Chancellor’s early Christmas gift for housebuilding

Chancellor George Osborne delivered an early Christmas present for the housebuilding industry with this week’s Comprehensive Spending Review (CSR).

The review included a host of measures aimed at delivering new homes – mostly for sale through a range of initiatives. Key housing announcements included:

  • A doubling of investment in affordable housing to £2bn, with the aim of delivering 400,000 affordable homes
  • 200,000 starter homes
  • Trials of a rent to buy model for 10,000 homes
  • At least 8,000 homes for elderly people and those with disabilities
  • London’s own version of the Help to Buy initiative
  • A freeing up of land constraints, with the release of enough public sector land to accommodate 160,000 units and brownfield sites in the green belt now to be released for starter home development
  • Extending the £1bn Builders’ Finance Fund
  • £310m to facilitate garden city development at Ebbsfleet
  • £2.3bn in loans for the regeneration of large council estates and infrastructure.

But the Christmas cheer was tempered on several fronts. The build and buy to rent sector will today be evaluating the potential impact of a 3% levy on stamp duty for buy to let and second homes. There was also the news that the first five housing associations would begin marketing Right to Buy homes from today under a pilot project, marking a dramatic shift for the housing association sector, while a cap on housing benefit for new tenants in the social housing sector puts further pressure on the poorest, particularly the young.

Other measures in the CSR included:

  • The Chancellor followed up his summer Budget announcement of an apprenticeship levy with the firm detail. The levy, which comes into effect in April 2017, is set at 0.5% of an employer’s pay, but an employer allowance means the levy will only be paid by employers with pay bills of more than £3m. The new levy leaves a question mark over the future of the Construction Industry Training Board (CITB), to which most contractors are already paying a training levy
  • Increased funding for the Renewable Heat Incentive to £1.15bn, at the same time generating a £700m saving by 2020/21
  • Reform of the Energy Company Obligation and its replacement from April 2017 with a lower cost obligation on energy suppliers
  • £23bn on school building over the course of the parliament.

What they said?

Melanie Leech, chief executive of the British Property Federation: “This could be a seminal moment for the government, and the start of a building programme that actually delivers. By committing billions of pounds to building new homes, government is really putting its money where its mouth is, and has set itself some ambitious targets that it must not fall short of.

“Today’s announcements mean nothing unless government invests simultaneously in placemaking, and it must not be blinkered in its pursuit of new homes if it wants to create sustainable communities at the same time.”

David Orr, chief executive at the National Housing Federation: “This announcement provides the conditions for us to deliver thousands more homes for people at every level of the housing market.

“Shared ownership is a housing association success story – with over 275,000 properties already delivered.”

David Hawkes, Chartered Institute of Building (CIOB) policy officer: “The supply-side focus to alleviate the housing crisis is welcome and long overdue. While much of the current shortfall in UK housing supply is associated with the private home ownership market, greater consideration must be given to expand housing association, local authority and affordable build-to-rent sectors, alongside the provision of accessible, high quality homes for the disabled and elderly. The announcement of some support for these tenures is a start, but it must be recognised that increasing supply across the full range of tenures smooths out demand instabilities and provides house builders and their supply chains with the confidence to invest.”

Jenny Holland, head of the parliamentary team at the Association for the Conservation of Energy: “The appalling state of our housing stock is one of the key causes of excess winter deaths, which today’s figures show surged last winter to their highest level in 15 years.  Yet despite this, the Chancellor has today ignored industry-wide pleas to release infrastructure funding for an energy efficiency programme. Instead, he has announced that the Energy Company Obligation (ECO) – the only remaining help for householders living in cold homes – will be slashed to £640m a year from 2017, a drop of 42% on annual ECO spending to date.

“The Chancellor boasts that households benefitting from the ECO are expected to save £300 on their bills. But these lucky few will amount to just 200,000 per year. The other 5 million poorest households who struggle with their basic living costs won’t even get a look in until April 2022.”

Iain McIlwee, chief executive of the British Woodworking Federation: “A steady flow of new joiners and carpenters is critical to the Chancellor’s new housing ambitions. We have already warned that there could be a catastrophic collapse in apprenticeships if the CITB’s services are lost to construction and this would undermine the whole vision expressed by the Chancellor today.

“So we are keen to participate in the further development of the proposed apprenticeship levy now that government has confirmed the scope and the rate of the levy, and has confirmed that all employers committed to training and development will be able to access this support. It’s particularly good news that the focus is on quality apprenticeships and ensuring standards of training are high, and we will continue to work closely with the industry’s training providers to develop improved qualifications for joinery and wood skills.”

Dr Diana Montgomery, chief executive of the Construction Products Association: “Some in our industry will be pleased to hear the Chancellor clarify its ambitions for the Apprenticeship Levy.  Today we learned that it will be paid on payrolls in excess of £3m.  The Chancellor suggests that this will mean less than 2% of UK employers will pay it; however, we estimate that this may affect manufacturers with as few as 100 employees or more. We appreciate the establishment of a new employer-led body to set apprenticeship standards and ensure quality, not quantity.  This body needs to include manufacturers and distribution representatives of the construction supply chain.  The critical focus must be on a ‘light-touch’ approach that delivers the right skills.

“The government’s plans for housing now include a total of 400,000 new ‘affordable’ homes by 2020, with support for starter homes and shared ownership schemes.  Our view continues to be that while we’re pleased with the government’s aim to help first time buyers, the housing crisis has less to do with supporting demand and more to do with increasing the supply. Today’s plans – paired with a raft of measures addressing planning reforms, the release of appropriate land for housing and help for SME house builders – may go some way towards achieving that.”

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