Law News

Budget was a Missed Opportunity that will Affect Tenants, Experts Warn

Rose Jinks - October 30, 2018

Yesterday’s Autumn Budget announcement from Chancellor Philip Hammond was a missed opportunity that will ultimately affect tenants, according to experts from across the property industry.

The Policy Director of the Residential Landlords Association (RLA), David Smith, went as far as to say that the statement “fails the country’s private tenants”.

He explains: “Whilst the Chancellor again outlined the Government’s desire to boost homeownership, he failed to address the needs of the millions of people who cannot or do not want to rent.

“With the demand for private rented housing rising whilst supply is shrinking, we needed pro-growth taxation measures to ensure that tenants have an adequate supply of housing to choose from. Despite being given innovative suggestions to protect tenants in their homes, encourage sale to tenants, and improve energy efficiency, we got a damp squib with little more than promises of further consultations. Eventually, the Government will need to stop consulting on the housing crisis and take action.”

Neil Cobbold, the Chief Operating Officer of proptech firm PayProp UK, was also disappointed with the lack of information on Government plans: “The ban on upfront fees charged to tenants was first proposed by Chancellor Philip Hammond almost two years ago, along with a cap on security and holding deposits. Given the length of time that has passed, it’s crucial that letting agents, landlords and tenants get more information about when and how it will be implemented.

“Next year is set to be a crucial year for letting agents – now that they have more clarity, they can plan accordingly. The Bill will pose a challenge for letting agents, but they must try to take the positives out of the situation. The fees ban will force agents to look for alternative revenue streams and streamline processes using technology.”

He points out another missed opportunity, this time on tax breaks for landlords offering long-term tenancies: “This would have been a welcome move by the Government, as it would have allowed landlords and tenants who want to pursue longer tenancy agreements to do so without making it a mandatory requirement for the entire private rental sector.

“Industry research has shown that mandatory longer tenancies may cause some landlords to exit the sector, and that not all tenants are looking for long-term agreements. However, for many landlords, a Capital Gains Tax (CGT) break would be a timely incentive to continue to provide much-needed rental housing stock.

Budget was a Missed Opportunity that will Affect Tenants, Experts Warn

Budget was a Missed Opportunity that will Affect Tenants, Experts Warn

“Such a policy could have provided vital feedback to the Government’s previously announced plans to introduce mandatory three-year tenancies, indicating whether long-term tenancies are needed or if they should remain an optional decision rewarded with a tax break.”

John Phillips, of Just Mortgages and Spicerhaart, is concerned that the crisis isn’t enough of a concern for the Government: “Once again, it appears that housing is less of a priority for the Chancellor than we might have been led to believe. Funding for further infrastructure is one thing and, hopefully, it will mean more houses do get built, but that is only one element in fixing the broken housing market.

“The housing crisis appears to be less critical to the Treasury than all the people we know are looking to buy or sell a property. Instead of listening to the industry, the Government appears to believe that the health of the housing market will come solely from first time buyers. This blinkered view will do nothing to get the whole market moving, which is vital in the long-term.”

Neil Knight, also from Spicerhaart, agrees that the announcement doesn’t go far enough: “We welcome the Chancellor’s announcement of a further £500m for the Housing Infrastructure Fund, to unlock 650,000 homes, and news that he will empower up to 500 neighbourhoods to buy land for housing for sale to local people in perpetuity.

“However, these were the only major announcements in terms of housing, and we would have liked to have seen more measures announced, considering what a hot political topic housing is.

“We had hoped that the Chancellor might have announced plans to speed up the build out permission process, following the publication of Sir Oliver Letwin’s report earlier today, which would go a long way to help Government reach its targets, but there was no such announcement today.

“Let’s just hope that when the Chancellor addresses the findings of the report in the New Year that there is more support for developers and local authorities, so that we can start building the homes that this country so desperately needs.”

The CEO of Quintessentially Estates, Penny Mosgrove, shares this sentiment: “Overall a disappointing Budget for the sector. Hammond duped us with the glorifying statistics of how well the UK economy was doing, how the deficit was down, employment was up and it was the end of austerity! Yet, housing, which is the biggest issue of our generation, has been ignored.

“Yes, first time buyers are being helped, and now first time shared ownership buyers are now being included in that support, but what about the rest of the market? The empty nesters looking to downsize, who are asset rich but cash poor, the hard-working family who is struggling to put together bill for Stamp Duty, despite being in need of a larger home. Supporting just the first time buyers means that the bottle neck gets worse and transactions will not increase – which means they collect less tax.”

Alan Waxman, the Founder and Chief Executive of Landmass, takes a swipe at the Chancellor: “Philip Hammond has failed to penetrate the property market. No one can argue against helping first time buyers, but stimulating just this part of the market has a detrimental impact on the property market as a whole. In fact, it increases prices, hitting first time buyers the hardest, as demand increases, and then so do prices, so the net effect is that it actually costs the buyers more in total – fools logic!

“It is a shame that he didn’t have the political will to reduce the punitive Stamp Duty for hard working families, investors and young entrepreneurs, as this will have increased activity and Stamp Duty revenue, helping people lower down the chain to move up the ladder, rather than stay still and build more basements or extensions!”

Were you, too, disappointed in the Chancellor’s Budget announcement yesterday? And do you agree with these experts, that the lack of attention on housing will ultimately affect tenants?