The Autumn Budget 2018 made no great fanfare about housing proposals and, in fact, contrary to previous budgets, housing appeared quite far down the agenda and played second fiddle to some more headline-grabbing reforms and "give-aways". That said, there are still some exciting and welcome housing initiatives in the budget albeit the potentially more dramatic changes were simply billed as "coming soon".
Key housing elements of this years' budget included:
- £291 million from the Housing Infrastructure Fund, funded by the NPIF, to unlock 18,000 new homes in East London through improvements to the Docklands Light Railway
- British Business Bank scheme providing guarantees to support up to £1 billion of lending to SME housebuilders
- £653 million to 2021-22 for strategic partnerships with nine housing associations to deliver over 13,000 homes
- a new five-year strategic business plan for Homes England, to be published on 30 October 2018
- the Housing Revenue Account cap that controls local authority borrowing for house building will be abolished from 29 October 2018 in England, enabling councils to increase house building to around 10,000 homes per year. The Welsh Government is taking immediate steps to lift the cap in Wales (33)
- the Housing Infrastructure Fund to increase by £500 million to a total £5.5 billion, unlocking up to 650,000 new homes.
Those changes all point to public money and intervention working towards unlocking sites for the delivery of housing, which is undoubtedly welcomed by many, however, the key elements that many in the residential development sector were looking out for were how the Chancellor would build on the Letwin Report and what, if anything, would be done to Help To Buy. There were answers, of sorts, on both fronts.
The Lewtin Report identified that greater differentiation in the types and tenures of housing delivered on large sites would increase the market absorption rates of new homes – the binding constraint on build out rates on large sites. The budget simply reiterated that the government will respond to the review in full in February 2019. However, the budget did give some further clues as to what is to come in the new year, including the introduction of a simpler system of developer contributions including simplifying the process for setting a higher zonal Community Infrastructure Levy in areas of high land value uplift, and removing all restrictions on Section 106 pooling towards a single piece of infrastructure.
The adjustment that may well yet prove to have the most economic impact in the sector was given relatively little air-time by the Chancellor but appears fairly clear from the supporting policy documents, namely that Help To Buy will come to an end. But not quite yet. The budget confirmed that from 2021 the product will be available on a more limited basis (for first time buyers only) and based on new, fairly conservative, price caps. In addition, there was confirmation that Help To Buy will come to an end completely in 2023.
Given the limited scope of the product from 2021, the house-building industry must now prepare for a market without that product. It is undeniable that as financial tool, Help To Buy has had enormous traction in the housing market and whilst the demand for housing continues to create positive market conditions for developers, adjustments will need to be made to account for the lack of that product .
Tom Willows, residential development partner commented:
"House-builders will already be considering how they position themselves for life after Help To Buy but before that all eyes will be on the promised planning reform in the new year. The planning system has been subject to regular reform and whilst many of the Letwin Report proposals are laudable, there is always a danger that further changes to the system simply create uncertainty and inconsistency".