Autumn Statement and Spending Review: Implications for housing 27/11/2015

27/2015

 

Key points

 

• A target of 400,000 affordable new homes started by 2020/21, three-quarters of them for low cost home ownership
• A pilot scheme with five housing associations to extend the Right to Buy to start immediately
• Further planning reforms and the release of public sector land for 160.000 homes to accelerate housing supply
• A new London Help-to-Buy scheme offering 40% equity loans
• Higher rates of Stamp Duty for purchasers of buy-to-let or second homes
• HB entitlement for council and housing association tenants to be limited to relevant local housing allowance rates from April 2018. For single claimants under 35 this will be the shared accommodation rate

  

Context

 

Revised estimates of economic growth and tax revenues over the next four years have enabled Chancellor George Osborne, in his Autumn Statement on 25 November, to abandon the tax credit cuts rejected by the House of Lords and avoid further cutting police spending in real terms. General grant for local government will largely disappear by the end of the Parliament and councils will be expected to rely on revenue from council tax and business rates, which they will be able to retain. Council tax may be increased by up to an additional 2% to pay for social care. More detail will be provided in the local government settlement.

 

Five point plan for housing

 

The Chancellor set out a five-point plan for housing, including:

 

• A target of 400,000 affordable housing starts by 2020/21, mostly for low-cost home ownership, including:
  • 200, 000 discounted starter homes, with a £2.3 billion fund to support delivery of 60,000 of these in addition to those delivered through planning gain
  • 135,000 Help-to-Buy shared ownership homes
  • 10,000 homes that allow a tenant to save for a deposit while renting
  • at least 8000 specialist homes for older people and people with disabilities

 

• A pilot of the voluntary Right to Buy with five housing associations, commencing immediately.

 

• Proposals to accelerate housing supply by:
  • Further planning reforms, including a new delivery test for local authorities
  • Release of public sector land sufficient for 160,000 homes
  • Ensuring release of unused commercial, retail and industrial land for starter homes and supporting redevelopment of Green Belt brownfield sites
  • Support for SME builders
  • £2.3 billion in loans for council estate regeneration and infrastructure investment
  • £310 million for the new garden city at Ebbsfleet as part of a wider £700 million regeneration programme

 

• A new London Help-to-Buy scheme offering a 40% equity loan in recognition of higher house prices in London.

 

• Rates  of Stamp Duty Land Tax 3% higher to be charged on purchasers of buy-to-let properties and second homes, with effect from 1 April 2016.

 

The 400,000 affordable homes include the 200,000 starter homes already announced in the Summer Budget and a further 50,000 are acknowledged to be included in existing commitments. The provision of £2.3 billion to fund 60,000 starter homes represents an average grant rate of £38,000 which exceeds the average grant of £14,000 currently paid for homes for affordable rent, although it should be noted that this rate is no longer sustainable given the social rent cuts.

 

Housing Benefit Cuts

 

The government plans:

 

• For councils and housing associations, to limit the amount of rent eligible for HB to the relevant local housing allowance. For single claimants under 35 who do not have dependent children this will be the shared accommodation rate. This will apply to tenancies signed after April 2016, with HB entitlement changing from 1 April 2018
• To limit HB and Pension Credit payments for claimants who go abroad to 4 weeks rather than the current 13 weeks

 

Restriction of HB entitlement to LHA rates is expected to save £120 million in 2018/19, £170 million in 2019/20 and £225 million in 2020/21. Local housing allowance rates were frozen for four years in the Summer Budget. In the great majority of areas, council rents are well below local housing allowance rates for similar size dwellings, and will fall further below as a result of the 1% rent reductions planned from next year. In some areas, however, rents charged for newly built properties may exceed local housing allowance levels. Housing association rents, in particular where affordable rents are charged, are significantly higher, but it seems likely that most of the savings from these changes will come as a result of restricting single claimants under 35 to the shared accommodation rate.

 

Read the full Autumn Statement and Spending Review.