A Budget For Homes? The Devil Is in The Detail
Last week’s Budget was billed as one which would put solving the UK’s housing crisis at its core – so did Chancellor Philip Hammond deliver on that promise, asks Tony Abel.
Certainly the standout announcement was the decision to abolish stamp duty for first-time buyers on properties costing less than £300,000, and on the first £300,000 of properties costing less than £500,000.
First-time buyers are a crucial part of the market, because if they feel confident and able to enter the market, it has a positive effect right on up the chain. For house builders, they are also vital – a good proportion of all new home buyers are people taking their first steps on the property-owning ladder.
With the stamp duty cut, the Help To Buy scheme and continued historic low mortgage rates, the Government could argue that it has taken some big steps to boost the demand side of the market. However, most commentators agree that the real solution to our chronic housing problem is to increase the supply of housing, which means building more new homes. Without measures to do this, all the stamp duty cuts in the world will have little effect.
The Chancellor acknowledged this, and came up with a number of proposals which he said would help boost the current low level of new home building. In 2016/17, just 184,000 new homes were built, although that figure reaches 217,000 if you include conversions; it is still way below the peak of 350,000 in the 1930s, and doesn’t even meet the number of new households coming into existence in the same period.
Politicians are fond of accusing developers of causing this shortfall by sitting on land with planning permission and not actually building new houses (so-called ‘landbanking’). We welcome his intention to look into why this happens; it is easy to lay the blame on developers, but often the problem lies with our labyrinthine planning system, and the myriad of technical hoops that house builders must jump through – archaeology, ecology, flood assessments, utilities and so on.
The best way of boosting the housing supply is to encourage smaller builders back into the market. They were the ones which were disproportionately hit by the financial crisis on 2008/9, and the result is a market which is dominated by a small number of very big players.
Smaller builders almost never sit on land with planning permission – they simply don’t have the balance sheets to be able to do so. They are also the ones which find it most difficult to raise the finance to build – which is why the extra funds announced in the Budget for enabling sites to move forward through tackling infrastructure challenges and providing loan guarantees is most welcome.
Encouraging smaller house builders to enter the market, and supporting those which are working hard to boost the supply of housing, can only be a good thing. Ultimately it will offer the consumer a wider choice, and relax the hold that a few big players have on the market.
Building new homes is not like a gas hob – you can’t just turn it on and get the benefits immediately. Extra money in the Budget is a good start, but issues such as speeding up the planning process and ensuring that there are enough skilled people to actually build the new homes are equally important. On the surface the Budget is good news for the housing market; but as ever, the devil will be in the detail.