Autumn Budget 2021: What does it mean for housing providers?27/10/21
The Government’s focus in today’s Budget (27 October 2021) was on paving the way for post-Covid recovery. Whereas the two preceding budgets were reactive emergency budgets, today an emphasis was placed on the long-term future to “level up” the country.
As expected, the majority of the new funding announced expectedly prioritised healthcare, which will be driven largely by a significant increase in national insurance contributions. Together with the corporation tax announced earlier in the year, we are on track to see one of the largest tax rises since the 1990s. Although it was a relatively property-lite budget, a series of key spending initiatives were nonetheless unveiled for the housing sector. Read on for our summary of the main items from today’s Budget and what this means for housing providers below.
Investment in new homes
The main housing announcement in the Budget was the promise of a multi-year investment of nearly £24 billion to build new homes. There is to be £1.8 billion in funding to regenerate derelict and unused ‘brownfield’ sites for the development of 160,000 homes. Further details are awaited as to how the scheme will work and what form the finance will take. Although it is welcome investment that will help more people get on the housing ladder, the figure is lower than some had hoped for and will concern those who have been warning that there is not enough brownfield land for homes to be built on to meet the demand for affordable housing.
Residential Property Developer Tax
Reference was made by Mr Sunak to the Residential Property Developer Tax announced in February. The rate of the tax has today been confirmed as 4% and will take effect from 1 April 2022. The tax is aimed to raise a sum of at least £2 billion over the next decade to go towards funding the Government’s efforts to remove unsafe cladding and remedy historic building defects from high-rise residential blocks.
Most registered provider (RP) activities will benefit from charitable exemption and so will not be subject to the tax.
The effects of tax changes
The Chancellor announced a rise in the National Living Wage from £8.91 to £9.50 per hour to come into effect from 1 April 2022. This is a 6.6% increase in the minimum wage for all those aged 23 and over - more than twice the current 3.1% rise in the cost of living, which is good news for a sector that is already facing increased rent and service charge arrears. Based on a 40 hour week, the new minimum wage would amount to a salary of £1,646 per month or £19,760 a year. The Government has also bowed to intense pressure by partially reversing the recent universal credit cuts with the taper rate, which reduces the amount a benefit claimant can earn from work, set to be reduced on 1 December from £0.63 to £0.55.
The Chancellor also announced that eight regions across England will receive £6.9 billion to transform local transport networks into London-style integrated settlements with train, tram, bus and cycle upgrade projects. The improved infrastructure may to some extent help to unlock housing developments in areas that have previously suffered from lack of connectivity. These are, however, not entirely new transport links and this is really only £1.5 billion of new money as £4.2 billion of this sum was already announced in 2019.
What wasn't included
A notable omission from today’s Budget was any reference to the digitisation of the town planning system. The Chancellor had been expected to announce £65 million to develop new software to simplify and speed up the planning process. With the proposed use of accessible 3D interactive maps the software has potential to highlight the large number of development opportunities within communities, particularly on small and infill sites. However, we will have to wait for further detail in relation to this and how they tie into the wider planning reform agenda.
The Chancellor had also been expected to announce £9 million to be pledged for councils seeking to transform neglected urban spaces into green areas, so-called “pocket parks”, to enhance biodiversity and enable carbon sequestration. Although this failed to be mentioned, we did hear a few more details of the Government’s carbon reduction targets, and how these are expected to be achieved. The Chancellor announced a sum of £3.9 billion to decarbonise buildings, including £1.8 billion to support tens of thousands of low-income households to make the transition to net zero while reducing their energy bills.
For much of the last year the housing market has been fired up by the stamp duty holiday, first announced in July 2020 and then extended in March 2021. There were a few rumours that a re-introduction of the stamp duty holiday was on the cards but no such announcement was made by Mr Sunak. The market remains in a transition period, adjusting to stamp duty rates having returned to their pre-July 2020 levels and high inflation meaning interest rate rises are seemingly imminent.
How Capsticks can help
Capsticks’ housing team provides a truly full-service to over 200 registered providers, with particular expertise in development, corporate and securitisation, housing leasehold and asset management. If you have any queries around what's discussed in this article or the Budget itself and the impact on your organisation, please speak to Susie Rogers to find out more about how we can help.