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What did the Conservative Party conference tell us about housing?

  1. 11 October 2018
  2. By Nick Perman

At the Conservative Party conference, housing was high on the agenda. But what are the promised policies and who will they help?

The Conservative Party conference, which took place in Birmingham from 30 September to 3 October, will probably be best remembered for Theresa May jiving onto the stage to Abba's Dancing Queen, Boris Johnson's manoeuvring and an inevitable preoccupation with Brexit.

In between, however, there were some major announcements on housing. The biggest of these, perhaps, was the planned removal of the cap on local councils borrowing to fund houses, but plans to tax foreign buyers further were also outlined.

Local councils freed to build new homes

In an effort to help solve the housing crisis, the Prime Minister announced in her conference speech plans to lift the strict cap on borrowing for local councils.

May told the audience that solving the housing crisis was the 'biggest domestic policy challenge of our generation'.

“It doesn't make sense to stop councils from playing their part in solving it,” she added. “So, I can announce that we are scrapping that cap. We will help you get on the housing ladder – and we will build the homes this country needs.”

Town hall chiefs, who have been calling for years for the cap to be removed, were delighted with the move, with the Local Government Association (LGA) calling it 'fantastic' and reminding everyone of the key role councils can play with regards to housebuilding.

The government's current ambition is to build 250,000 new homes a year, rising to 300,000 a year by the mid-2020s. Such a target will require the largest housebuilding boom since the 1970s, when local councils were responsible for building more than 40% of new homes. In 2017, according to government statistics, this had fallen to less than 2%.

As a result of May's plan, local councils will be able to take out big loans against the value of their housing stock, enabling them to borrow billions of pounds more for housebuilding. In theory, this could lead to tens of thousands of new homes being built.

Government sources confirmed that the cap – first introduced in 2012 - would be scrapped entirely, but it's not yet clear when this change will be made.

Critics suggest local authorities will be further overloaded with debt, but supporters of the move – which includes Labour and a cross-party Commons Treasury select committee – insist that councils must be part of the solution in dealing with the UK's 'chronic' housing shortage.

A tax on foreign buyers

The other eye-catching housing policy came right at the start of the conference, when May announced controversial plans to levy a higher rate of stamp duty on overseas investors. She insisted that it should not be as easy for foreign investors to buy a home in the UK as it is for people resident in the country.

The additional money raised will support the government's rough sleeping strategy, but it's not yet clear how much the increase will be. A consultation is set to be held later this year on the proposals, but the extra tax could be up to 3% and will be on top of the existing 3% stamp duty surcharge on second and buy-to-let homes.

There are worries that the prime section of the market – especially in London – could be hit hardest by the new levy. Roughly a third of homes in London are sold to overseas buyers, rising to nearly half in prime central London. Conservative party aides also pointed to research carried out by York University, which said that approximately 13% of new London homes were purchased by non-residents between 2014 and 2016.

If an additional 1% levy is introduced, it's expected to raise £40 million a year, a figure which rises to £120 million if an extra 3% surcharge is implemented.

The plans were met with fury by some, including Camilla Dell, managing partner at buying agency Black Brick, who labelled the plans as 'desperate'.

“The new proposed tax will simply pour more glue into what is already a very fragile London market,” she argued. “What it will do is dissuade wealthy buyers from buying homes well above £1 million and in turn reduce the tax take - not just from stamp duty but other ways in which foreigners contribute through employing people and spending money in our shops.”

Another buying agent, Caroline Takla of The Collection LLP, also criticised the move as 'knee-jerk'.
“SDLT receipts are perceived as an easy way for the government to raise revenues, and with Brexit costing the UK economy £500m per week it is a simplistic solution to try and fill the monetary crater left in HM Treasury’s coffers,” she said, adding that the new-build sector will be most affected as developers take a hit on prices.

“Unfortunately, this is a sector that supports many jobs in construction, architecture, interior design and sales and will likely have a knock-on effect on unemployment which can only fuel some of the challenges that this new tax is trying to address,” she concluded.

Others, however, were more positive about May's proposals. The Association of Accounting Technicians (AAT), which has been lobbying the government hard for action to be taken against overseas residential investors, welcomed the idea.

Phil Hall, AAT head of public affairs & public policy, said the plans were a ‘sensible, measured response' to the increasing problem of overseas investors buying up UK housing stock.

“Middle income earners from across the world, especially China, Malaysia and Singapore, are finding UK property an increasingly attractive proposition,” Hall added, insisting that it was no longer just the super-rich who were investing in the UK. “This has been exacerbated by the weakness of sterling following Brexit.”

Fixing the broken housing market

May has frequently dedicated her premiership to 'fixing the broken housing market', and in his speech at the conference Housing Secretary James Brokenshire reiterated this ambition.

“We need to be bold and radical to remove unnecessary barriers and speed up delivery,” he said. “And in doing so we need a reformed planning system that is effective and responsive.”

He also said the government needs to be smarter on how it uses land and the space available, prioritising brownfield sites but also looking at land that’s already been built on, giving councils greater powers to build the garden communities of the future, resolving the leasehold crisis and creating a New Homes Ombudsman to champion home buyers, protect their interests and hold developers to account.

The Conservatives are certainly still placing a huge focus on housing, but the distraction of Brexit and other domestic issues could continue to dog progress and make all the talk on housing policy a bit hollow.

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