Chancellor Rishi Sunak announced £7.1bn of funding for the National Home Building Fund in the government’s Spending Review. Here’s how it could impact the UK housing market.
In the Spending Review, the government introduced a raft of funding that will impact the UK housing stock. Through the National Home Building Fund, the Chancellor has pledged £7.1bn over the next four years. This large sum of funding will help unlock up to 860,000 homes.
Overall, the Spending Review announced nearly £20bn of investment in housing. This is the single biggest investment in new homes in England’s history. In addition to the housing fund, the government also confirmed £12.2bn for the Affordable Homes Programme across the next six years. Providing up to 180,000 new homes, this is also the largest investment in affordable housing in a decade.
The housing market’s role in the economy
The UK housing market is playing a significant role in the country’s economic recovery from the coronavirus pandemic. Since the end of the first lockdown, the sector has spurred economic activity. The National Home Building Fund will help the country sustain this recovery and deliver additional housing.
Many professionals in the UK property industry are glad to see substantial funding going towards additional housing delivery. This will help meet the strong demand for more housing across the country and to help rectify the housing shortage.
The housebuilding sector will receive significant support
Within the National Home Building Fund, £2.2bn of new loan finance will go towards supporting housebuilding. This includes funding for SME housebuilders, modern methods of construction (MMC) and a new Help to Build scheme for custom and self-builders. Additionally, an extra 100m will fund authorities in 2021/22 to support housebuilding and regeneration. This will include unlocking brownfield sites and serviced plots for self and custom builders.
Building homes using MMC is a key way to boost the UK’s housing stock. Self-builders can also help bolster the UK’s housing supply and bring forward a greater variety of homes. Andrew Baddeley-Chappell, CEO of National Custom & Self Build Association, feels the announcements show the government is committed to increasing the diversity of choice in new homes being brought to the market.
He states: “Greater choice will lead to great innovation and competition that will lead to more and better homes. We hope to see the new Help to Build scheme up and running as soon as possible together with the additional wonderful, affordable, sustainable, uplifting new homes that it will help deliver.”
Planning system reform will be key
This year, change of use and permitted development rights have been updated. And more planning changes will likely come forward soon. Some property professionals have stressed the importance of speeding up the planning process. And many feel there is a need to bring forward significant planning reform.
Brian Berry, the chief executive of the Federation of Master Builders, says the government must be bolder to build, build, build our way to recovery with better and greener homes. He welcomes the extra support and funding, “but without urgent investment in our local authority planning departments to speed up decisions, projects are struggling to get off the ground.”
In a recent blog post, Savills states the planning system will be key in the UK’s post-pandemic recovery. The Spending Review included an additional £12m of resource funding to take forward the government’s changes to the planning system.
The Royal Town Planning Institute (RTPI) has cautiously welcomed some of the government’s announcements to invest in homebuilding and level up the country. However, the institute says the £12m allocated for planning is only 10% of what is required.
Victoria Hills, chief executive of the RTPI, comments: “While we understand the impact the pandemic has had on the country’s public finances, the government will not be able to achieve its ambitions to radically overhaul the planning system without adequate investment in local authorities.”
Housing market changes still to come
Many professionals in the UK property industry have been calling for an extension to the stamp duty holiday and were disappointed there were no announcements on this in the Spending Review. The tax holiday has led to a mini-boom in the property market and is currently set to end on the same day the furlough programme will end.
We are expecting to see changes to stamp duty and capital gains tax next year. Additional planning policy changes are also to come. Many UK landlords, property investors and developers will be eagerly awaiting announcements in these areas to see how it will affect them.