On Wednesday 27 October, the chancellor, Rishi Sunak, delivered his Autumn Budget for 2021. It’s been marketed as a generous package of increased spending to boost the nation’s post-Covid recovery, but as always there are winners and losers – and not everything in it is quite as straightforward as it seems.
In terms of the property sector, the budget contains several points that might affect housing, property sales and the rental market.
A levy on larger property developers
The ongoing cladding crisis has blighted vast numbers of lives, and the government's response has so far been nowhere near adequate. The biggest problem is the sheer cost of raising the estimated £15 billion needed to deal with the issue. The two proposed funding solutions are a new Building Safety Levy on tall buildings, and a residential property developer tax.
It's the second of these that Rishi Sunak has confirmed in the Autumn Budget. From April 2022, the government will impose a 4% tax on residential property developers with profits of more than £25 million. There’s been a feeling since the cladding crisis began that while leaseholders have been left with hefty bills and unsaleable flats, the developers who installed the unsafe cladding have often escaped with minimal consequences. With this in mind, the residential property developer tax is likely to be a popular move, and the fact that it’s targeted at larger housebuilders should ensure that smaller builders aren’t disadvantaged by the extra tax.
Funding set aside for affordable homes
The chancellor has confirmed that he is allocating £24 billion towards housing – with nearly half of this set aside for the creation of around £180,000 affordable homes. This will come as very welcome news for first-time buyers, many of whom will have seen their dreams of home ownership dashed by the post-lockdown property boom and the price rises that have come along with it.
Interestingly, there’s a conspicuous focus on brownfield sites in the Autumn Budget, and this seems unlikely to be a coincidence considering the government’s recent retreat over its hugely unpopular proposed planning reforms. One of Michael Gove’s first acts when he took over as housing secretary during the latest Cabinet reshuffle was to ice the ‘developers’ charter’ that would have made it easier to develop green-belt land. Clearly there’s a growing understanding in government of just how unpopular these policies would have been in Tory heartlands, and the chancellor’s talk of brownfield development and funding for urban parks is perhaps designed to distance Boris Johnson’s government from their previous proposals to ‘concrete the countryside’.
Funds to clear the courts backlog
There's an increase of £2.2 billion to courts, prisons and probation services, with specific mention of trying to clear the backlog in the courts.
Presumably this backlog will include the long queue of repossession proceedings, and this will be a welcome relief for landlords who've been stuck with non-paying tenants, sometimes for many months.
Universal Credit taper rate cut and National Living Wage increases
In the context of the current rent arrears crisis, it’s more important than ever that lower-earning tenants get a decent deal out of the Autumn Budget. Given the recent cut to Universal Credit, both tenants and landlords alike will have been awaiting any tweaks to benefit payments with some trepidation.
Universal Credit isn't just an all-or-nothing payment. Many low-paid workers use benefits to supplement the shortfall between their wages and their living expenses, and if they earn above a certain income threshold, their benefits are reduced. The rate at which benefits are withdrawn is called the 'taper rate'.
The Autumn Budget cut the taper rate by 8%, from 63% to 55%, meaning that people who work can keep more of their benefits.
In some ways this represents a degree of fiscal sleight of hand, since the recent £20 drop in Universal Credit (which was temporarily raised during the pandemic) has left the majority of claimants worse off overall. However, it's true that for some working people, the change to the taper rate will leave them better off. The Resolution Foundation has estimated that roughly 1.2 million households might find their finances improved.
Along the same lines, the chancellor has announced that in 2022 the National Living Wage will increase by 6.6% to £9.50 an hour. This too should help shore up the finances of the lowest-paid workers, leaving them less likely to find themselves in rent arrears.
