rented homes and 200,000 starter homes, the latter being homes to be sold to first time buyers under the age of 40 at a 20% discount.
And it is clear that by “affordable”, the emphasis is at least as great on affordable housing to buy as it is on affordable housing to rent:
“And affordable means not just affordable to rent, but affordable to buy”
For local authorities and housing associations, the good news appears to be that there was to be no more bearing down on rent reductions (something that had been rumoured in advance that might occur). But at the moment we have no guidance on how the government will find the £12 billion in welfare savings that are still promised to be found. Further announcements on this are awaited and might include further restrictions on housing benefit entitlement. For the moment we are told that housing benefit payments to new social housing tenants will be capped at the prevailing local housing allowance rates for tenancies signed after 1st April 2016 but will come into effect only from 1st April 2018.
This is unlikely to have much of an impact on most housing associations and local authorities who already set their rents at these rates so they will be breathing a sigh of relief that they will not have to revisit their business plans further. Only where the local housing allowance rates and social rents are on a par might this have more of an impact, though the 1% annual rent reduction will mitigate this.
The housing budget is being doubled to £2 billion per year, that’s £7 billion over the life of this Parliament. So we are talking about serious money. Half of the homes are to be the starter homes, 135,000 will be a revamped shared ownership product, 10,000 rent to buy homes and 8,000 specialist accommodation units for elderly and disabled persons. That just leaves funding for 50,000 affordable rented homes –those already caught by the HCA’s affordable housing funding programme – so funding for affordable rented homes seems to dry up after 2018.
There is a huge switch of State funding from sub-market rents to sub-market sales. Further details on how some of these initiatives will work are awaited.
To meet the particular needs of London Help to Buy will now offer an equity loan from the State of up to 40% of the cost of a house, instead of 20%. As a taxpayer one would hope that the government punt on house prices not falling comes off. The OBR is predicting house price rises of 5% a year until 2020, so perhaps the risk is not that great.
The government hopes to dampen demand for investment in the buy to let sector by imposing an extra 3% SDLT on purchases. This will be introduced in April 2016. The government must be careful not adversely to impact on the burgeoning institutional PRS. This is recognised in the statement.
“It will be introduced from April next year and we’ll consult on the details so that corporate property development isn’t affected.”
The first five pilots for the “voluntary” extended RTB for housing association tenants was also announced yesterday. This will offer tenants for Riverside HA, L&Q, Sovereign HA, Thames Valley HA and Saffron HA the opportunity to get ahead of the crowd; and for the Treasury to assess uptake levels and to measure how much this initiative may actually cost the State.
The shared ownership announcement is interesting.
“We’ll remove many of the restrictions on shared ownership – who can buy them, who can build them and who they can be sold on to”
The shared ownership product has lurked in the shadows of the housing market. It is not well known out of London and has been rather outshone by the Help to Buy product which has been quite a success (at least in marketing terms). Shared ownership has not been helped by the restrictions set out above. Landlords can only be local authorities or housing associations. If the scope of providers (and customers) can be widened together with better publicity as to how shared ownership works then it could provide a useful further addition to the range of home ownership options and open up the potential of ownership to those currently excluded from this market.
Use of shared ownership may also help avoid some of the regulatory restrictions engaged with Help to Buy though charitable housing associations will have to consider if and how it will impact on their status. On the other hand, it has been argued that the plethora of home ownership options does not make life easy for mortgage providers.
The availability of funding for these home ownership products provides a great opportunity for housing associations. They can rebound from the shocks of rent reductions and RTB by finding a new reason for being by developing new housing for part of the public that they are used to dealing with. And by performing in such a way, convincing a sceptical government that housing associations have a valuable role to play.