Much has been made of the government’s decision to make housing a key pillar in its ‘levelling up’ programme. But what will any of this actually mean for conveyancers? Let’s dig into the details, good and bad.
The Bad News
As with any government edict, the Autumn budget isn’t all good news for conveyancers. The Conservatives commitment to balancing books post-pandemic has seen investment cut in some areas and questionable attempts to raise funds in others.
End of Help to Buy
Much like the SDLT holiday, extensions to the Help to Buy scheme have been a common feature of recent budgets. But not this time. The scheme is now set to end permanently in 18 months.
Help to Buy has come in for a lot of criticism during its time, with many fearing it would create an artificial housing bubble and inevitably lead to negative equity for many buyers. However, its incentivising effects on the market shouldn’t be underestimated.
Help to buy has effectively acted as a government-backed subsidy for both developers and buyers. And, for all its flaws, it’s hard to argue that it hasn’t helped some people get on the ladder and incentivised developers to build.
Without it, there’s a very real risk that many of the major developers begin to scale back their new build operations. Indeed, this has already begun, with builder Bellway announcing this week that it would scale back ahead of the scheme’s end.
Some will no doubt argue that the demise of Help to Buy is covered by the government’s 95% mortgage scheme (which has its limitations, as we discussed in an earlier blog). But unfortunately, this scheme doesn’t incentivise the building of new homes in the same way as Help to Buy.
The result is fewer starter homes being built and an ever greater depression at the lower end of the market. It’s all well and good being offered a mortgage with a 5% deposit, but if you can’t find an affordable house to purchase, what’s the use?
Residential Property Developer Tax
Of all the announcements made in the budget, this is undoubtedly the one that generated the most headlines in the conveyancing world. Dubbed the ‘Grenfell tax’, the chancellor confirmed a £5 billion spend on removing flammable cladding from hundreds of residential buildings all over the country. And this will be funded by a levy on larger builders.
This is a thorny issue. On the one hand, it’s positive news (more on which later), no one should have to live in an environment where tragedy could strike at any moment. But, on the other, it’s likely to affect the number of new properties being constructed.
It’s not hard to imagine a scenario in which builders scale back new-build development to pay for the levy being extracted by the government. Of course, people’s safety and wellbeing should come before anything else, but it would be foolish to assume this policy won’t have an impact on new developments.
What’s more, it’s worth pointing out that the estimated cost of refitting cladded homes is somewhere in the region of £15 billion. You don’t have to be a genius to figure out that the £5billion earmarked represents a huge shortfall on what’s needed to resolve the problem. So, we could see a decline in new developments for the sake of policy which only partially fixes the issue it’s set out to tackle.
No Specialist Housing Proposed
Firstly, it’s important to state that the Treasury’s commitment to building 160,000 new, greener homes on Brownfield sites is laudable. Nevertheless, it’s a rather vague proposal that will do little to address many of the root causes of Britain’s housing crisis.
The country needs new homes, that much is indisputable. However, what it doesn’t need are more luxury flats that are unaffordable for the people who need them most. The government’s focus needs to switch to producing affordable homes for first time buyers, social housing, and specialist developments with care and wellbeing services attached.
These are what the country needs. After all, there’s nothing ‘green’ about building yet more property that sits empty because few people can afford to or want to live in. Beyond the social benefits of building this type of property (such as taking some of the strain off of social and healthcare services), it would also give the market a much needed shot in the arm.
The Good News
So, that’s the bad news, what about the good?
Although the Residential Property Developer Tax has its shortcomings, as we discussed earlier, on the whole, it’s a very welcome step. Firstly, because the Grenfell fire was an appalling tragedy that should never be repeated. Anything that contributes towards preventing a similar disaster should be applauded.
On top of this, it should also help inject some confidence back into this area of the market. We’ve all heard the stories about buyers who purchased expensive properties in cladded blocks, only to find their investment essentially worthless in the wake of Grenfell.
And this has made many people reluctant to buy high-rise property, even in luxury tower blocks. It’s understandable. Would you want to live in a home that could easily catch fire at any minute? Or risk having to pay for the work to remove the cladding out of your own pocket?
By removing cladding from residential buildings, developers are helping to rebuild confidence in high-rise living. It may require some short term pain in the form of a government-mandated levy but, in the long run, it should be good for the housing market.
£24bn ‘Housing Settlement’
It might not be nearly enough to resolve the UK’s housing problems, but the £24 billion housing settlement proposed by the budget is a good start. In effect, this settlement is a commitment to ‘lock in’ most of the housing initiatives already underway. Former Secretary of State for Housing, Robert Jenrick’s ‘First Homes’ plan is set for a 20% increase in investment. Meanwhile, £11.5 billion is to be set aside for new build homes.
These are all steps in the right direction and could help boost a sluggish market following the end of the SDLT holiday.
Like all the other good news we’ve covered, the £1.8 billion commitment made to unlocking 1500 hectares of brownfield sites to help deliver 160,000 new homes comes with some caveats.
But, despite this, the additional funds earmarked for developing former industrial land should be welcomed. It appears to demonstrate that the government is serious about its commitment to Boris Johnson’s ‘brownfield first’ pledge made at the Conservative Party conference last month.
CPRE’s annual State of brownfield report reveals that there is enough suitable brownfield land available in England for more than 1 million homes across 18,000 sites and over 26,000 hectares. And a commitment to unlock some of this land can only be good for future transaction numbers and the general state of the market.
What Conclusions Can We Draw?
Government policy is always notoriously hard to assess at the time of its conception. In truth, we probably won’t know effective this budget has been until long into the future. All the same, it is possible to draw some preliminary conclusions.
There is much to be welcomed in this budget. The government does seem to be at least semi-serious about addressing some of the market’s problems. And the commitment to finally removing cladding from residential buildings is a worthy one.
Nevertheless, the budget could go much further. The government needs to address the types of homes it’s building, provide more support to first time buyers, and seriously consider how it can incentivise greater movement throughout the market – not just at the top end.
This budget is a welcome sticking plaster, but we’re still waiting for the major surgery required. Who will provide it?