Housing is a key focus area for the government, and we can probably expect a few big changes across the board in next month’s spring statement from the new Chancellor.
Rishi Sunak, who was appointed as Chancellor after Sajid Javid stood down earlier this month, will have had less than four weeks to prepare his first Budget. The date is set for 11 March, and Sunak has pledged to “deliver on the promises we made to the British people”.
Some insiders expect a more radical spring statement than the one Sajid Javid would have been most of the way to completing. It is also expected to stick closely to the Conservatives’ general election manifesto, with more cash put into social care, the NHS and infrastructure spending.
Treasury urged to consider private rented sector
The Residential Landlords Association (RLA) and the National Landlords Association (NLA) have released their first joint statement calling for a tax reform in the private rented sector (PRS) in the upcoming Budget.
According to the two landlord bodies, punitive tax changes, including the stamp duty levy on second homes and changes to Section 24 mortgage interest relief, are putting landlords off the industry. As a result, smaller buy-to-let landlords are said to be leaving the sector, while others are switching to short-term lets to avoid the tax changes – and this is having a knock-on effect for tenants.
In part of its submission to the Treasury, the RLA/NLA states: “The government wants to encourage longer term lets but the tax system encourages short-term holiday lets. There needs to be a fundamental review of tax policy applying to the private rented sector to ensure that it supports government objectives and a thriving sector that supports long-term letting with an adequate supply of housing.
“Tenants and prospective tenants are finding it harder to access the rental properties they need as a result of the demand for such homes outstripping supply. This is driving up rents and making it harder for tenants to save for a home of their own.”
Proposals for the rental market
The RLA/NLA proposes that the stamp duty levy is dropped where landlords add to the net supply of housing through developing new properties. This could include bringing empty properties back into use, converting commercial premises to residential, or turning large properties into smaller units of accommodation.
It also suggests a capital gains tax exemption for landlords who sell properties to sitting tenants, to help more renters into homeownership. Tax relief should also be available, says the statement, if a landlord invests in improvements to the energy efficiency of a rented property.
David Smith, policy director for the RLA, said: “The tax system for rented housing is failing. It encourages the provision of holiday homes over long term properties to rent, it deters investment in new housing and provides no support to those wanting to make energy efficiency improvements.”
“For the sake of those living in rented housing or who are looking for accommodation, Ministers need to use the Budget to urgently change course and work with good landlords to ensure the provision of good, long term, affordable housing.”
What about homeowners?
A controversial mansion tax had been in the pipeline, but has now been ruled out by Boris Johnson. The tax, which would have applied to high-value properties, would have been rolled out in the Budget, with the additional money being invested in other parts of the country.
A new scheme is also being launched for first-time buyers, called the First Homes scheme. The plan is intended to lower deposit and mortgage requirements for local first time-buyers by 30%, and will prioritise veterans and key workers including nurses, police officers and firefighters.
First Homes will only encompass new-builds, in a bid to reduce the premiums on these properties that put many first-time buyers off. According to the campaign, it will save buyers an average £94,000 on a purchase, and the discount will be carried on when it is later sold to another buyer.
Housing Secretary Robert Jenrick said: “First Homes will be life-changing for people all over the country looking to buy their first home.”
“I know that many who are seeking to buy their own home in their local areas have been forced out due to rising prices. A proportion of new homes will be made available at a 30% market discount rate – turning the dial on the dream of home ownership.”
Green housing focus
The Royal Institute for Chartered Surveyors (RICS) has also submitted a “wish-list” to the government ahead of its 2020 Budget announcement.
In it, the institute states that the built and natural environment need to be a major focus for the year ahead, with sustainable, green housing stock being made a priority. The measures proposed by RICS include “greening” our construction activity, reducing VAT by 5% for sustainable home improvements and promoting modern methods of construction in public infrastructure schemes.
It also recommends a full-scale stamp duty review, and proper funding for planning departments including recruitment of additional staff with specific expertise in areas that are deficient.
Hew Edgar, head of UK government relations & city strategy, commented: “RICS wants to see clear action to fix the host of challenges facing the built environment.”
“This includes pragmatic, long-term solutions to the problems of housing supply and affordability, the UK’s ailing high streets and town centres, and mitigating the effects of climate change.”
In a blog by Bob Young of Fleet Mortgages in Financial Reporter, he lists a number of rumoured changes that could be announced: “Stamp duty payment moved from the vendor to the seller? Big changes to threshold levels? Significant cuts for properties above £1m? Dare we dream of cuts to rates for additional properties? Will the landlord community finally be cut some slack?”
However, in conclusion, he goes back to the main issue of the PRS, stating that the main hope from the Budget is that the chancellor will recognise the importance of the PRS for the UK’s housing market.
He writes: “For too long it’s been treated as a second-class citizen when the reality is that without a strong private rental market, the housing gap gets wider and the difference between the housing haves and have nots gets broader.”