Budget 2018: maintaining the focus on the UK’s housing crisis
In last year’s Budget, we commented how it was an interesting time for both house builders and property investors alike. There were some welcomed announcements and it appeared the Chancellor clearly had his eye on the needs of the UK’s housing market.
With yesterday’s Budget including some positive news for investors and entrepreneurs, it was pleasing to see the Chancellor hadn’t shifted his eyes from the country’s housing crisis and there were some welcome announcements for small housebuilders in particular.
Half a billion extra for housing
The Housing Infrastructure Fund was first announced in July 2017 by then Secretary of State for Communities and Local Government, Sajid Javid. Committing £2.3 billion to helping “ensure the right infrastructure is in place at the right time to unlock the high quality new homes that this country so badly needs”, the available funds doubled in last year’s autumn Budget to £5 billion.
And in yesterday’s Budget, it was great to hear an extra £500 million has been committed to the fund, bringing the total figure to £5.5 billion.
Anticipated to support the development of 650,000 new homes, it can be argued that the £290 million of this additional £500 million which is being set aside specifically for London is needed more elsewhere in the country. However, the bigger picture of 650,000 new homes has to be remembered - we’re still in the middle of a housing crisis and with estimates of 300,000 new homes needed each year, this can only be seen a positive step towards meeting this figure.
In addition to this, there was £1 billion provided to the British Business Bank for use as guarantees for smaller housebuilders, £653 million for partnerships with nine housing associations and money allocated for neighbourhoods to provide land for housing which can be sold to those in the local area at a discount.
Increased confidence for house builders
One of the biggest announcements in yesterday’s Budget for home buyers was that the Help to Buy equity loan scheme is being extended for a further two years to March 2023. Having already received a two year extension to April 2021, the 20% loan (40% in London) has seen the additional extension to further support more homeowners get onto the property ladder.
Whilst the news is positive for those who were keen to utilise the scheme but wouldn’t be in a position to buy within the next two years, it’s undoubtedly good news for homebuilders, too.
Although there is clearly a consistent demand for new houses in the UK, from a buyer’s point of view, the cost has been and always will be the prohibitive factor. No matter how much of a demand there is, this can sometimes result in sale periods that are longer than anticipated. There is little doubt the properties will sell, but as with any asset, the seller wants a sale as quickly as is possible.
As such, by continued to provide support to house buyers, house builders can positively estimate an active buying market for at least several years, allowing for greater levels of confidence.
Additionally, there had been some criticism of the scheme as it was being used by some not to buy their first home, but to move and upsize. This has been directly focused on in the latest Budget by introducing percentage house caps as opposed to set financial limits. Now, it will be 1.5 times the average forecast first-time buyer price in the area, which ranges from £186,100 in the North East up to £600,000 in London.
And whilst the Help to Buy scheme may not be the golden ticket for every new homeowner, it definitely offers a helpful hand to many - in fact, it was reported in April 2018 that the scheme had supported over 150,000 house purchases since its inception.
“Not only do housebuilders now have more certainty for longer-term planning and building the thousands of new homes our country so desperately needs, but it also gives potential buyers who are saving for a deposit the peace of mind that they too can benefit from the scheme over the coming years” - Kevin Roberts, director of Legal & General Mortgage Club
A potential reform of the planning system
In last year’s Budget, it was announced there would be a review of the current house building process to explore why there weren’t enough homes being built in the UK at present.
With the Letwin Review recently being published, one of the primary recommendations is that the current planning system needs to be reformed as in many instances it is too long and drawn out. The impact of this is clear - an unnecessary slow process at the start of any housing development.
Highlighted within the Budget, whilst the Chancellor didn’t confirm there would be any immediate actions, it was agreed the recommendations of the review would be considered and the planning systems would be reviewed in full.
However, it was interesting how the Chancellor gave reference to the Letwin Review’s finding that ‘landbanking’ is not systematic. It’s in no way a nod that the government will be exploring this further, but it’s clearly on their radar.
It’s hardly surprising this is regularly mentioned, though - the analysis this year suggested house building across half of England was slower than before the 2008 financial crisis, and so there needs to be an indication that progress has to be made.
A continued drive to tackling the housing shortage
Regardless of your involvement in the UK’s housing sector - buyer, builder or simply an onlooker - the difficulties faced are apparent. We have a growing population which is producing a huge demand for housing, yet we aren’t building enough homes. Everywhere around the country there’s a shortage of homes. Simply put, we need the right homes, in the right locations. And we need them to be built at volume continually.
Something we’ve talked about regularly, it’s going to require a combined effort from all involved to tackle the issue. We need everything from more regional housebuilders to the wider backing of the government, so with the announcements made in this week’s Budget, it’s positive to see the Chancellor hasn’t taken his eye off the end goal and, at the very least, is making positive strides to allow all involved to continue to tackle the country’s housing crisis.