Despite repeated cries by the Chancellor that “your hard work has paid off”, the Autumn Budget was underwhelming in its efforts to address the housing crisis. In brief, nothing new for renters, a mixed bag for landlords, and support for first-time buyers moving into shared ownership. Several extra pots of cash for housebuilding but well short of what’s needed and nothing radical in terms of reforming the land market to funnel the proceeds of development to local communities and build more council homes.
The only announcement specific to the private rental market in the Budget was a reduction in lettings relief on Capital Gains Tax paid by landlords selling up. Owner-occupiers already pay no capital gains tax when they sell, but landlords currently get up to £40,000 tax-free. Philip Hammond told Parliament that lettings relief will be limited to circumstances where the landlord is living in the property along with tenants, which means that it will no longer apply where the landlord previously lived in the house but no longer does so. An additional exemption period will also be reduced for 18 months to 9 months, effectively halving this element of the tax relief. With landlords threatening to sell up in droves, that could see the Treasury benefit from those that do decide to exit the market. But some landlords now stand to pay less tax on their rental income - the higher rate threshold was raised to £50,000 - so they're less likely to be considering it this morning. Nonetheless, the Budget confirms that the days of preferential tax treatment for landlords is over, with the Government continuing to steadily reduce tax relief for those who already own more than one home.
Stamp duty relief has been extended to all first-time buyers of shared ownership properties valued up to £500k, and this will be applied retrospectively to all who have bought since the last Budget. As shared ownership is supposed to be an ‘affordable’ housing option for those who can’t buy at full price, it’s an oddity that these first-time buyers didn’t already receive the helping hand of stamp duty relief, so it's good news that they will get this rebate.
The current Help to Buy scheme for first-time buyers runs until 2021 and, despite widespread criticism that the scheme only helps those who can already buy and pushes up house prices for everyone, Hammond announced renewal of the scheme from 2021 to 2023, albeit restricted to first-time buyers and lower price caps set regionally. After 2023 the government does not intend to introduce a further Help to Buy scheme, which is sadly not a promise to scrap it.
In housebuilding news, fiscal Phil promised a new wave of strategic partnerships with nine Housing Associations which will deliver 13,000 homes across England, £500 million for the Housing Infrastructure Fund, and up to £1 billion to support SME housebuilders.
Hammond pledged £8.5 million so that neighbourhoods can allocate or permission land to build discounted homes for sale to local people through Neighbourhood Planning. The detail on this is unclear but we were pleased to hear him refer to discounts "in perpetuity", something we called for as part of the now-stalled Starter Homes policy, and which is critical if affordable housing schemes are to benefit future generations as well as today's.
The final report of the Letwin Review was been published alongside the Budget, although the Government haven’t yet commented on the recommendations. Oliver Letwin proposes that local authorities are given more clout in the planning system and can demand more of landowners and developers. However he stops short of calling for much needed reform of the Land Compensation Act which ensures landowners get speculative ‘hope value’ for land they sell, which drives up land prices and makes it harder to build affordable homes. Generation Rent, along with Shelter, New Economics Foundation, and Conservative think tank Onward have called in an open letter for reforms in the way we capture planning gain for the community, and a cross-party committee has since backed them, so it’s disappointing that Letwin’s Review didn't tackle it too.
And, finally, good news for local authority housebuilding with the Housing Revenue Account cap is abolished as of 29th October, so councils can now borrow against their housing assets. Of course, we already heard this from the Prime Minister at Party Conference, but it’s an important policy reversal that we can still be pleased about and could build an extra 10,000 homes every year.