Chancellor Phil Hammond is not giving much away about the impending Autumn Statement on 23 November, but he has admitted the housing shortage is a challenge he will need to tackle.
URBAN have put together some thoughts on what we might expect from the Statement and how they might affect landlords, buyers and sellers.
Clues may be found in the Chancellors own words - “all the tools” at the government’s disposal will be used “because making housing more affordable will be a vital part of building a country that works for everyone.” So we may expect a mix of tax, housebuilding and possibly government backed schemes.
We do anticipate the government will behave cautiously given the prediction that there will be a £25 billion black hole in public finances by the end of the current Parliament, and borrowing this year is estimated to hit £60.5bn, up from an official projection of £55.5bn. The Chancellor has already stressed that any fiscal boost in the Autumn Statement will be “careful, considered and targeted”.
Hammond has already announced a £3 billion Home Building Fund to help boost housing. This will help small family firms to build 25,000 new homes by 2020 and up to 225,000 in the longer term. A separate £2bn loan fund will pay for a further 15,000 new homes by 2020 on surplus public sector land.
This will hopefully be great news for people trying to get on the property ladder as the shortage of property is one of the factors keeping house prices high and more building means more properties to choose from.
We predict an initial drop in the market as small builders compete with the ‘big boys’ and barter with each other to attract the buyers, however as more and more buyers rush in, (prompted by the momentary drop in price) eventually we would expect that this will die down, and the cut-throat market cogs will whirl back into motion.
For any landlords who keep their properties within a limited company it is worth noting that the Chancellor has indicated that he will not slash corporation tax to 15pc to boost the economy. He has implied he intends to stick to a plan to cut the rate to 17pc by April 2020, from its current level of 20pc.
The National Landlord Association (NLA) has been lobbying the government about next year’s ‘Tenant Tax’ in the hope of getting it repealed and the government are likely to reconsider it. A similar tax policy has just been scrapped in Ireland, which could give the Chancellor room to reverse the restrictions before they come into force in Britain.
However, during this period of uncertainty the government will be sensitive to public opinion. Recent labour-backed research, the Redfern Review, revealed that among the population as a whole, 49% thought more should be done to dis-incentivise buy-to-let, while two-thirds thought the government should do more to help first-time buyers.
There have been calls for Mr Hammond to scrap the second home stamp duty surcharge that was introduced in April. It means buyers who already own another property have to pay an extra 3% in tax. Recent data up to end of October suggests buy-to-let investors have not been deterred by the surcharge and the government raked in £670m from buy-to-let and second homes to end of October this year - so we think it unlikely that it will be changed in this Statement.
Hammond did say that he would put money into small projects that deliver productivity improvements like rail and road repairs. He believes that they had the best returns because they could be started quickly and have long-term benefits. As proximity to transport links is one of the key factors in choosing a buy-to-let property any savvy buy-to-let investors would be wise to keep an eye on this.
The Department for Work and Pensions predicts that the amount spent on housing benefit for privately rented housing will rise from £9.5bn for 2014-15 to £10.8bn by 2018-19, and the government may well decide to do something to curb this high bill and meet social housing needs. A Housing White Paper is expected to be published at the time of the Statement.
There’s a number of different schemes about and here are three we’ve identified:
Rent to Buy
Influential Tory thinktank Renewal believe Theresa May should oversee a huge revival of government-funded housebuilding by constructing 75,000 homes a year for rent by low-paid workers. The scheme would allow low-paid workers to make substantial savings on private sector rents and let them save for a deposit.
Under the “rent to buy” scheme, residents would be offered five to ten-year tenancies to give security and stability not found in the private rented sector. New dwellings would be allocated by councils to local people who work but are on low wages.
The government’s Social Reform committee has been looking at how to make housing more affordable for families. They may be influenced by research and proposals from the Joseph Rowntree Foundation who are urging the Chancellor to build 80,000 affordable homes for ‘just managing’ families.
We may see a radical new policy where housing rents are linked to local wage levels.The idea would be that a household with someone in full employment could access rents based on the bottom quarter of local earnings, starting at a level based on 28% of that figure. The foundation claim that their Living Rents model could create 40,000 affordable homes to rent, and that it would cut the housing benefit bill by £5.6bn a year.
Buy as you Go
The Housing Federation’s submission to the upcoming Autumn Statement argued that a more flexible government investment programme for housing of all tenures, including social rent, would give housing associations the space and opportunity to come up with new ideas to help end the housing crisis. As part of this, they put forward a suggestion for ‘Buy as you Go’.
‘Buy as you Go’ homes are a new idea for affordable housing. The concept is quite simple: you pay a monthly rent with no huge upfront deposit and, over time, some of your rent goes towards buying the home. Eventually (after 25 or 30 years of full payments) you own the home outright. This will sound great to many people struggling to save a deposit because of their high rents.
Countdown to the Autumn Statement
One week to go. We’ll be bringing you our up to the minute analysis on 23 November so check back with the Landlord University or sign up to our newsletter by emailing firstname.lastname@example.org
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