Housing’s Autumn Statement and a View from Scotland
by Ken Gibb
I have just read Alex Marsh’s excellent post on the housing elements of the Autumn Statement/Spending Review. The key things that I agree with that are worth repeating are, first, that this is a full-blooded return to tenure-based rather than an (all) housing strategy (I particularly liked the proposed renaming of shared ownership as mostly renting). Second, this does indeed look like a serious threat to general needs social housing development in England. Third, as Alex says – there is absolutely no guarantee that the measures proposed and the money directed to home ownership/shared ownership initiatives will actually deliver the scale of change required. That depends on the market and levels of activity. At the moment these claims for housing supply are just words that need the market and local planning functions to accommodate them if they are to approach reality. They did not in previous rounds of housing supply claims made by the Coalition Government. Fourth, it is certainly not all bad – the planning reforms outlined in the statement may in the longer term actually be quite positive but we need to see the details.
A few other points that are housing-related. First, the decision to squeeze social sector housing benefit further by capping it at Local Housing Allowance levels will have most impact in the short run on single people and will matter more regionally where LHA rates are closer to social rents. But there is also a longer term question that arises – is this the first stage of the process of unifying Housing Benefit for all tenants across a common allowance like structure? More broadly, the reversal on tax credits neither reduces the long term impact of their absorption into Universal Credit nor does it resolve the issue of how the Government makes it additional £12 billion in welfare savings. This has just been pushed off stage for a wee while.
Second, I am a bit more sanguine about the stamp duty changes proposed by the Chancellor on buy to let landlords (less so for second homes) for several reasons. The first is that we are told that this will help fund affordable housing and it is not clear to what extent that this hypothecation will be the source of funds rather than a general contributor to the pot. I raise this because for one thing both in rUK and in Scotland the new tax rates have delivered less than projected revenue – a timely reminder of the standard risks of hypothecation. It is all very well to target a tax revenue source but it is another thing to guarantee that it will raise the required funds.
A related point is that SDLT or LBTT (the Scottish acronym) is simply not a very clever tax in that as a transactions tax, it inhibits mobility (as the Mirrlees Review makes clear and far better to raise revenue from property with an annual tax. Instead Osborne is ratcheting up the transactions tax with one presumes more market consequences in the private rented sector. It is a little odd that private renting has been taking such a fiscal buffeting with the reduction in tax relief on interest on borrowing at higher rates of tax and now this further tax. From a wider housing system point of view I don’t think we should deterring investment in this non-neutral but populist way. Intervention should be more about regulation. Interestingly in Scotland (where Osborne’s BTL/second homes stamp duty changes do not apply), we are about to legislate to support tenants and longer tenancies (but also introducing second generation local rent increase limitations in areas designated to be high pressure).
Meanwhile in Scotland we wait to see how this translates into the draft Scottish budget in December when we will also hear for the first time what the proposed Scottish Rate of Income Tax will be for 2016-17. The SR headlines thus far are that capital spend will increase by 14% in real terms but revenue funding will fall in real terms by 5.7%. John Swinney has also been helped by the ONS’ decision that their non-distributing model of funding capital infrastructure (Hub) projects through the Scottish Futures Trust has not been reclassified into the public sector.
Unlike rUK, we have a Parliamentary election in May – so there is both a lot of party political noise obscuring policy debate but at the same time there is an opportunity to influence platforms and engage debate. Two examples of this are the SNP’s pledge that, if re-elected, they will up their affordable housing supply programme from 6,000 units per year to 10,000 units (in response to the new national needs figure of 12,000 per annum). Secondly, we anticipate the publication of the Commission on Local Tax Reform’s final report in the coming weeks. It is supposed to provide options to help the political parties to put forward their own local tax reform proposals for the election.