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Philip Hammond promised to fix the UK’s “broken housing market” in his Autumn budget, announcing the government would spend £44bn over the next five years.
He promised an extra £15bn in cash and launched a series of measures including guarantees on housebuilder loans.
However, his pledges to increase housebuilding received short shrift. The Office for Budget Responsibility warned that it had reduced its forecast for residential investment, the amount spent on building new homes or improving existing homes.
It said house prices and housing transactions were likely to be lower than it predicted in March and that residential investment growth would struggle to exceed 2 per cent a year throughout the forecast period and was not expected to exceed pre-financial crisis levels as a share of national income. It said this represented “a challenging baseline for the government’s housebuilding target”.
In his statement, Mr Hammond said the government planned to build 300,000 new homes a year by the middle of the next decade and revealed a “comprehensive package of new policy” to solve the housing crisis, including the introduction of a consultation on planning reforms and extra cash to train construction workers.
But more than half of his £15bn cash injection — some £8bn — was in the form of guarantees to support smaller housebuilders and will not entail any Treasury spending.
The cash, including the guarantees, brings the government’s total commitment to housing up to £44bn over a five-year period. It includes a fresh £2.7bn for the housing infrastructure fund and just over £1bn for a new land assembly fund, which will be used by the housing regulator to help unlock new development sites.
A further £1.5bn will be earmarked for providing loans to small housebuilders in a bid to kick-start construction.
While this was welcomed by most housebuilders, Anthony Codling, housebuilding analyst at investment bank Jefferies, said it would potentially finance only 30,000 plots of land over five years, assuming that an average plot costs £50,000.
Lindsay Judge, senior policy analyst at the Resolution Foundation, a think-tank, said the chancellor had shown “welcome ambition”, but she remained unconvinced that the package of measures would cause house prices to fall.
“Big questions remain over how much this will reduce housing costs given that the single biggest measure announced — the stamp duty exemption for first-time buyers — is expected to feed through into higher house prices,” said Ms Judge.
“Around one-third of new spending on housing announced today will support demand — something which is likely to push up house prices,” said Ms Judge. “At the same time, the Chancellor has also shown ambition with policies to boost housing supply. What’s questionable is whether he has got the balance between supply and demand measures right.”
Alongside the cash giveaways, a consultation will be launched on introducing minimum densities for housing development in city centres and around transport hubs, along with policy changes to make it easier to convert retail and commercial land into housing.
Lucian Cook, head of residential research at Savills, the estate agency group, said the planning reforms built on ideas first outlined in the government’s housing white paper, published earlier this year, while Johnny Morris, head of research at estate agent Hamptons, pointed out that many of the measures announced were “commitments to consult on what to do”.
Other measures included extra money for local councils, with £400m in loan funding for the regeneration of estates in rundown neighbourhoods, and £28m in additional support for Kensington and Chelsea as they cope with the aftermath of the Grenfell Tower disaster.
Councils were also given more room to borrow, with the chancellor offering to lift caps on borrowing in areas of “high affordability pressure”. They will also be able to apply council tax to empty homes in a bid to deter investors from letting large properties sit empty.
However, the Local Government Association, which represents local authorities and has long been an advocate of increased borrowing powers for councils, said the measures did not go far enough.
Lord Porter, the conservative chairman of the LGA, said he believed councils had a great role to play in solving the housing crisis.
“If we are to get back to building 300,000 homes a year, then the Government needs to ensure all areas of the country can borrow to invest in resuming their role as major builders of affordable homes,” he said.
The Homes and Communities Agency — the housing regulator — has been notionally granted powers to intervene more actively in the land market and has been renamed Homes England.
The chancellor also announced policies to help renters. A consultation will be launched on the barriers to landlords offering longer, more secure tenancies to tenants who want them, while an extra £125m was set aside to boost the housing benefit of those living in areas where rents have grown fastest.
“This is the most comprehensive package of measures we’ve seen in a budget for a long time,” said Mr Cook at Savills. “Whether it’s a game-changer or not remains to be seen.”