Autumn Budget 2017: Package to fix ‘dysfunctional housing market’

22 November 2017

Philip Hammond made fixing the “dysfunctional” housing market the cornerstone of his Autumn Budget, with the goal of restoring “the dream of homeownership for a new generation”.

He announced measures that aim to raise housing supply by the end of this Parliament to hit 300,000 homes a year – the highest level since 1970.

The package includes £15.3 billion of new financial support for housing over the next five years, making the total figure spent on housing up to at least £44 billion over this period. This includes £1.2 billion for the government to buy land to build more homes and £2.7 billion for infrastructure to support housing.

He will also introduce planning reforms to ensure more land is available for housing, focusing on cities and towns for new homes while protecting the Green Belt.

Review of planning permissions

Mr Hammond highlighted concerns over the “significant” gap between the number of planning permissions granted and the number of homes being built. He pointed out that in London, there are 270,000 residential planning permissions that remain unbuilt.

To tackle this, the government is setting up an urgent review of planning permissions, which will be chaired by Oliver Letwin MP and will report on the results in the Spring Statement in 2018.

If necessary, to get these planning permissions built he would consider using direct intervention through compulsory purchases.

Other measures to boost housing include:

  • Creating five new ‘garden’ towns in areas of high demand, delivered through public-private partnerships.
  • A commitment to build up to 1 million homes by 2050 in the Cambridge-Milton Keynes-Oxford Corridor including a housing deal with Oxfordshire to deliver 100,000 homes by 2031.
  • New money for the Home Builders Fund to get SME housebuilders building again.
  • A £630 million small sites’ fund to unstick the delivery of 40,000 homes.
  • A further £2.7 billion for the Housing Infrastructure Fund.
  • £400 million for estate regeneration.
  • A £1.1 billion fund to unlock strategic sites, including new settlements and urban regeneration schemes.
  • Lift the cap on councils’ borrowing in high demand areas to get them building again.
  • £8 billion of new financial guarantees to support private housebuilding and the purpose-built private rented sector.
  • To support a house-building workforce, an additional £34 million to develop construction skills across the country.
  • £10 billion more money into the Help to Buy equity loan scheme to help those saving for a deposit.
  • Councils in high demand areas to be permitted more homes for local first-time buyers and affordable renters to be built
  • The government will consult on the barriers to landlords offering longer, more secure tenancies to those tenants who want them.

“It will take years to see the benefit”

Commenting on these measures, Jonathan Hopper, managing director of Garrington Property Finders, says: “The Chancellor is tackling only part of the problem – the shortage of new homes, rather than the shortage of homes for sale.

“It’s a mistake made by politicians of all stripes. The lure of the building site photo opportunity, in which a beaming minister dons a hard hat to drive home the message ‘Britain is building again’, is all but irresistible to Westminster.

“Britain clearly needs to build many more homes to keep up with future demand. But the Chancellor’s excessive focus on this small part of the housing shortage misses the bigger, and more immediate, picture.

“Even if his plans do unleash a wave of new homebuilding, it’ll take years for the property market to see any significant benefit. The Chancellor is solving the problem of tomorrow but doing little to solve the problem of today – the abject lack of a fully functioning property market.”

Jane Forbes, housing lead partner at PWC, agrees that housing supply will remain a problem.

She explains:  “The commitments of £44 billion in capital funding and loans and to build 300,000 homes each year are extremely welcome and show the government recognises that housing and rising homelessness are the most important non-Brexit issue facing the UK.

“It's not, however, a new area of focus for the government and the Chancellor's comment that 'it takes more than money' to solve our housing challenge reflects the difficulties the UK has consistently faced in ramping up supply, irrespective of the capital support available.

"The reclassification of housing associations to the private sector should improve the contribution from this element of the industry, although the call to lift the cap on council borrowing under the Housing Revenue Account by the Local Government Association went unheeded despite only 1,840 homes being built by local authorities in England in 2016-17.”

“An eight-year wait for new homes”

Lewis Johnston, RICS Parliamentary and Public Affairs Manager, adds: “The pledged £44 billion package of housing support seems positive, but it does not represent the kind of comprehensive strategy we need, nor is it clear how much of this figure is made up of previously announced policies. Most of the announced measures are also only due to come in in 2019/2020 instead of having an immediate impact, and the Chancellor stated that we would not be building the 300,000 new homes a year until the mid 2020s, leaving the country to wait at least eight years.

“While the Chancellor is right to say there is ‘no single magic bullet’ to increase housing supply, it requires a lot more than the proposals he has put forward, which amount to a series of marginal and delayed ‘nudges’ at a time when housing supply needs an almighty immediate shove.

But he admits that it wasn’t all bad for house-building, adding: “We are pleased the government has acted on our recommendation to lift the local authority borrowing cap for housebuilding and we hope this will herald a new era of well-built, affordable council homes delivered at some scale.  As far as they go, measures to provide extra support for small building firms (£1.5 billion) and to speed up developments where planning permission has been granted are also welcome. Nevertheless, they are too small to make a real dent in the challenge we face.”

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