The Autumn Budget 2018: Key announcements for housebuilders
We may not have expected the last pre-Brexit budget to focus on housing, but there were several elements which underline the government's continuing commitment to the housing industry.
Outlined below are the key points:
Help to Buy scheme extended
The Help to Buy equity loan scheme, which offers a 20% government loan (40% in London) to buyers of new-build properties, has been extended to 2023. The extended scheme will be restricted to first time buyers and new regional price caps for a property to be eligible will be introduced. The price cap for a property in the South West to be eligible for the scheme is £349,000 from April 2021 to March 2023. This is 1.5 times the current regional average first time buyer price. It is recognised that no industry should be reliant on government assistance indefinitely and it is positive that we now have some clarity on the term of this scheme.
Review of build out rates
Alongside the budget, Sir Oliver Letwin has published his independent Report on how the government can raise build out rates and why there is gap between housing completions and the amount of land allocated or having planning permission. The Report found no evidence that speculative land banking is part of the business model for the major housebuilders, nor that this is a driver for slow build out rates. It found that greater diversity in the types and tenures of housing on large sites would increase the market absorption of new homes into the market and that developers should be required to build a wider range of properties so as to increase sales and accordingly build out rates.
In addition, the Report recommends that the government adopt primary legislation to enable local authorities to purchase land compulsorily at prices which reflect the value of the sites once they have planning permission. Guidance is proposed limiting land value uplift to a fixed multiple of circa ten times existing use value through new large site ‘diversity planning’ rules.
The government will respond to the review in full in February 2019. If implemented these recommendations could instigate a significant intervention into the housing and land market.
Homes England launch five-year plan
Homes England is the government’s housing accelerator. It is responsible for increasing the number of new homes that are built in England, including affordable homes and homes for market, sale or rent, increasing the supply of public land and speeding up the rate that it can be built on.
Alongside the budget, Homes England has set out how it will improve housing affordability through a new five-year Strategic Plan. The plan, which runs to 2022/23, outlines Homes England’s ambitious new mission and the steps the national housing agency will take to respond to the long-term housing challenges facing the country – in partnership with all parts of the housing industry sector.
The new plan sets out far-reaching delivery objectives including to:
- unlock public and private land where the market will not, to get more homes built where they are needed
- ensure a range of investment products are available to support housebuilding and infrastructure, including more affordable housing and homes for rent, where the market is not acting
- improve construction productivity.
Housing Revenue Account cap abolished
The Housing Revenue Account (HRA) cap which controls local authority borrowing for house building in England has been abolished, enabling councils to increase house building to around 10,000 homes per year.
Many local authorities have already pledged to build thousands of new homes in anticipation of this move.
New development rights for high street homes
A consultation has been launched to breathe new life into the high street by proposed new permitted development rights to allow upward extensions above commercial and residential properties, and to allow commercial properties to be demolished and replaced with homes. Developers have reacted with some caution over the use of such rights which have in the past created pockets of poor quality private rental homes.
Land value uplift payments simplified
The government will introduce a simpler system of land value uplift payments that provides more certainty to developers and local authorities, while enabling local areas to capture a greater share of uplift in land values for infrastructure and affordable housing. The proposals include simplifying the process for setting a higher zonal Community Infrastructure Levy rate in areas of high land value uplift and removing all restrictions on s 106 pooling towards a single item of infrastructure. The government will also introduce a Strategic Infrastructure Tariff for Combined Authorities and joint planning committees with strategic planning powers.
The detail of these proposals will be eagerly awaited.
Support to the SME housebuilding sector
The government has earmarked £1bn of guarantee capacity to support lending to the SME housebuilding sector, via the British Business Bank working with Homes England.
This confirms the government's long standing commitment to help the smallest scale builders.
SDLT relief for shared equity properties
A welcome correction is that first time buyer's relief from SDLT has been extended so that first time buyers of shared-ownership homes priced up to £500,000 will be exempt from SDLT, whether or not a market value election has been made.
Previously, the initial purchaser of a shared ownership lease had the choice of how to pay SDLT. It could elect to pay SDLT on the market value of the whole of the property at the outset (known as the 'market value election'), in which case no further SDLT would be due on staircasing transactions. Alternatively, the initial purchaser could elect to pay SDLT on each separate share as it was purchased. A market value election could only be made on grant of the lease and could not be withdrawn. This change has also unusually been implemented retrospectively for any shared-ownership buyers since November 2017.
Discounted sales to local residents
The government wants to support parishes and communities to provide more affordable homes for local people to buy. The government will provide £8.5m of resource support so that up to 500 parishes "can allocate or permission land for homes sold at a discount". Neighbourhood plans and orders are approved by local referendums.
The government will update planning guidance to ensure that neighbourhood plans and orders approved by local referendums cannot be unfairly overruled by local planning authorities. The government will also explore how it can empower neighbourhood groups to offer these homes first to people with a direct connection to the local area.
Housing Infrastructure Fund increased
The Housing Infrastructure Fund (HIF) will increase by £500m to a total of £5.5bn, which is expected to unlock up to £650,000 new homes. The HIF is a capital grant programme for new physical infrastructure under which funding is awarded to local authorities on a competitive basis. The fund provides Marginal Viability Funding where the costs of putting in the infrastructure are unviable, and Forward Funding aimed at providing initial funding for large strategic schemes which will then give the market confidence to provide further investment.
The housing crisis will not be solved by this budget alone. However, the Autumn Budget 2018 is building on the foundations laid in the 2017 Budget – and these measures show that the government is following through in a very positive way.