Policy Response:

Budget 2017

Policy Response - Budget 2017
Budget 2017

07 December 2017, by Savills Research

Steps in the right direction, but not a game changer

Housing continues to be a high priority for this government. With the Prime Minister making it her personal mission to address/solve the housing crisis, it formed the centre piece of a budget which built on foundations laid out in the Housing White Paper, published earlier this year.

A package of measures, consultations and funds was announced aiming to increase supply of new homes from its current level of 217,000 homes per year to 300,000 by the mid-2020s. Extra funds to increase activity among small and medium sized housebuilders, unlock development opportunities through the provision of infrastructure, and for Help to Buy will all be welcomed by the industry, especially given a relatively muted outlook for the wider housing market.

 

Committing to a national housing target of 300,000 homes per year is a step change in aspiration. Our analysis suggests this level of housing is required to begin to impact on the stretched housing affordability at the centre of the housing crisis. Significant progress has been made over the past three years, with the certainty of government money going into Help to Buy and affordable housing giving the industry the confidence needed to expand construction capacity. New housing delivery reached 217,000 in the year to March 2017, the highest rate of delivery since 2008.

However, with limited supply side interventions proposed and limited focus on delivering the 100,000 submarket homes that are needed each year, it is not clear from the measures that the Chancellor announced how the new target will be achieved. There is more that can be done to align the interventions with the ambition.

 

Key Measures, Consultations and Funds


Increasing Housing Delivery

  • New garden towns
  • Intensifying development in brownfield urban areas
  • First time buyer led development

 

Additional Funding for development

  • There is now a total of £44 billion of funding for housing in the 2018-2023 period, although only £15.3 billion of the funding announced in the Budget is new
    • £8bn of new guarantees to support housebuilding, SMEs and purpose built rented housing
    • An extra £2.7bn for the Housing Infrastructure Fund
    • An additional £1.5bn in the Home Building Fund for SME builders
    • £1.1bn land assembly fund, focused on urban regeneration
    • An additional £800m for local authority housebuilding
    • £400m for estate regeneration
    • £600m for small sites infrastructure remediation
    • £200m to develop training, innovation and skills in the construction sector
  • Funding for Affordable Housing
    • The extra £2 billion of funding for affordable housing announced in October was reconfirmed, meaning that the total budget for the Affordable Homes Program for the period to 2020-21 is £9.1 billion

 

Review of build out rates

  • The government will set up a review panel, chaired by Sir Oliver Letwin, to investigate the relationship between housing completions and planning permissions. Additionally, they will establish a register to track all residential planning permissions. These two measures aim to tackle the supposed problem of “landbanking”

 

Taxation: Stamp duty changes

  • The rabbit-out-of-the-hat in the budget was the abolition of stamp duty for first time buyers on purchases up to £300,000 (for properties in over £300,000, no stamp duty will be paid on the first £300,000 of the purchase price up to £500,000)
 
 

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Key contacts

Emily Williams

Emily Williams

Associate
Residential Research

Savills Margaret Street

+44 (0) 20 7016 3896

 

Frances Clacy

Frances Clacy

Associate
Residential Research

Savills Margaret Street

+44 (0) 20 7409 5905