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Budget: £15.3bn of ‘new financial support’ for housing over next five years

The UK government has pledged £15.3bn of new ‘financial support’ for housing in the form of capital funding, loans and guarantees as it targets the delivery of 300,000 homes per year by the mid-2020s

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A five-year housing package announced by Chancellor Philip Hammond at his Autumn Budget today (22 November 2017) includes the lifting of the housing revenue account (HRA) borrowing cap for local authorities in areas of high affordability pressure "so they can build more council homes".

 

Councils will be invited to bid for increases in their caps from 2019‑20 to a total of £1bn by the end of 2021‑22.

 

There will also be a focus on planning reforms to “ensure more land is available for housing” in a way that “maximises the potential in cities and towns for new homes while protecting the Green Belt”.

 

The government also announced £1.5bn of reforms to the Universal Credit programme.

 

And Mr Hammond announced the removal of stamp duty on properties worth up to £300,000 for first time buyers – though the Office for Budget Responsibility has said that this will increase house prices by 0.3 per cent.

 

Meanwhile, the Budget documents confirm that the voluntary Right to Buy pilot will proceed with a "£200m large‑scale regional pilot of the Right to Buy for housing association tenants in the Midlands".


The Chancellor set out the latest raft of new financial programmes and policies, wrapping them up with previous initiatives and announcements to come up with “£44bn of capital funding, loans and guarantees” for UK housing over the period.


He said it marks “an ambitious plan to tackle the housing challenge” and represents the “biggest annual increase in housing supply since 1970”.

 

However, the Budget documents show £15.3bn of new financial support, and over half of that - £8bn - is an idea for guarantees to support SMEs and purpose built rented housing, which would need to be explored with the industry. (See breakdown below).

Some of the schemes will be run through the National Productivity Investment Fund (NPIF), which was announced at the 2016 autumn budget as £23bn of high-value investment from 2017-18 to 2021-22 to support housing, research and development (R&D) and economic infrastructure.

 

There was no specific mention of capital funding for social or affordable housing in his speech. The Budget documents reference October’s announcement of £2bn funding for affordable housing, which it says is “including funding for social rented homes”.

 

However, last month had already seen a flurry of policy announcements, including the removal of the local housing allowance cap and proposals for a new funding regime for supported housing, along with a return of social and affordable rents to CPI+1% from 2020.

 

There was also no mention by the Chancellor of the reclassification of housing associations and their £63.5bn of debt off the public balance sheet and back into the private sector, which grabbed national headlines last week. The budget documents say the reclassification “reduces [public] borrowing by £5.1bn in 2020‑21”.

 

Turning to land and planning, Mr Hammond said there will be a focus on “high quality, high density homes in city centres and around transport hubs”.

 

Government will “intervene to change the incentives to ensure such land is brought forward for development”, he said, and use “direct intervention compulsory purchase powers as necessary”.

 

“In London alone, there are 270,000 residential planning permissions unbuilt. We need to understand why,” he said, ahead of revealing plans for an ‘urgent review’ to look at the gap between planning permissions and housing starts.

Housing investment

  • Lifting the Housing Revenue Account borrowing caps for councils in areas of high affordability pressure, so they can build more council homes. Local authorities will be invited to bid for increases in their caps from 2019‑20, up to a total of £1bn by the end of 2021‑ The government will monitor how authorities respond to this opportunity, and consider whether any further action is needed.
  • Strengthen the ability of the Homes and Communities Agency (to be renamed Homes England) to use investment and planning powers to intervene more actively in the land market.
  • Land Assembly Fund – £1.1bn for a new Land Assembly Fund, via the NPIF, helping Homes England to work alongside private developers to develop strategic sites, including new settlements and urban regeneration schemes.
  • New garden towns – bring together public and private capital to build five new garden towns, using appropriate delivery vehicles such as development corporations, including in areas of high demand such as the South East.
  • Increasing the Housing Infrastructure Fund – invest in infrastructure through the NPIF to support new housing in high‑demand areas, with a further £2.7bn to the competitively allocated Housing Infrastructure Fund (HIF) in England. This takes the total investment in the HIF to £5bn.
  • Strategic planning in the South East – supporting more strategic and zonal planning approaches through housing deals in the South East, where housing need is at its most acute.
    - Includes a housing deal with Oxfordshire to bring forward a joint statutory spatial plan and commit to a stretching target of 100,000 homes in the county by 2031, in return for a package of government support over the next five years, including £30m a year for infrastructure and further support for affordable housing and local capacity. The government is also continuing housing deal negotiations with Greater Manchester, the West Midlands, Leeds and the West of England.
  • Small sites: infrastructure and remediation – a further £630m through the NPIF to accelerate the building of homes on small, stalled sites, by funding on‑site infrastructure and land remediation. (3)
  • Home Building Fund: £1.5bn providing loans specifically targeted at supporting SMEs who cannot access the finance they need to build.
  • Housing guarantees – government will explore options with industry to create £8bn worth of new guarantees to support housebuilding, including SMEs and purpose built rented housing.
  • Affordable housing – along with lifting the HRA borrowing cap in some areas, the government says it has already shown its commitment to increasing the supply of affordable homes through the £2bn of funding for affordable housing announced in October, which it says includes funding for social rented homes. That takes the total budget for the Affordable Homes Programme from £7.1bn to £9.1bn to 2020‑ It is expected that this will provide at least 25,000 new affordable homes
  • Estate regeneration – £400mn of loan funding for estate regeneration to transform run‑down neighbourhoods and provide new homes in high‑demand areas.
  • Construction skills – supporting industry with £34m to scale up "innovative training models" across the country, including a programme in the West Midlands. The government is working with industry to finalise a Construction Sector Deal that will support innovation and skills in the sector, including £170m of investment through the Industrial Strategy Challenge Fund.
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