Leaders Response to the Spring Statement
Michael Cook, Chief Executive Officer of Leaders Romans Group
Given the challenge of making £15 billion worth of cuts to public spending, today’s Spring Statement was never going deliver everything on the property industry’s wishlist.
That said, two significant pieces of good news stand out amongst some otherwise depressing statistics. And this goes to show the faith that the government has its our sector to deliver much needed growth.
Affordable Homes Programme
The first is the £2bn top-up for the Affordable Homes Programme which will provide up to 18,000 new social and affordable homes. Since council housing effectively ceased four decades ago, the private rented sector has fulfilled an important role in preventing homelessness. Today, with demand for rental properties outpacing supply, it’s good to see the government helping to address this need.
However, it seems a missed opportunity that the government rarely addresses social housing in its broadest sense – homes for sale as well as for rent. At very little cost to the taxpayer, the government could do much more to champion shared ownership as an affordable and practical way of addressing this country’s housing crisis and enable first time buyers to get a foot on the housing ladder. Our shared ownership division, SOWN, is busier than ever responding to unprecedented demand from would-be-homeowners and yet government announcements – everything from the Labour manifesto to the recently published Planning and Infrastructure Bill – consistently fail to mention shared ownership.
Funding for construction training
The £600m for construction training is also very welcome. But again, there is a cost-free solution to the skills shortage which has been overlooked. Again it concerns communication. The various trades and professions that make up the construction sector deserve greater respect and recognition. Tony Blair’s ‘education, education, education’ ethos which led to a significant increase in young people pursuing academic courses had its benefits. But for many it resulted in an unusable degree and a delay in starting in a profession. The answer is two-fold: more vocational degree courses to equip people with the necessary skills for the construction and property sectors; and a greater championing of the non-university route into these roles. This approach would deliver a saving to the Exchequer and a boost for the development sector.
Stamp Duty
There is undoubtedly a long-overdue need for a comprehensive reassessment of Stamp Duty. Unfortunately this may have to wait until a future spending review, but in the meantime, I would hope that the government sets about considering changes to what can be a very damaging tax – one that can cost the Treasury, rather than benefitting it, bearing in mind the unintended consequence of discouraging people to move up the property ladder.
The Renters’ Rights Bill
There’s much that needs to be changed in the Renters’ Rights Bill before it is enacted – not least the courts process, the increase in allowable arrears and the abolition of rent in advance. It’s not a fiscal consideration but it will impact considerable on costs to the government. So in the context of toady’s spending review we call on the government to consider the financial damage that the Renters’ Rights Bill will cause unless substantially amended – a potential increase in homelessness and the resultant cost to the public purse – and look at making amendments to the Bill during its final stages.
Andy Jones, Group Director of Corporate Sales, Lettings & BTR at Leaders Romans Group (LRG)
The positive news for the property sector in relation to today’s announcement is that the government remains confident that our sector, perhaps more so than any other, has the potential to deliver true economic growth, and in doing so, turn around the country’s economic prospects. Announcements such as the delay in implementing the Building Safety Levy, the additional funding for the Affordable Homes Programme and for construction training are testament to that.
But there’s much more that needs to be done.
A need for incentives to encourage investment in the property sector
To respond to market demand (let alone compensate for RLSs being unable to take on more affordable housing units and the imminent impacts of the Renters’ Rights Bill) further investment is needed.
I am not suggesting further public investment in bricks and mortar at a time when the government is clearly very stretched to deliver on the basics, but more incentives, fiscal and otherwise, to encourage global investment.
February’s reduction in the Bank of England interest rates was welcome and may encourage more activity, particularly among those already considering property investment. However, given the current market uncertainties (compounded by interest rates being held at 4.5% in March), investors are remaining cautious.
To meet the government’s ambitious housing targets, further change is necessary. For example, incentives across the property market in relation to new Net Zero targets, a comprehensive review of Stamp Duty (which, having hit investors hard in October’s Budget, will hit first time buyers hard next week).
Currently many new build schemes are stalled due to viability issues. While the revised NPPF and Planning and Infrastructure Bill will open up the opportunity for more development – public and private, for sale and for rent, brownfield and greenfield – getting these homes built will require the government to be flexible in planning gain requirements. These can now include up to 50% affordable housing, 10% (or more) biodiversity net gain and substantial Section 106 commitments, alongside increased material and labour costs.
We had hoped to see a reversal of the abolition of Multiple Dwellings Relief (MDR) – this must be a future priority. Currently the abolition of MDR is estimated to have cost the UK 25,000 homes – almost 7% of the government’s 370,000 housing target – while also costing 60,000 jobs. Were the decision to abolish MDR reversed, the BTR sector would have the means of delivering much needed additional units across a variety of tenures, including much-needed later living accommodation.
A recognition of the potential of Build to Rent (BTR)
Attending industry events recently, I have been shocked by a lack of awareness of BTR among politicians. And yet BTR is growing at an unprecedented rate: the British Property Federation recently reported a 23% growth in completed BTR units over the past year alone.
Against the backdrop of the Renters’ Rights Bill and greater regulation for the private rented sector, the BTR sector is emerging as a key solution to the supply-and-demand crisis in the rental sector. At little cost to the public purse, the government could help further increase the much-needed supply of BTR homes by creating BTR-specific policies, both at a national level (BTR is mentioned just once, briefly, in the current NPPF) and in local plans (which, in failing to include BTR-specific policies, contribute to the lack of awareness and potential misunderstanding of the benefits of BTR).
Tim Foreman, Managing Director of Land and New Homes, Leaders Romans Group (LRG)
Building Safety Levy to be pushed back a year after housing sector backlash
As part of the Remediation Acceleration Plan published in December 2024, the government originally planned to launch the Building Safety Levy in Autumn 2025. This has now been delayed by a year, partially to allow housing developers who will pay the levy around 18 months to factor the costs into their financial planning. While safety is a very important consideration, it is only right that developers have more time to prepare. The schemes to which the levy will apply will have been through extensive viability tests and to make this additional financial requirement at such a late stage in the process would have had an immediate and very detrimental impact, especially affecting smaller builders.
£2bn top-up for the Affordable Homes Programme
The additional funding for affordable housing is very welcome especially as the demand for affordable housing, and cost of building it, continues to increase.
However, delivery of affordable housing would benefit from addressing a wider range of types and tenures than the government is currently providing for. Specifically, shared ownership plays a very important role in getting people on to the housing ladder and yet seems to have been largely ignored by this government.
The popularity of shared ownership is increasing, partly because today’s first-time buyers are paying almost a third more to get on the property ladder than they were five years ago. Furthermore, in the last decade the number of private renters moving into home ownership fell by 23%. The government’s current stance on housing affordability – not least the recent increases in Stamp Duty and the freezing of Lifetime ISAs – has resulted in policies that are making it even harder for first time buyers to enter the market. Shared ownership deserves the same level of government-assisted marketing as benefited the now defunct Help to Buy scheme and it seems detrimental to the whole ‘growth agenda’ that the government is ignoring this important tenure.
Keeping the property market moving
The significant increase in Stamp Duty as of next week could lead to costs for a first time buyer rising by £6,250. This, along with the absence of shared ownership policies, is ill-thought through in relation to meeting people’s changing needs – and generating repeat revenue for government coffers.
First time buyers are the foundation of the vast majority of chains in the house-buying process: without them, the housing market would come to a standstill, impacting everyone from young families desperate to move out of a flat to downsizers who can make family homes available.
A Stamp Duty review
In the last week there have been calls for the government to review or abolish Stamp Duty. I think we have to accept that the latter is never going to happen other than in the most extreme (short term) circumstances.
But the government must realise the need for flexibility. Exorbitant levels of Stamp Duty hinder movement in the property market, not only providing a significant financial hurdle for would-be first time buyers but also preventing people from downsizing at the other end of the chain.
A review of Stamp Duty, even if resulted in a lower level being paid, could increase the number of moves considerably and in doing so, actually raise funds which could be channelled into the government’s most pressing areas of demand.
£600m for construction training
The funds that have been allocated to train up to 60,000 more skilled construction workers are very welcome as housebuilding targets were inevitably going to be compromised by an absence of construction workers, trades and craftspeople.
While this move goes some way to addressing labour shortages in the medium/long term, I still have grave concerns about the availability of labour and materials to deliver 1.5 million homes this Parliament. Furthermore, we need to ensure that an increase in quantity does not denote a decrease in quality.
It is also important that the SME housebuilder is protected: we need variety, adherence to local styles, flexibility to work on smaller sites and the many other benefits that smaller housebuilders bring. Overdemand for materials risks smaller housebuilders missing out on vital construction products and as such threatens their existence – ironically, when they are needed most. It is encouraging that the October Budget announced plans to double the ENABLE Build scheme to £2 billion so that smaller housebuilders and firms can support the delivery of new homes, but support needs to be in place throughout the build progress, not only at the start.
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