George Osborne has delivered his latest Budget, to a mixed reaction from the housing sector.
Among the mix of comments Liz Peace, chief executive of the British Property Federation, claimed the Budget contained “more good than bad for the property industry”; whilst David Orr of the National Housing Federation warned of the dangers of creating “another housing bubble that will continue to push house prices up” if more housing was not built.
But what does the Budget actually hold for the housing sector?
Below, is a full breakdown of the housing element of the Budget, as kindly provided by the RLA’s partners The Public Affairs Company:
- Government spending on Housing and the Environment will be £23 billion in 2013/14.
Help to Buy
- Help to Buy will made up of two schemes – “equity loan” where the Government will provide a loan of up to 20 per cent of the value of a new build home and a “mortgage guarantee” where lenders will be incentivised to make more mortgages available for people with small deposits.
- It is aimed at increasing the supply of low-deposit mortgages as well as new housing.
- The equity loan scheme will begin from April 2013 with the mortgage guarantee scheme available from January 2014.
- The schemes will be applicable to properties with a value of up to £600,000.
- Both schemes are open to home movers and first time buyers.
Equity Loan Scheme
- The Government will provide buyers with an equity loan of up to 20 per cent of the value of a new build property. The loan is interest free for the first five years. From year six a fee of 1.75 per cent is payable on the equity loan, which rises annually by RPI inflation plus one per cent.
- Help to Buy equity loan is focused on new build properties only.
- The equity loan can be repaid at any time within 25 years (or the terms of the mortgage), or on sale of the property.
Mortgage Guarantee Scheme
- Subject to the final scheme design, the Government will make available £12 billion of guarantees to lenders which will be sufficient to support £130 billion of high loan to value mortgages. The purpose of the scheme is to increase the availability of mortgages for buyers with small deposits.
- The Government will provide lenders with the option to purchase a guarantee on the high loan-to-value portion of the mortgage. This guarantee will incentivise lenders to offer a greater number of mortgages to buyers with small deposits.
- Mortgage guarantee will only be available to buyers with deposits between five per cent and 20 per cent.
- If a borrower’s property is repossessed, the Government will cover a proportion of the losses suffered by lenders.
- This is available on new and existing builds.
- Full details of the scheme can be found by clicking here.
Right to Buy
- The Government wants to give more social housing tenants the opportunity to benefit from home ownership. Since its introduction in the 1980s Right to Buy has helped almost two million households to experience the benefits of home ownership.
- In April 2012 the Government reformed the scheme by increasing the maximum discount to £75,000.
- To broaden opportunity the Government will now:
- Look at ways to simplify the application process to ensure applicants are not hampered by a burdensome, administrative process.
- Reduce the qualifying period before tenants become eligible for Right to Buy from five years to three years.
- From 25th March raise the maximum discount cash cap in London to £100,000 where the current cap is most keenly felt.
- The additional receipts from increased sales will be used to pay down housing debt and support the Government’s commitment to 1:1 replacement of all additional homes sold.
Support for new development
- The £200 million Build to Rent fund announced at Autumn Statement 2012 was significantly oversubscribed. Budget 2013 announces that this fund will be expanded to £1 billion to support the development of more homes in England. The fund will provide equity or loan finance to support the development finance stage of building new homes for private rent.
- The Government is committed to implementing ‘zero carbon homes’ from 2016. The Department for Communities and Local Government (DCLG) will publish a detailed plan, setting out its response to the 2012 consultation on the energy efficiency requirements in building regulations, by May 2013. The Government will then consult on next steps, including on the means of delivering allowable solutions, by Summer Recess.
- In London, the Mayor will work with the Homes and Communities Agency to support new build home purchases through Help to Buy: equity loan and new private rented homes through Build to Rent. This will involve a minimum of £750 million of funding up to 2015-16.
- The Government has recently issued a prospectus to support affordable homes delivered through the guarantee programme. The Government now wants to go further and will double the existing affordable homes guarantee programme, providing up to an additional £225 million to support a further 15,000 affordable homes starting in England by 2015.
- The Budget recognises the concerns of social landlords regarding uncertainty on social rents after 2014-15. Certainty, the red book says “is important to help landlords plan future housing development, providing affordable housing and boosting the construction sector.” It therefore announces that at the 2015-16 Spending Round the Government will set out a social rental policy that gives social landlords certainty until 2025.
- The Government also wants to make sure that affordable housing is available to those who need it most. Ministers recently consulted on ‘Pay to Stay’ proposals to ensure that those social housing households on high incomes make a fairer contribution. The Government will shortly take steps towards allowing social landlords to charge market rents to tenants with income of over £60,000. The Government intends to require these tenants to declare their income to ensure they make a fair contribution, with all additional income reinvested in housing.
- Alongside measures to increase home ownership the Government is reforming the planning system to ensure that reforms will increase housing supply. Planning constraints have depressed the supply of new homes. Over the last 10 years, there have been an average of only 161,000 net additions to the housing stock a year while the number of households in England is projected to grow to 27.5 million in 2033, an increase of 232,000 households a year.
- The National Planning Policy Framework, published in March 2012, is, the Budget argues, already having an effect. The proportion of planning applications being approved is at a ten year high and the pace of local plan making has increased, with 70% of councils now with at least a published plan. The Government will continue with the reform of the planning system to ensure the regime is simple to access, supports growth and is responsive to housing need. The Government will:
- Publish significantly reduced planning guidance by this summer, in line with Lord Matthew Taylor’s recommendations, providing simplicity and clarity. The Government will make greater use of information on prices to ensure that sufficient land is allocated to meet housing and employment need.
- Ask local areas to put in place bespoke pro-growth planning policies and delivery arrangements, as part of new Local Growth Deals, pursued in response to Lord Heseltine’s review, and through City Deals.
- Consult on allowing further flexibilities between use classes to support change of use from certain agricultural and retail uses to residential use to increase responsiveness within the planning system.
- In addition, DCLG is progressing a public sector land auctions model and will work with HM Treasury to conduct a feasibility study into wider use of the model.
- The Government believes judicial reviews have created unacceptable delays to the development of crucial infrastructure and housing projects. The Ministry of Justice has already consulted on shortening the time limits for bringing a planning judicial review and will set out its plans in the spring. The Government will also develop further measures to streamline the process for planning judicial reviews by summer 2013.
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