Budget 2017: Will the Chancellor have a trick up his sleeve for buy-to-let?

John Goodall

March 6, 2017

John Goodall is chief executive of Landbay

On Wednesday 8 March, Philip Hammond will take centre stage in the House of Commons to deliver his first and last Spring Budget before the Autumn Statement becomes the calendar’s main fiscal policy event. The last few years have been something of a policy rollercoaster for the buy-to-let market, so we could be forgiven for expecting more of the same on Budget day. Coming so soon after the government’s flagship Housing White Paper, we’re unlikely to see any big leaps forward for housing reform, but he could have a few tricks up his sleeve.

For all the hoopla around the white paper, many commentators felt that it lacked real bite, that it didn’t spell out exactly how the government planned to get much-needed spades in the ground sooner rather than later. Nevertheless, one promising theme did shine through, an acknowledgement of the importance of the private rental sector to the UK housing market, and an affirmation that a professionalised buy-to-let sector can only be a good thing for Generation Rent.

Over the last few years, the government has been pulling all manner of tax and regulatory levers in an attempt to improve standards for renters. However, while this has been a step in the right direction and we now have a more professional and sustainable buy-to-let sector than we did five years ago, the proportion of take home pay tenants are currently spending on rent continues to rise. The average renter now sends roughly half their take home pay to the landlord each month.

A step change in the white paper, to encourage more institutional investment in large scale developments specifically designed to rent rather than buy, will help to control rental growth and improve living standards for renters. But as ever, this can only work if the proposals made in the white paper, especially those around relaxed planning control, actually translate into more properties being built. The Spring Budget will be a chance for the Chancellor to reassure the industry on these plans, and I hope make clear exactly how much money will be committed from the public purse, and where it will be spent.

Large scale PRS schemes are already on the way in many of the areas facing the fastest pace of rental growth. According to the latest Landbay Rental Index, 20 areas in the UK have seen the average rent paid for a residential property grow in excess of 3% over the last year. Areas such as Luton, Northamptonshire and Peterborough, where rental growth is reaching particularly unsustainable levels, should be the prioritised focus for the government, developers and landlords.

For developers, who may find uncomfortable some of the financial pressures applied the market in recent years, an exemption of the 3% stamp duty surcharge would be a definite sign of the government’s commitment to these overstretched housebuilders, so we’d welcome any such changes to accommodate construction that is adding to housing stock. Rumours of increasing the stamp duty threshold from its base at £125,000 would also help those struggling to get their foot on the housing ladder. This tax has proved to be a major obstacle for many aspiring homeowners, and hasn’t tracked house price inflation, so its relaxation could be pivotal in creating some real change in ownership levels.

Recent figures show housing transaction volumes are falling and are predicted to continue to decline over the coming months, so it’s important due attention is paid to monitoring the health of the property market as a whole, given the vital role it plays in the UK economy.

As we look ahead to the Budget, we would like to see the government follow through on the positive noises we have heard thus far. There are currently over four million tenants in the private rented sector, but affordability is becoming an issue across many parts of the UK. Whether tenants are renting as a stepping stone on the way to home ownership or, increasingly, renting for life, they rely on the buy-to-let market to ensure rental growth doesn’t dampen their purchasing power.

One major hurdle for aspiring homeowners is finding somewhere rewarding to grow their deposit. Initiatives such as Help to Buy, and the new Lifetime ISA and Innovative Finance ISA are giving first-time buyers a leg up, but as the range of ISA options expands, it would also be good to see the limits across all ISAs rise from £20,000, providing aspiring homeowners with more options and flexibility as they ready themselves to buy.

All in all, we’re not expecting fireworks for the sector on Budget day, but the government appears to now appreciate the part it plays, which could be hint of things to come.

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