Budget 2021: the key takeaways for housing

Cladding

The Affordable Homes Programme was not the only housing announcement recycled by Mr Sunak in his speech.

We were told once again yesterday that the government would be implementing a new tax on developers’ profits as part of their payback for the building safety crisis that is affecting hundreds of thousands of leaseholders across the country.

This is not the first time we have heard the idea of a developer tax being launched. It was first announced last year and a consultation on it has already been published.

The government has said it expects to recoup around £2bn over the next decade through the new levy.

While a large sum of money, it will still be a drop in the ocean of the £15bn the Housing, Communities and Local Government Select Committee estimates will be needed to fix the country’s cladding issues.

Included in the Budget documents is more information of how exactly the tax would work, with developers who earn over £25m in profits having to pay 4% of every pound secured over that figure.

It is expected that the tax will impact 30 of the country’s biggest developers. Research by Sirius Property Finance has assessed how some of the biggest house builders could be hit, with Persimmon having to pay £40m on its profits over £1bn. Barratt would pay £35m and Taylor Wimpey £33m.

Some of the house builders have expressed their disapproval of the tax, with the Home Builders Federation stating that the cumulative impact of taxes on the sector could “threaten site viability and site investment”.

On the other end of the scale, leaseholders believe that the tax does not go far enough to punish those they believe are partly responsible for the building safety crisis they find themselves in.

The End Our Cladding Scandal campaign, which represents affected leaseholders, called the move a “slap on the wrist” for developers and highlighted that the country’s seven biggest builders recorded profits of more than £15bn since the Grenfell Tower tragedy and that 10 executives of these firms have been personally “rewarded” an astonishing £708m.

Universal Credit

Viewers had to wait up until the very last moments of the chancellor’s speech for arguably the most important new policy move for the housing sector.

In his final announcement, Mr Sunak revealed that he would be cutting the Universal Credit taper rate by 8%. The taper rate is one where Universal Credit is reduced once a claimant starts to earn over a certain amount.

The drop from 63% to 55% means the level of Universal Credit a claimant can receive will be cut by 55p rather than 63p in every £1 over the work allowance.

As part of the government’s drive to attempt to make it more attractive to be in work, it also intends to increase work allowances by £500 for households with children or those with a member with limited capability for work. Both changes, which amount to a £2bn tax cut, will come into effect by 1 December at the latest.

Though the move was broadly welcomed, some housing figures have pointed that many will not be advantaged by this. There are currently around 2.5 million households currently on Universal Credit not currently in work.

It is important to point out that many people who are unemployed are out of work for a myriad of reasons – such as living with a long-term disability or being full-time carers.

This comes after claimants are still coming to terms with the government removing the £20-a-week uplift in Universal Credit, which equated to £1,040 per year. Introduced during the pandemic, the uplift was described as a “lifeline” for millions of low-income families, and its removal equates to about £6bn cut.

So for some claimaints that benefit from the tapering, the money gained may not make up the loss.

Local Housing Allowance

Buried deep in the bottom of the Budget documents is an important nugget of information for renters. After making the bold decision to once again align Local Housing Allowance to cover the cheapest third of private rents during the pandemic, in April the government decided to refreeze the rate for 2021/22.

While the term used is ‘freeze’, in reality it is a drop in real terms as inflation and the cost of renting grows from year to year. So, what about next year?

Well, it would seem as if the freeze is likely to stay in place for another 12 months at least. The government has said that its forecast is “defaulting Local Housing Allowance rates for 2022/23 to the level of elevated cash rates agreed for 2020/21”.

The Department for Work and Pensions has told Inside Housing that this will be looked at in an uprating review in November, but if it has not been committed in the Budget, it could be the case that the freeze will remain in place next year.

This is significant for those living in privately rented accommodation and relying on housing benefit. At a time when the cost of living is on the creep due to issues, such as increasing energy bills, spending more on housing will leave even less money in the pockets of those already struggling.

Homelessness

In his speech, Mr Sunak promised to spend “£640m a year for rough sleeping and homelessness”.

The Budget documents clarify exactly what he means by this. After an analysis, Inside Housing has discovered that the government plans to spend £639m in resource funding – spending that relates to day-to-day operations – “by 2024/25”. Over the total three-year Spending Review period, the government will spend £1.9bn in resource funding, which equates to an average of £633m per year.

On top of that, the government will spend £109m in capital investment – which is spent on investments that add to the public sector’s assets such as housing – over the three-year period. This equates to an average of £36.3m per year, bringing total average spend to £669m.

As Mr Sunak pointed out in his speech, a £639m-per-year resource investment is 85% higher than pre-pandemic spending in 2019. However, the total spending is still lower than the £750m that the government said it has spent on homelessness and rough sleeping this year.

The end of this Spending Review period coincides with the government’s target to end rough sleeping, so some will be questioning the logic of cutting spending in this area considering how far the government still has to go to make this a reality.

The Budget documents provide some detail of what this money will be spent on, including continued funding for the Rough Sleeping Initiative, the delivery of homes under the Rough Sleeping Accommodation Programme, and a promise of £200m a year by 2024/25 to “address the drivers of rough sleeping”. This will be tackled by spending money on things such as “transitional accommodation for prison leavers” and “treatment for substance misuse”.

However, the Budget is silent on continued funding for Housing First. As it stands, funding for the government’s three pilot programmes is set to finish at the end of this financial year and those working in the pilots have warned that more than 1,000 people are at risk of returning to the streets if this funding is not continued.

Levelling Up Fund

While not a purely housing-based announcement, the chancellor also revealed that more than 100 projects across the UK would be recipients of the first £1.7bn tranche of a £4.8bn Levelling Up Fund.

With the department in charge of housing now focused on levelling up too, you would think the two would go hand in hand.

While unveiling the fund 11 months ago as part of last year’s one-year Spending Review, Mr Sunak described the fund as taking “a new holistic place-based approach to the needs of local areas”. And it has been fraught with controversy ever since, with some accusing the government of channelling funds towards Conservative-held areas.

Among the 105 projects being backed, two in “the great city of Stoke-on-Trent”, as Mr Sunak put it yesterday, include the creation of 450 new homes. Luton will also see 300 new homes being built via the Levelling Up Fund, Budget and Spending Review background documents reveal.