Spring Budget 2023 - The disconnect between policy and housing.

On the 15th March, the Chancellor of the Exchequer, Jeremy Hunt delivered his Spring Budget, accompanied by a full fiscal statement from the Office for Budget Responsibility, setting out the government’s plans for tax and spending policy for the year ahead.

Unfortunately, the much touted four “E’s” (Enterprise, Education, Employment and Everywhere) fails to deal with one of the key issues facing the economy, namely the lack of housing, particularly affordable housing. Housing is a fundamental human necessity and wherever you look there is a shortage. The growing number of homeless people, the frenzy when accommodation is made available for renting and the increasing cost of renting all bear this out.

For housing, there is a big disconnect between the what the sector needs and government policy. With all of the major house builders publicly stating that they will build fewer houses this year than last year, what we needed from the Chancellor was a stimulus for the housing market. Unless our housing stock increases significantly, the problem will only get worse. Stamp duty reductions and tax relief on mortgage interest for first time buyers would have really helped but the budget did not address these issues at all.

In addition, the government wants to see an improvement in the quality of housing stock. However, it is not doing anything to help with supply and the enforcement of Minimum Energy Efficiency Standards (MEES) could mean that some housing becomes unlettable. The lack of incentives for retrofitting such as VAT exemptions and grants and financial support such as soft loans is hard to understand.

Construction, like many sectors, is struggling to find the staff it needs so hopefully the proposals to increase employment and help the economically inactive back to work will bear fruit.

Since the budget, we have seen the housing market staring to show signs of stabilisation in
April with Nationwide reporting that while house prices are down 2.7% year-on-year, they did rise by 0.5% in April. At the same time, the Halifax House Price Index suggests house prices in April are 0.1% higher than they were at the same time last year.

The build to rent sector has had a tough year, especially for mortgaged investors who have been particularly hard hit by higher interest rates. In 2021, there were only 10,400 completions in the BTR sector, compared to 76,000 mortgage redemptions; leading to a continued shrinking of the rental supply, which in turn is pushing up prices.

It’s also a concerning time for those in the commercial property sector, particularly landlords of older office space, that are facing difficult choices around investment to bring up to new standards and compete with newer office buildings that tick more of the green credentials.

In contrast, student accommodation is expecting to see material growth this year with continued record applications for university places and limited supply.

House builders are also feeling more positive, so while the total number of houses being built this year is likely to be significantly less than 2022, demand is starting to pick up. Many developers are maintaining strict work in progress control whilst restricting discretionary spend and limiting land purchases.

Right now, the sector needs strong leadership and stability – Rachel Maclean is the 15th housing minister since 2010, and the 6th in the last 12 months. Such a rapid turnover means none of them have the time (or incentive) to get to grips with the complex and multi-faceted issues the sector is facing.

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