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It was encouraging that the Autumn Statement had several things to say about housing. In particular there was a welcomed shift in rhetoric towards boosting the supply of homes and some of the measures that the Centre had been calling for were also announced. But the policies, whilst welcome in direction, remain far too limited in size and geographically blind to have more than marginal effects. Furthermore, the Coalition’s flagship housing policy remains Help to Buy, a broadly demand-side measure.
Two of the more eye-catching announcements on housing were firstly, raising the local authority borrowing cap to £300 million, and secondly, offering up to £1 billion in loans for infrastructure over six years to unblock house-building on stalled sites.
The most sought after announcement was undoubtedly the increase in borrowing caps for local authorities. This will enable local authorities to borrow £300m to fund house building against future housing revenue accounts. While a raised borrowing cap is welcome, the parameters are still tightly drawn. For instance, £150m for each of the next two years is a long way short of the £7bn over five years called for by the Local Government Association among others. The fund will be allocated on a competitive basis and those with strong Local Enterprise Partnership (LEPs) support will be favoured. Whilst this further strengthens the role of LEPs in aligning housing and growth priorities, raising the cap by so little is unlikely to make a significant impact on the ground.
Stalled sites, another favourite topic for this government, were targeted with a £1bn infrastructure fund focused on kick-starting house building. The latest scheme for stalled sites has echoes of similar policies (such as UK Infrastructure Guarantee Scheme, Kick Start and Get Britain Building) which have had limited success before. For this iteration to be more effective than previous attempts, the fund must tackle the issues of additionality, so that it unlocks only those schemes which would be unviable without grant, and targeting, so that it focuses on areas that need new homes, not sites that are stalled due to lack of demand, or indeed theme parks.
Beyond the headlines several other housing measures were also announced. Councils will be made to sell their expensive vacant properties in order to build more homes, this could enable new housing to be built that better matches current needs and demand, and better management of housing stock. An expansion of the controversial right to buy programme might also enable local authorities to manage their assets better if the ‘replacement rule’ is adhered to and fair pricing for both parties is ensured. In social housing the ‘right to move’ was established for tenants employed or moving to work. While this could support some flexibility in the labour market it appears to be largely a political decision. Of interest mainly in London, capital gains tax will now apply to non UK residents when selling property. This is likely to provide an additional revenue stream for the Treasury rather than be a serious deterrent to foreign investors.
Finally, it’s good to see that outside London the pooling of New Homes Bonus money to the Local Growth Fund, which we thought was a flawed idea, has been cancelled. Within London, pooling will continue which makes more sense given the Mayor’s remit and funding control over housing, although London Councils disagree.
Overall the measures announced were a move in the right direction, and the acknowledgement of the need for housing supply was welcome. But the funding remains far too small to deliver the surge in house building that is needed in many parts of the country, and the significant political and financial focus remains on the demand side through Help to Buy. The most positive news for the housing market referenced was however not a specific policy announcement. The improving prospects of the UK economy, alongside the medium to long term certainty of interest rate rises, are likely to have a far greater effect on future house building than the welcomed but small scale changes announced last week.
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