How will the Summer Budget announced by George Osborne today affect the housing sector? hamag reports:
Social housing and housing associations
Social housing tenants classed as higher income earners will not be allowed to claim taxpayer-funded subsidies for their rent anymore, according to George Osborne’s Summer Budget 2015 announcement today.
In a new measure called ‘Pay to Stay,’ the Chancellor intends to cut the welfare bill by £12bn. The action is expected to cease benefits for approximately 350,000 people who currently live in local authority and housing association owned homes. George Osborne said that the move should save around £250m per year by 2019.
As of 2017/18, social housing tenants whose household income exceeds £40,000 in London and £30,000 across the rest of the UK will be charged a rent that is average for that market area. The Treasury estimates that currently 9% of social tenants in Britain are classed as being on a higher income (40,000+ on above £50,000 and 300,000+ on above £30,000). This 9% of tenants are benefitting from an average of £3,500 reduced rent per household per year.
Since 2010, housing associations and local councils have been able to charge standard market rents to those on incomes exceeding £60,000 per annum. Osborne expects that the additional rental income that local authorities receive by lowering the threshold can be used to reduce the deficit and generate extra income for housing associations, which in turn can be reinvest in affordable housing, tackling the housing crisis and improving existing housing stock via maintenance.
Rents in social housing are also to be reduced by 1% a year over next four years.
Leading London property consultancy Daniel Watney LLP commented on the importance of extending permitted development rights if there is any hope of boosting homeownership within the UK.
Charles Mills, head of planning, commenting on extending PD rights, said "The government needs to work closely with local authorities to ensure the extension of permitted development rights works effectively, especially in London. In areas of the capital, office-to-resi conversions are likely to be a double-edged sword, helping bring about much-needed housing supply, but also taking valuable office space out of the market, at a time when demand is at an all-time high."
Partner and head of residential at Daniel Watney, Julian Goddard said “The Conservatives face an uphill struggle in their bid to boost homeownership, with high house prices, strict lending requirements and weak wage growth all keeping first-time buyers out of the market. Extending Help to Buy and building ‘Starter Homes’ will benefit a few, but do little to change the overall picture.”
“The government also faces questions about what it will do for the private rented sector. Moves to encourage institutional investment and boost the supply of purpose-built rental accommodation are welcome, and will help drive up standards in the sector. But plans to relax rules around sub-letting and short-term lets will have the very opposite effect. Burdening landlords with Right to Rent checks, which is likely to cost tenants extra in fees, will not help either.”
Buy to let
The Chancellor says buy-to-let landlords have an advantage, because they can offset mortgage payments against income. That has encouraged the growth of buy-to-let mortgages. Osborne says he wants to level the playing field. Mortgage tax relief for buy-to-let landlords to be restricted to the basic rate - this will be phased in. Osborne said that further planning reforms will be announced at the end of the week. More of this on Friday.
Video below: George Osborne leaves Downing Street to deliver his Summer Budget, the first Conservative budget in 30 years