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UK: Chancellor John Healey’s Budget has received a less than enthusiastic reception from real estate professionals.
The Budget included the following announcements:
• No major changes to building regulations for the rest of the parliament, except for safety
• Biodiversity requirements will be removed from brownfield sites
• Councils will get cheaper borrowing for housing, and no land sold to social housing providers will attract VAT
• A new equity loan scheme, Your First Home, will lend £4.7 billion
• Tax on income from property rental will increase by a further two per cent from April next year. It was already due to go up to 22 per cent from 1 April next year and will now go up to 24 per cent
• National minimum wage and the national living wage will rise by 3.9 per cent in April
• An increase in the threshold for small business rate relief for retail, hospitality and leisure businesses from £12,000 to £18,000
• An extra £20.4 billion for the state-controlled national wealth fund and the British Business Bank to try to increase investment in growing companies
• A new “founders’ relief”, a 10 per cent tax rate on lifetime gains, up to £10 million, for the founders of businesses
Industry reaction:
NRLA chief executive Ben Beadle said: “The Chancellor has today made life harder for renters right across the country. As the Office for Budget Responsibility has confirmed, hiking taxes will drive up rents and drive down supply in the rental market when demand is already way ahead of the number of homes available How that fits with a commitment to providing households with more breathing space is anyone’s guess. The Chancellor is yet again trying to balance the books on the backs of landlords. He should be taking decisions that could boost the supply of homes, reduce rents for tenants and support growth. Those investing in property, boosting new development and providing a roof over the heads of renters now face lower returns, less security and more red tape. This will mean one thing: higher rents.”
The ARL chief executive Brendan Geraghty said: “The housing sector, including Build to Rent, is being held back by cumulative regulation. Our members are experiencing this firsthand, and the OBR has echoed that today stating that it has affected housebuilding activity to a greater extent than previously assumed. Viability is the test that every housing policy must pass and if a development cannot be funded and built, it delivers no homes, affordable or otherwise. Some of today’s measures including no major changes to building regulations for the remainder of this Parliament (aside from building safety, and rightly so) are welcome but pausing further regulation will not repair the cumulative damage. We need a more radical reset of the taxes, charges and overlapping regulatory requirements that make new homes unviable. The Government must now move beyond preventing additional costs to actively reducing the burdens holding back delivery, and we hope that the Budget promise to consider how to amend regulations to support development and ensure that regulation is more proportionate, will be met. We stand ready to work with the Government and the announced Better Regulation Executive to develop a regulatory system, one which enables the sustained delivery of the high quality, additional rental homes this country wants and needs.”
Adam Hills, client services director, LRG Living Markets, said: “The Government has missed an opportunity today to help address the housing crisis by making investment in rental homes more attractive. Without stronger support for landlords and delivering new supply (including of BTR homes), the consequences will be felt by investors and residents alike. Before the Budget, we called for government to assess the combined effect of taxation, regulation and compliance on rental investment. For corporate landlords, the practical question remains whether rental income can support financing, maintenance, regulatory obligations and improvements while providing a return that justifies further investment. We have not identified a reduction in the additional-dwellings SDLT surcharge or a dedicated package to improve BTR viability. The removal of SDLT on rent under assured tenancies fails to reduce the acquisition costs faced by companies purchasing rental homes. The announced exemption from biodiversity net gain requirements for residential brownfield developments up to 1.5 hectares could help some smaller BTR schemes. However, we await the implementation details, and this does not appear to resolve the financing, infrastructure and construction costs affecting larger developments. On the positive side, the commitment to greater stability in building regulations, subject to building safety exceptions, should help investors plan ahead.”
Oliver Knight, head of residential development & investment research at Knight Frank, said: “Your First Home tackles a genuine affordability constraint, but the risk is that the scheme is targeted so tightly that it limits its impact on housing delivery. The 2.5 per cent deposit is a significant step in reducing the upfront cost of buying, but purchasers will still need to find the cash for stamp duty on top. The higher income ceiling in London recognises the capital’s affordability challenge, but the £650,000 inner London and £500,000 outer London price caps could still restrict take-up. The impact is likely to be greater in more affordable markets, where a larger proportion of new-build stock falls within the local thresholds. Where the scheme does increase demand, faster sales and greater certainty around absorption could improve development viability, support site starts and help unlock marginal schemes. However, the developer contribution and annual funding cap will need careful thought if stronger demand is to translate into additional housing supply.”
Juanita Francis, head of property at TV Edwards Solicitors, said: “Today’s Budget has been disappointing for the future growth of the residential property market. Given it’s his first Budget as Chancellor, the Chancellor had an opportunity to make a real impact and put forward a clear timetable for reform, creating the conditions needed to get the property market moving again. But that didn’t come to fruition today. While the Your First Home scheme and the First time Buyer ISA, replacing the Lifetime ISA, was welcome news in helping first-time buyers get onto the property ladder, it was disappointing that the Government didn’t look beyond first-time buyers or new homes. Not every first-time buyer wants a new property, which can be costly, and we need reform that also makes it easier for existing homeowners to move up or down the property ladder. If the Government wants to encourage movement in the housing market, reducing the financial barriers to moving, such as Stamp Duty, would have been a good place to start. Stamp Duty is a huge financial barrier for ordinary people who simply want to move home. In London, where property prices are significantly higher, someone buying a £600,000 home could face a £20,000 Stamp Duty bill before they’ve even paid their solicitor, surveyor or removal costs. This represents a substantial additional expense on top of an already expensive purchase. It can make the difference between someone being able to move and deciding that the costs are simply too high.”
