November 23rd, 2016
In the Chancellor’s first Autumn statement, it was telling that one of the standout headlines was to announce the end of the Autumn statement. Housing was identified as a large structural weakness of the economy, and although positives for contractors were there, you had to look really hard for them.
Housebuilding
The Chancellor committed £2.3bn for a new housing infrastructure fund to commit to areas of high housing demand. Mr Hammond recognised that housing developers faced significant planning hurdles in order to build, due to weak local infrastructure in many instances. The housing infrastructure fund would commit to improving roads, schools, and other vital infrastructure in local areas to facilitate an increased demand.
First time buyers
The extension of the Help to Buy equity loan scheme, and also of the newer Help to Buy ISA; will be welcomed by contractors in London and the South East who seek to buy their first homes. This is a boost for contractors in London and the South-East, where savings for an appropriate deposit is very difficult given house price inflation.
The Chancellor also committed £1.3bn for 40,000 additional affordable homes, which could mean another boost for those looking at low deposit options like shared ownership. Good news to enable contractors to move sooner if this investment happens in the right areas.
Landlords
It was very different news for contractors who let property however. There has been a further squeeze on landlords to compound recent tax hikes around erosion of mortgage interest tax relief mentioned in the last Autumn statement. These have already meant that landlords face escalating tax bills for existing investment properties, as less mortgage interest is allowed as a tax-deductible expense. This hike is to be phased in from 2017.
Mr Hammond has used todays Statement to pass lettings charges onto landlords by banning lettings agents from charging tenants for vetting and administration costs. It appears that the Government is committed to making buy to let the domain of those who can really afford it.
Stamp duty hikes on second homes and a squeeze on lender affordability calculations for buy to let by the Prudential Regulation Authority (resulting in bigger deposit needed) have all contributed to squeezing the ‘dinner party landlord’ out of the market.
Conclusion
Coming full circle to tenants, it is likely that the knock-on effect on the landlord squeeze will result in tenants bearing the brunt of the cost long-term. The initiatives for first time buyers around Help to Buy and more shared ownership options do provide a route out of renting into home ownership. The infrastructure fund for housing in long overdue and Mr Hammond should be commended for addressing this key issue in the availability of housing stock.