The first ever Spring Statement was announced today by the Chancellor, and as expected (and perhaps hoped for), it made for relatively light reading and there were no surprise tax announcements from a real estate perspective.
The overall message was one of optimism, with the Chancellor announcing upgraded projections for growth, expectations for falling inflation and debt and borrowing. We saw claims that the UK economy had reached a turning point and that there was “light at the end of the tunnel”.
On housing, the Chancellor kept his comments brief. It is reassuring though to hear that the Government is making good progress in respect of the Housing Programme previously announced at the Autumn Budget, which it is hoped will tackle the growing housing challenge. He confirmed the Government’s commitment to raise the supply of new UK homes to 300,000 a year by the mid-2020s and further announced that London will be receiving an additional £1.7billion funding which it is hoped will deliver an additional 27,000 affordable homes by 2021-22.
In the Autumn Budget it was recognised that there was no “silver bullet” to resolve the current housing crisis. Whilst it is encouraging that the Government are clearly committed to spending, one of the biggest challenges facing the sector is the rate of attrition – homes given planning permission, but not built or under construction within 3 years. This continues to be high. Our Housing Inquiry shows that the number of new homes that do not start construction or complete within three years of receiving planning permission has grown, with the attrition rate increasing from 33% in 2016 to 46% in 2017. Of the 55,000 homes granted planning permission in 2014, around 30,000 were built or under construction by the end of 2017. https://www.grantthornton.co.uk/en/insights/london-housing-permissions-and-completions-still-too-low
As announced at the Budget, a review of the gap between housing completions and planning permissions is currently being undertaken by Sir Oliver Letwin. An update has been posted by Sir Oliver and we are expecting a full update on his review to be unveiled in June. Jessica Patel offers further insights in her separate Passle piece “Why are build rates so low?”.
The Chancellor also announced that the SDLT first time buyers (FTB) relief introduced at Autumn Budget 2017 has already benefited 60,000 first time buyers. However, it is still questionable whether FTB relief will have a significant impact in terms of improving overall affordability for first time buyers, particularly in an undersupplied market. The concern is that this measure will continue to stoke short term house price inflation so that the overall cost of the home may not be reduced by the full SDLT saving representing a windfall to housebuilders and benefiting lenders. This is likely to be more evident in those parts of the UK (such as London and the South East) with the most demand. Indeed, the last time a similar relief was introduced HMRC concluded that it had no material impact on the level of purchases which does bring into question the longevity of this measure.
The statement also announced that the next revaluation for business rates has been brought forward from 2022 to 2021, allowing businesses to benefit from the change earlier. Good news for many property-intensive businesses, such as retailers and leisure-providers.
Overall it is clear that the Government is maintaining a strong stance on housing, and along with recent proposed changes to the National Planning Policy Framework, intends to take the necessary policy steps to get its target of 300,000 houses built.