What does the ‘mini-budget’ mean for UK housing?

The Chancellor of the Exchequer, Kwasi Kwarteng, has delivered his first fiscal announcement since being appointed by Liz Truss. We say fiscal announcement, but it was a budget in all but name as the government hopes to promote economic growth and quell public concern as the cost-of-living crisis bears down on us all.  

Dr Kwarteng reeled off a spate of measure from tax cuts to investments zones, but what does it all mean for the UK housing sector? 

Stamp Duty cut 

The ‘cherry on top’, ‘humdinger’, ‘pat on the back’ announcement to affect the housing market was the cut in stamp duty which came into immediate effect. The difference this time round compared to previous iterations of this policy, is that the change is being labelled as permanent, rather than time specific. 

First-time buyers will breathe the biggest sigh of relief with the government suggesting 200,000 homebuyers each year will benefit from the change. Rather than paying stamp duty on homes above £300,000, this limit will jump to £425,000 on homes worth up to £625,000 (up from £500,000). Existing homeowners will also see a reprieve, as the threshold for the tax will double from £125,000 to £250,000.  

The higher Stamp Duty threshold should help more people access Shared Ownership. However, rising interest rates in the coming months may well offset this. 

 Investment zones 

Stop me if you think you’ve heard this one before.  

The government is in talks with 38 local and mayoral combined authorities in England about creating investment zones. The plan is to stimulate growth in areas of the country which need it most. While not the first time this has been proposed by the powers that be, the housing industry will collectively marvel at the prospect of a ‘streamlined planning process’.  

Dr Kwarteng promised a planning and infrastructure bill to fast-track infrastructure projects, because the current system is “too slow and fragmented”. The bill will accelerate major infrastructure projects by “minimising the burden of environmental assessments, making consultation requirements more proportionate, reforming habitats and species regulation and increasing flexibility to make changes to a development consent order once it has been submitted”. 

Quite how all this will pan out remains to be seen but should the zones be a roaring success, the sector will hope for a shift in planning reform across the board, in all areas of the country.  

 More land, more homes 

“We are getting out of the way to get Britain building.”  

In what should be perceived as a positive step, Kwasi Kwarteng has vowed to make further surplus government land available for new development, to increase housing supply and enable forthcoming planning reforms. This is another policy that has been round a few times before and has often resulted in housing associations missing out due to government ‘best value’ rules as they are outbid by private sector players. If the land could be made available for affordable homes this could be an important change. 

Energy bills price cap 

Dr Kwarteng reaffirmed the government’s promise to support UK households as the country faces up to a cost-of-living crisis, with energy prices spiralling out of control.  

We already knew about the Energy Bills Support Scheme (EBSS) £2,500 cap on household energy bills with the first instalment of £400 expected to land at the beginning of October, but now the Chancellor has revealed his support for businesses in the form of the Energy Bill Relief Scheme (EBRS). Housing associations who have residents relying on a communal heating network will receive support via the EBRS and are expected, backed up by new government legislation, to pass the benefit directly on to residents. The same applies to private landlords who operate on a bills-inclusive basis. Those who live in housing association properties but do not rely on communal heating, will receive their discount through the EBSS like everyone else.  

It’s all about rents 

Kwasi Kwarteng’s plan has touched on some important issues within the housing sector, such as Stamp Duty and the energy crisis, but the biggest issue for social housing providers remains the prospect of a 2023 rent cap with options of 3%, 5% and 7% still being discussed, against a current rate of inflation of 9.9% [August 2022]. Until an announcement has been made on the rent cap consultation, expected later this year, it is difficult for providers to update their business plans for the coming years. 

The Chancellor’s announcement has gone down like a lead balloon with financial analysts and markets alike. Sterling has nosedived to its lowest ever value against the US Dollar, millions of homeowners’ mortgage rates have rocketed, and the Bank of England is expected to hike interest rates to a lip trembling 6% by next summer, according to some analysts. Housing association leaders are glued to the price of funding through the bond markets like never before. 

And now we wait, as a sector, as homeowners, as buyers, to see how measures announced by the Chancellor play out. If some of the initial consequences are prolonged, they will negate many, if not all, the benefits of the tax cuts.  

Did you like this blog? For more housing industry news and opinions sign-up to receive our monthly newsletter.