Chancellor Rishi Sunak laid out the government’s spending pledges and commitments in a Budget that was more generous than expected, but also left many believing more could have been done.
From a property perspective, announcements were thin on the ground compared to other recent Budgets and fiscal addresses, with cladding and “levelling up” dominating.
There was also an interesting post-Budget revelation about capital gains tax, which will come as welcome news to those who pay this tax.
Here, we outline what was said, what it could mean for the market and explore some early reaction from the industry.
What did the Chancellor reveal about housing?
Sunak’s biggest announcement about housing focused on a £5 billion fund to remove cladding from the highest risk residential buildings, which will be paid for by the previously announced Residential Property Developers Tax. This tax will be charged on developers with profits of more than £25 million at a rate of 4%, to ensure SME businesses aren’t unduly impacted. In total, only 31 housebuilders made that much profit in 2019.
Meanwhile, as part of the government’s “levelling up” agenda, the Chancellor said there will be up to 180,000 affordable homes built on brownfield sites as part of a ‘multi-year housing settlement’ of nearly £24 billion. This represents the largest cash injection in a decade, Sunak said.
£11.5 billion of this will be used for the construction of affordable homes, with the focus on developing brownfield sites back into use instead of encroaching further on green space or the Green Belt.
Sunak told the Commons: “We are investing more in housing and homeownership with a multi-year settlement totalling nearly £24 billion.
“The government will provide £11.5 billion to build up to the 180,000 new, affordable homes the country needs annually, 20% larger than the previous programme.”
He also said the government would be investing an extra £1.8 billion to bring 1,500 hectares of brownfield land into use, as well as meeting its commitment to invest £10 billion in new housing and unlock a million new homes.
Radical reform to capital gains tax and to other property taxes – as had been predicted by some commentators – didn’t come to pass. Property taxes were nearly entirely off the menu, with no mention of stamp duty, inheritance tax or council tax, and only one small mention of capital gains tax in the post-Budget small print.
The lack of change is likely to come as a relief to the lettings sector, who have been most affected by property tax alterations in recent years. But those seeking a better, more streamlined tax system for property will no doubt have been frustrated by the Chancellor’s lack of action.
How did the industry react to Sunak’s speech?
PayProp Chief Sales Officer Neil Cobbold said that landlords could breathe a sigh of relief that they weren’t in the spotlight for once.
“There was no mention of lettings or the private rented sector, which will come as a relief to many landlords and agents who had been expecting changes to property taxation.
“The cladding crisis affects the sales and lettings market in equal measure, and is tied in with the ongoing leasehold scandal.
“I think we can all agree that fixing the crisis is a must to avoid another Grenfell-style tragedy, so it’s pleasing to see the government has announced a £5bn fund to remove unsafe cladding from the highest risk residential buildings, which include many in the private rented sector.”
Anna Ward, senior research analyst at Knight Frank, said: “The government’s confirmation of a £1.8 billion brownfield fund will help alleviate some of the impact of the pandemic on new homes output.
“As ever, the devil will be in the detail.”
She added: “There are questions marks over how quickly this can be rolled out and which areas it will target to help ease housing shortages.”
Meanwhile, Savills Senior Research Analyst Lawrence Bowles, said: “The government leaked news of the £1.8 billion funding for brownfield housing development earlier in the week.
“This works out at £11,250 per home.
“Whether this funding will be enough to meaningfully shift development focus where previous governments have failed to implement brownfield-first policies remains to be seen, and it is unclear how the funding will deliver the significant number of new homes needed.”
Shelter Chief Executive Polly Neate said: “Housing costs are almost every family’s biggest outgoing and their biggest worry – but there was very little in the Chancellor’s budget to lighten that load.
“With no plan and no new money to build enough truly affordable social homes, thousands of families will remain caught in a relentless struggle to keep a roof over their heads.
“While lowering the taper rate to allow people in work to keep hold of a bit more Universal Credit is really good, it won’t reach all of the five million families hit by the recent UC cut, and it doesn’t help people unable to work because they are sick, disabled or have young children to look after.
“The government cannot level up this country if it keeps missing opportunities to sort out the housing crisis. Until it commits to building 90,000 green social homes a year, families are going to continue to face the agonising choice of whether to put food on the table or pay the rent.”
Timothy Douglas, Policy and Campaigns Manager at trade body Propertymark, said the Chancellor’s spending review left a lot to be desired despite providing some good news.
“A rise in the national living wage is good in principle but with inflation expected to top 4% by the end of the year, higher household bills from the ongoing energy crisis, a cost-of-living squeeze, and the cut to Universal Credit, it is unlikely to provide the boost to incomes that’s needed.
“The £65 million funding for those in rental debt provides some support but the devil is in the detail.
“Almost four million low-income households are in arrears with their household bills, yet this money will be targeted at those who are most at risk of homelessness, excluding a significant number of others from help.”
He added: “A £1.8bn fund for brownfield homes and £11.5bn for 180,000 affordable homes is welcome, but the latter is not new money and only 32,000 of those homes will be social rented housing – a mere third of what is needed which is simply not enough when council waiting lists are predicted to almost double to 2.1 million by next year.
“The UK Government has also missed a golden opportunity to reshape an outdated Stamp Duty Land Tax system to reflect rising house prices and remove some of the market distortions it causes.”
He went on: “It is further disappointing there is no reform of the court system to deal with the volume of possession hearings – an estimated 62,000 just in England and Wales alone – or proper funding for landlords so that calls for energy-efficiency improvements on an older private-rented stock are financially viable, and not just hot air.”
While it was a lower-key Budget than expected from a property perspective, and received a largely lukewarm reaction from the industry, there were some key announcements that are likely to have a direct or indirect impact on the market as we continue to emerge from the pandemic.