Breaking Property News 31/10/24
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Labour’s first Budget – A missed opportunity for meaningful change
A property industry insider view of the Autumn budget
Rachal Reeves the new Chancellor of the exchequer unveiled a £40 billion taxation budget in her autumn statement. Reeves says it is a moment of ‘fundamental choice’ for the UK, insisting that the Labour government will protect the NHS, protect working people and rebuild Britain. As all budgets do it covered many areas of taxation and investment.
In terms of housing, Reeves has committed to spending £5bn on housing investment in 2025-26, with an uptick on the delivery of affordable housing. Labour will also reduce right-to-buy discounts, with local government getting any revenue from housing stock being sold. And to stimulate the 300,000 new homes which the new government promises will be built every year; a legion of new planning officers will be taken on.
Opportunities Missed
Trying to make sense of what the first Labour budget means for the rental sector and the property sector in general we looked to hear what a senior industry expert Sian Hemming Metcalfe, Operations Director at Inventorybase and Advisory Panel Member for ARLA Propertymark made of it,
‘Today’s budget falls short of a balanced approach. It misses a crucial opportunity to provide tangible support for renters and those reliant on social housing, both of whom face intensifying pressures from limited housing options and rising costs, further exacerbating rental market tensions.
The budget delivered little in the way of tangible support for renters or those relying on affordable housing. It failed to address the structural shortage of rental and social housing that’s central to today’s affordability crisis.’
Stamp Duty Increase on Second Homes – A Mixed Bag for Renters and Buyers
We then asked Sian for her take on the hiking of SDLT rates for second homes, which will hit some of the general public but will mainly penalise Landlords.
‘Raising the stamp duty surcharge on second homes by 3% will discourage buy-to-let investments but could open up the market for first-time buyers by reducing investor competition. Yet, on the flip side, this tax hike could create a major supply shock in the rental market. With less incentives for landlords to purchase properties, the available rental stock will likely dwindle and prices spike as demand continues to grow.
Statistics highlight how stretched renters already are: private renters are spending on average, 28.4% of their gross income on rent, the highest level in over a decade. Given that retirees now account for around 16.2% of private renters – and this group is expected to grow significantly as homeownership declines for future retirees – these changes could push rents further out of reach.’
To give illustration to the new 3% rise in buying a second property, a professional landlord buying a second property at a purchase price of £280,000, would now be paying 5% SDLT on the first £250,000, so £12,500, and 10% on the next £30,000, giving a total stamp duty bill of £15,500. That is 5.5% of the actual asking price in revenue to HMRC. And in 2026 the SDLT on the same purchase price will rise to £18,000, a 6.4% rate of tax on the whole amount.
The Social Housing Crunch: Demand Outstrips Supply
Knowing that Sian Metcalfe has strong views on the plight of the poorest and most vulnerable in society, we asked for her views on what the budget was delivering for those in the non-private rental sector,
‘The social housing waitlist currently stands at 1.29m households. However, recent studies suggest the real need may be closer to 3.8m people. Meanwhile, the government’s budget allocation to the Affordable Homes Programme, at £11.5 billion, is nowhere near sufficient to cover this gap. Last year, just over 6,300 new social homes were built, a shocking 84% drop since 2010.
For retirees and others reliant on fixed incomes, these shortages mean fewer options and longer waits. The National Housing Federation reports that the private sector, rather than social housing, is housing many retirees – a trend unlikely to change without significant investment in social homes. With social rent levels typically set at 50% of market rent, the sector is crucial for those on limited budgets, yet demand is far outstripping supply’.
Energy Efficiency and Rent Cap Gains
Asking if there was any silver lining in the October budget, Sian commented, ‘There are some positive takeaways – provisions for energy efficiency grants to help landlords meet stricter Energy Performance Certificate (EPC) requirements, which could prevent further rental price inflation from compliance costs. The government’s 10-year rent cap for social housing, tied to CPI plus 1%, provides some stability, but this applies solely to social housing – leaving the private rental market, where many face the brunt of rising costs, without such protection’.
It remains to be seen if a £40Bn Tax and spending spree will get past the OBR, the financial markets or indeed the city. In just one week the wise panel of the Bank of England sits down to decide if it will stick, raise or reduce the lending rate, which many will see as a judgement on this governments fiscal trajectory. It will then sit again and go through the same process in December.
Typically a budget takes a few days to be digested by all stakeholders and interested parties before we know if it has the nation’s approval, my personal thoughts are that having left the EU and endured Covid, there is little appetite for tightening our belts, some more than others, especially if a clear plan for growth is not front and centre. As the last thing we need is to swing back into recessionary times, headline inflation may be reducing but it is growth that fills the government coffers.
Andrew Stanton Executive Editor – moving property and proptech forward. PropTech-X
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