The Chancellor of the Exchequer, Phillip Hammond, paid special attention to fixing up a badly broken UK housing market in the budget announcement on Wednesday.
It was Theresa May’s pledge that she “dedicate [her] premiership to fixing this problem”. Did the Chancellor deliver a budget capable of fixing a problem or was the mix of policy, funding and tax changes he proposed nothing more than wall paper over gaping holes?
Consider that Hammond was in a precarious position; the fulcrum on which so much else sits. On one side of the balance beam is the future post Brexit and on the other end, stands all that fiscal responsibility entails. Trying to fuel growth but careful not to extinguish hope.
Balance a big theme
Balance was a big theme weaved in to Hammond’s foundation-laying budget speech and a special emphasis was placed squarely on housing and fixing its ills.
Indeed, it will be a delicate balancing act given the very dreary prospects for UK economic growth over the next five years as a result of reduced productivity. When the government speaks of its vision of up to 1 million homes by 2050 it must be viewed against the Office for Budget Responsibility’s slowdown in GDP growth for 2017 to 1.5% from 2% and a cut in its projected growth forecast of 1.6% for 2021.
The government says it wants to "build the homes that will make good on our promise to the next generation…where the dream of home ownership is a reality for all generations.”
Hanging in the balance
Hammond’s budget took on the a number of issues across the housing spectrum from the “need to increase the amount of housing available” for rough sleepers, low-income households through to imposing a 100% council tax levy as a way to address the issue of empty properties.
“It can’t be right to leave property empty when so many are desperate for a place to live,” Hammond said echoing a number of councils and charities have already highlighted the wastefulness of a resource given the UK’s housing crisis.
But key to May’s pledge and to helping young people on to the housing ladder is to focus on building. Hammond declared that he was sending a message to the next generation that owning a home was not a dream, “but a reality for [their] future.” That calls for some 300,000 homes to be built according to the government’s plan and to improve affordability.
Ambition to make dream home a reality
The chancellor’s solution calls for an ambitious plan to tackle the housing challenge over the next five years with £44bn of capital funding to support the housing market and for delivery of 300,000 new homes a year.
Through increased spending, planning reform, tax incentives and investment in training schemes, the government promises to take owning a home from a dream for so many to a reality.
He also announced an urgent Review to look at the gap between planning permissions and housing starts chaired by my West Dorset MP, Oliver Letwin. to review land banks in a report by next April and said that if “the report finds land is being withheld for commercial reasons we will use compulsory purchase powers if necessary to bring land forward for development.”
Stamp duty abolition
For the young, Hammond sought to mollify a generation of 25-34 year olds who have never owned a home and see only a distant prospect of ever doing so (the number of this age group owning their own home fell from 59% to 38% over the past 13 years) through abolishing stamp duty on properties worth up to £300,000.
An even bigger problem for first-time buyers is gathering the cash for a deposit and the Government aims to alleviate some of the burden by adding £10bn more into the Help to Buy equity loan.
Jeremy Corbyn responded that: “Government promised 200,000 starter homes three years ago but not a single one has yet been built. Back reduction in stamp duty for first-time buyers – it was in the Labour manifesto."
Realities less than clear-cut
Other critics argued it didn’t go far enough, mutual insurer, Royal London, said in a statement: "The Chancellor’s decision to abolish stamp duty for first time buyers…may sound like a good solution to helping young people onto the housing ladder but in reality it doesn’t go far enough as it doesn’t help those further up the ladder who can’t afford to move.
"First time buyers can’t buy homes if current home owners can’t afford to sell them," it warned. Other criticisms levelled was that it ignored other sections of the market.
Nick Sanderson, chief executive of Audley Group, while agreeing that cutting stamp duty was an important move to removing a barrier for first-time buyers saw it as a “blinkered focus” that ignores where the market’s greatest potential sits - with the over 65s.
Dreary economic outlook a hindrance
Hopefully there’ll be limited unintended consequences as satirised by the Daily Mash which described a real estate agent raising house prices the exact amount of the stamp duty cut.
The OBR also poured cold water on the effectiveness of the stamp duty cuts saying that a primary effect would be to raise prices and lead to the purchase of a piddling additional 3,500 homes.