After all the political promises in the run-up to the election, housing seemed to slightly fallen off the political agenda in the Summer Budget.
Many of George Osborne’s clarifications about how to help ‘hard working families’ own their own homes simply re-capped past discussions: more support for first-time buyers with the introduction of the Help to Buy ISA, and the revival of Right to Buy to help social tenants become homeowners in their own right. All of which will stoke demand without adding supply, which could arguably drive up house price inflation.
But the underlying and critical problem – the lack of construction – has been somewhat brushed under the carpet.
A second housing subtlety of the Summer Budget – the more complex nugget of reforms to taxation for buy-to-let landlords – won’t help solve this problem either. At the moment, landlords can offset the interest they must pay on mortgage repayments against their income, but this relief is to be stopped. This will help place first-time buyers on an even level footing when competing with landlords for the same limited stock of property, as landlords will no longer get the advantage of adding in tax reliefs to their budgeting when applying for a mortgage. However, in the short term these additional costs could simply be passed on to tenants in the form of higher rents – which may punish those who are renting whilst saving for a deposit.
To return to the real crux of the matter – the lack of housing – there is plenty that Osborne could have addressed.
Legislation to prevent land-banking by large developers, complemented with more support for smaller builders, could have helped kick-start the nation’s building efforts. Equally, easing planning restrictions could have helped move development up a gear.
The problem goes deeper than simply planning too. The pace of new building is being hampered by a lack of skilled construction workers. There may be a very real reason Osborne neatly circumvented this issue: the EU referendum proposed by the Conservatives could seriously impact the stock of workers – as at the moment we rely heavily on overseas labour for much of our building. The Chancellor has already highlighted the importance of supporting more apprenticeships, and focusing these within the construction sector could neatly help both create more jobs and build more houses.
Another important next step will be to make sure new homes are built in the right places. Demand for homes is closely linked to where buyers can get a job. Osborne wants to focus on creating a Northern Powerhouse, a linked-up system of satellite cities which will help balance out London in terms of job opportunities, culture and quality of living. The future provision of housing must be closely linked with these developing opportunities if this is to be a success.
Osborne has announced that further planning reforms will be announced on Friday. These reforms may yet hide the housing shake-up needed, but I’m not holding my breath.
