The chancellor committed almost £4bn to housing in Wednesday’s autumn statement, in a move he said represented a step-change in the government’s ambition to increase the supply of homes for sale and rent.
The money, which the Treasury said was new cash, will be spent through two funds: one providing money for infrastructure projects to make sites viable for building, the other providing money for affordable homes.
Philip Hammond said the government had made good progress, with the number of new homes being built last year hitting an eight-year high, but “for too many, the goal of home ownership remains out of reach”. He added that the challenge of delivering housing was not new “but the effect of unaffordable housing on our nation’s productivity makes it an urgent one”, and said the government planned to more than double capital expenditure on housing.
Measures to tackle the housing crisis included:
- A £2.3bn housing infrastructure fund for local authorities to help deliver up to 100,000 homes
- An extra £1.4bn for local authorities and housing associations to provide affordable housing to rent or buy
- Confirmation that the Greater London Authority will receive £3.15bn to deliver more than 90,000 homes starts by 2021
- The roll-out of right-to-buy to 3,000 more housing association tenants
The first fund is designed to address the problem of potential sites being objected to because of the impact on local infrastructure. The government said sites for up to 100,000 homes could be unlocked by allowing local authorities to bid for funds to spend on roads, utilities and services such as broadband. Money will be targeted at areas of high demand for housing, and councils in London will be able to apply.
The second tranche of money will be available to housing associations and councils and used to fund work on 40,000 additional affordable homes by 2021. The cash can support homes for shared ownership, affordable rents – classed as up to 80% of market rate – and the new rent-to-own policy, but will not be available for homes offered at social rents. New homes for social rent, considered by some to be the only truly affordable housing, are already disappearing, with recent figures showing they accounted for just one in five affordable homes last year.
The Local Government Association (LGA), which represents councils around the country, welcomed the additional funding for housing, but called on the government to include social rented homes in the package.
Lord Porter, chairman of the LGA, said: “Only an increase of all types of housing – including those for affordable or social rent – will increase affordability and make it easier for working families to save for a deposit to buy their first home.”
The Office for Budget Responsibility (OBR) warned that despite the extra money for affordable homes, it expected 13,000 fewer to be built over the next five years. This was a result of the move away from shared ownership schemes – which would have brought in more money for housing associations, and the government’s recent decision to drop plans for rent increases for higher-earning tenants.
Anthony Lee of BNP Paribas Real Estate said the proposed sum was unlikely to achieve the delivery of 40,000 new homes that the government suggested. “Before 2010, when grant funding was previously available to fund affordable housing in private sector-led developments it was typically provided at around £30,000 per bed space, or £130,000 for a three-bed unit,” he said. “However, since that time, house prices in many parts of London have almost doubled, so any grant funding has to work harder to achieve the same outcome that would have been possible in 2010.”
Groups representing aspiring first-time buyers welcomed the ban on letting agents fees which had been trailed ahead of Wednesday’s statement, and the additional funds for new homes.
Betsy Dillner, director of Generation Rent, said: “The government’s previous obsession with home ownership meant that funding wasn’t getting to the people most in need of affordable housing. By giving builders more flexibility over what tenure of homes they build, the government has made it easier to provide homes for people on the lowest incomes.”
However, she said that 40,000 homes over four years “won’t make a big difference”.
Reuben Young, policy officer at PricedOut, said that “more of the right types of homes will be built” under the plans, rather than money being focused on shared ownership. But he said that the continuation of the help-to-buy loan scheme, which Hammond mentioned in his speech, was unwelcome. “We hope government will wean itself off these inflationary demand-side subsidies as soon as possible so we can eventually see homeownership being affordable to average people,” he said.
Jan Crosby, UK head of housing at accountancy firm KPMG, said the autumn statement highlighted that there was “no magic fix for our housing issues”. Crosby said that funding for affordable homes remained at a historically low level, and that the forthcoming housing white paper needed to suggest comprehensive measures to tackle the problems in the market.
“There is a nod towards better integration of transport spending with housing in the detail of the autumn statement,” he said. “The white paper, however, will need to look more widely across infrastructure, devolution of spending powers, planning, taxation, public land funding, delivery models and rental tenures, as well as consider the impact of migration and the generational shift in home ownership, in order to be truly comprehensive and to move the dial on housing volume.”
Ahead of the statement, estate agents had called on the chancellor to make changes to stamp duty at the top end of the market and to look again at the new higher rate of tax on second homes.
Changes introduced two years ago have slowed sales of £1m-plus homes, although recent figures show that the government has recorded an increase in receipts.
Nick Leeming, chairman at estate agency Jackson-Stops & Staff, said: “A cut in current prohibitive stamp duty levels would get the market moving at all levels and give welcome relief to first-time buyers, who are having to grapple with a multitude of costs including saving for a deposit.
“This reform would have resulted in a chain reaction up the housing ladder, spurring current home owners to take their next step and freeing up housing suitable for first-time buyers and second steppers.”