One to remember: The 2020 Budget

Craig McKinlay

March 31, 2020

Craig McKinlay Kensington Mortgages

Craig McKinlay is the new business director at Kensington Mortgages

We are living through unprecedented times and this year’s budget was certainly as a result not like others.

The ongoing situation surrounding the coronavirus means it’s very understandable why, on this occasion, housing reform did have to take a back foot while there are more immediate and pressing issues.

It’s clear though the government is still making sure it’s on the agenda, with the announcement of a £10.9bn increase in housing investment, a further £9.5bn in the Affordable Homes Programme and publishing ‘Planning for the Future’.

So, although our minds are likely distracted, we should try to carry on as best as we can and see how these announcements may shape our future housing market once the current crisis is over.

Building 300,000 homes a year by mid-2020s

Unless the government does something dramatic, hitting this number seems optimistic. Last year alone, we built only 170,000 – quoted as a proud ‘11 year high’.

We would need to see a significant ramp up in building activity and faster planning regulation if we are ever going to reach those numbers.

Encourage building upwards

The UK has one of the lowest housing densities in Europe, with our preference for semi-detached housing over flats compared to our European counterparts.

The establishment of new permitted development rights to extend residential bocks by two stories is therefore certainly a step in the right direction if this goes ahead this year.

An additional £400m investment in brownfield sites and the launch of a brownfield map also seems a sensible solution to build high rises on these sites and utilise vital space.

Investment in the Affordable Homes Programme

The £12.2bn allocation of grant funding to support the creation of affordable homes will be welcomed across the industry, especially when affordability may become more difficult for new builds in the immediate post Help to Buy months.

Although money is vital, it’s only a part of it. Attitudes and planning also need to be considered too – where’s the plan to get planning? Or as the government specifies, we have to wait later this year via the Planning White Paper.

Communities and councils also need a clear incentive to engage with the government to build more housing.

‘Not in my back yard’, or NIBYISM, is a significant and sensitive challenge for most councils trying to build across the UK and being able to do so.

Everyone supports the building of new homes, as long as it’s not near them. In times like these when we need to think about caring for the community, if we can change attitudes towards NIBYISM and think of the wider picture – then this could make a genuine impact towards our long-term housing.

The First Homes Scheme

Being sold with a discount of at least 30% – the First Homes scheme is, in effect, the government’s replacement for the Help to Buy.

Lowering the cost of buying a home by an average of £70,000, this is a welcomed initiative for eligible first-time buyers.

And it’s positive the discount is locked into the property and passed onto the next set of homeowners to ensure they can benefit too.2

However, how the scheme will work in the long-term remains to be seen, and we await further details from the government over the coming months. Firstly, it will again heavily depend on local authorities and developers, so incentives need to be in place to encourage building.

Other affordability issues also remain, such as strict stress testing before first-time buyers are accepted for a loan.

Ultimately a continuation scheme for HTB is needed, but there are still fundamental issues that need to be addressed on the supply and criteria side to mortgage lending.

A(nother) new scheme

Secondly, the introduction of a ‘new consumer friendly, fairer and more accessible’ national Shared Ownership scheme also remains to be seen how this will differ in style to the current version.

Adding a new scheme into the mix isn’t necessarily the best option, with brokers, lenders and developers alike having to re-assess and learn lending requirements.

The verdict

Ultimately, we are living through worrying and uncertain times. No one has a crystal ball and no one knows how long our new ‘normality’ will last – so while these are measures are interesting and beneficial on paper – it’s understandable why they may need to be put on hold for time being, while we seek to look after those who need help the most.

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