There were whispers that Philip Hammond’s job as Chancellor was due for the chop back in the summer, but he was unexpectedly saved after the Conservative’s shaky win at the General Election in June. However, with their comedy double act (cough sweet, anyone?) showing a united front on the Front Bench, it seems Mr Hammond and Mrs May are working well in Number 10 and 11 Downing Street.
The comedy didn't top with cough sweets either. Mr Hammond tore through the Budget in a riot of jokes (ahem), poking fun at the opposition, Lewis Hamilton, Jeremy Clarkson, and even members of his own party - and showing that even with his hefty job of balancing the country's books, he still has time to it down on a Sunday night and watch Blue Planet like everyone else.
But aside from the stand up routine, was there anything of note in this year's Big Budget set to have an impact on the property market and landlords specifically?
Stamp duty exemption
‘We choose the future, we choose to run towards change, not away from it. To prepare our people to meet the challenges ahead, not run from them. And the prize will be enormous.’
One of the major announcements was the stamp duty exemption for first time buyers – but sadly no change for landlords!
There will be no stamp duty on purchases up to £300,000, and the relief will be available on the first £300,000 of purchases up to £500,000. This means a cut in stamp duty for 95% of first time buyers, with no duty to pay for 80% of first time buyers.
A report by the Centre for Economics and Business Research recently calculated that an additional 146,000 property sales could have taken place over the last five years had stamp duty not have been a factor standing in the way of eager first-time buyers.
By removing this barrier, Mr Hammond hopes that more buyers will be able to take the first step on the housing ladder. This is in addition to measures already in place, such as the Help to Buy equity loan.
There is criticism of this move though, with experts suggesting that the deposit is not the primary issue that first-time buyers have – instead it is the deposit that they struggle to save for, in relation to which the stamp duty is a relatively small figure. Until the property price comes down, deposit prices will remain unattainable for many.
Some experts also believe that the changes will have no impact on another major issue within the housing sector, the sluggishness that we are seeing within the second steppers and downsizer section of the market. This section of the market has seen no relief in this year’s Budget, and many are choosing to stay put in their ‘first time buyer friendly’ properties, as they don’t have the financial ability to move, despite potentially needing to. This blockage in the market is constraining the supply of first time buyer homes, so despite the government’s stamp duty amendment, there may simply not be the stock available…
Build more houses
‘If we don’t increase supply of homes, more money will increase prices and make matters worse. If we don’t train the construction workers of tomorrow, we will generate planning permission but we won’t turn them into homes.‘
The Chancellor pledged to build 300,000 new homes a year in England in a bid to tackle the housing shortage, an increase on Aprils pledge to build 200,000 a year. In a recent interview he maintained that the government was delivering new homes at record levels, with 217,350 ‘additional dwellings’ being delivered in England last year.
The latest plans include:
- 44billion funding over the next four years through capital funding, loans and guarantees to deliver 300,000 homes per year on average – the largest increase in housing since the seventies.
- £34 million funding to develop construction skills across the UK
- A planning system reform to free up land in for homes, in places people want to live
- A commitment to maintain the existing protections for Green Belt
- Increased house density in urban areas
- Policy changes to support conversion of empty space above high street shops
- Policy changes to make it easier to convert retail and employment land into housing
- Develop a centralised register of planning permissions
There will also be a review panel, chaired by Sir Oliver Letwin, exploring the reason why there is so often a Gap between when planning permission is granted, and properties built – commonly known as land banking. An interim report is expected to be ready in time for the Spring Statement in April, with the full report ready for Budget 2018.
Last week Prime Minister Theresa May stated that she would take personal charge of the government’s strategy to address the chronic shortage of new affordable homes being built, particularly those for rent, however despite this, there are still concern over the latest pledge – Labour has already shot back at the claims, stating that the government have ‘no coherent plans to address the housing crisis’.
Many are concerned about where funding for such grand plans is going to come from. One of the key changes is that Housing Association debt is being scrapped from the government’s balance sheet, clearing £70 billion of debt from Mr Hammond’s bottom line. This change - moving HA’s to a more ‘hands off’ level of government control – will allow Housing Associations more freedom to fund housing projects, encouraging building and development.
Whether the private rental sector will have the ability to purchase any of the new build properties is yet to be seen.
‘The switch to UC is a long overdue and necessary reform. Universal Credit delivers a modern welfare system where work always pays, and people are supported to earn. I recognise the concerns about operational delivery.’
The roll out of Universal Credit has been a great concern for many landlords, with well-known letting agents hitting the news recently, when they issued section 21’s to all tenants who were due to be receiving Universal Credit, due to the perceived uncertainty of the payments.
The announcements in today’s Budget show significant changes:
- Remove 7 days waiting period removed at beginning of claims
- Greater support at beginning - any household can get access full month within 5 days of applying
- Advances can be accessed online
- 1.5bn package to address concerns about delivery
These changes are great news for recipients and landlords alike. The lengthy wait time was leaving recipients with no access to funds during the period between application and receiving initial funds, and many people were finding themselves with no means to pay vital bills, such as rent, utilities, or even for food. With a more usable system in place, tenants are more likely to be able to manage their funds during the switch over to the new system, meaning landlords are less likely to find themselves facing significant rent arrears.
‘No one should doubt our resolve’
Although not a lot was made of this announcement, it can’t be ignored…
Mr Hammond’s brief note that local authorities will be given availability to increase the council tax rate from 50% on empty properties, to 100% - which could have a huge impact on landlords who have properties without tenants! However, until more information is released, we are a little in the dark.
We will keep you informed as more information becomes available.
‘We are all in politics to make people’s lives better’
The budget sets out the government’s first steps towards its commitment to cut rough sleeping in half by 2022, and to eliminate it completely by 2027. The budget announced an investment of £28 million in three Housing first pilot schemes, which will take place in Manchester, Liverpool and West Midlands to support rough sleepers with complex needs. This is in conjunction with the launch of the Homelessness Reduction Taskforce, which will deliver a cross-government strategy to deliver the commitment.
The government are also pledging a further £20million towards schemes to support people who are at risk of homelessness to be able to access and sustain tenancies within the private rented sector.
Safety in the rental sector
‘This tragedy should never have happened and we must ensure that nothing like it ever happens again.’
Following the disaster at Grenfell Tower, the Chancellor was sure to note that the Government have taken lessons from the tragedy.
As well as pledging £28million additional community support to victims, including new mental health services, regeneration support for the Lancaster West estate and a new community space, Mr Hammond re-confirmed that wherever measures are essential to make a building fire safe, the government will make sure that the current restrictions on local authority’s financial resources will not prevent them going ahead. The government awaits the findings of the Hackitt Review and will respond to the recommendations when they are published.
Rent rise support
‘We are listening, and we understand the frustration’
Although the budget may have felt a little buyer-biased, there was a show of support of the rented sector, although it was on the side of tenants!
‘Targeted Affordability Funding’ was announced, in a bid to support Housing Benefit and Universal Credit tenants who are living in locations where private rents are rising faster than housing allowance rates. The government pledged £40 million to spend over the next two years, which will top up the benefits of approximately 140,000 claimants, by an average of £280 each, in areas where affordability pressures are the greatest. Whilst theoretically a policy aimed at supporting tenants, this is also a great hep to landlords, giving landlords in high rent areas the option to accept tenants receiving benefits, without having to accept a rental rate far below the market average.
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