Real Estate Blog: The mini-budget with a big impact: The effect of the latest Government measures on the social housing sector in the midst of austerity
The notion that “everyone has the right to safe, decent, affordable housing” has been recognised as a human right since 1948, but it is hard to believe that the UK still lacks genuinely affordable homes that are energy efficient, truly affordable to run, and easy to maintain.
For me personally, this is one of the main reasons I chose a legal career in social housing and development and why I have recently moved to Freeths to join up with their amazing Social Housing department. Having seen first-hand the hardships faced by those most in need, I wanted to become part of the solution to the housing crisis by using my legal experience, commercial awareness and background in property to help deliver housing to those that need it most.
The Government’s “mini-budget” was released on 23 September, and its impact seems to have been anything but small. Since the announcement, there has been widespread criticism with many worried about state benefits being cut further and the impending October energy price rises. It is estimated that by Spring 2023, more than 60% of households will go into fuel poverty as the UK continues its downward economic turn.
So what effect might this have on the social housing and development sector?
We are currently seeing some stark economic forecasts – the value of the pound has plummeted in recent weeks and businesses and consumers will continue to face exceptionally high costs as inflation looks set to spiral upwards in late 2022 / early 2023. Goldman Sachs are predicting that inflation could even peak above 22% in 2023. Inflation of around 23% has been typical for construction products in recent months and this is set to rise even further as we move into next year.
For housing associations and registered providers, this means navigating even more cost pressures associated with the construction of affordable homes. As housing associations and registered providers become more ‘resident-orientated’ with their affordable schemes, this can in turn increase labour and materials costs where green initiatives and specific adaptations for disabled or elderly tenants might be a requirement.
The knock-on effect to first-time buyers and those in need of affordable homes could also be devastating should any of these additional construction costs render certain sites unsustainable for affordable development. As the UK continues its downward economic turn it is estimated that by Spring 2023 more than 60% of households will go into fuel poverty (where the cost of keeping their home warm pushes their residual income below the poverty threshold). This quite simply defeats the object of what the social housing sector and its registered providers are trying to achieve in creating homes for all.
Has there been any benefit to the social housing sector as a result of the mini budget?
In short, yes. We have all heard the news of a permanent change in SDLT thresholds which I am sure will come as great relief to those looking to take their first step onto the property ladder. It is hoped that this tax cut will continue to create an appetite for housing stock as we navigate these uncertain waters through the current recession.
The mini-budget also announced “The Growth Plan” – a major package of over 30 measures to tackle high energy bills, drive down inflation and cut taxes to drive growth and development.
It is understood that the housing sector will benefit from new ‘Investment Zones” across a number of localities. Each Investment Zone will offer targeted and time-limited tax cuts for businesses, backing them to increase productivity and create new jobs. This could encourage investment in new shopping centres, restaurants, apartments and offices – creating thriving new communities.
These areas will also benefit from further liberalised planning rules to release more land for housing and commercial development, and reforms to increase the speed of delivering development. Time-consuming negotiations between councils and developers for each project over affordable housing contributions will be scrapped. This will be replaced with a set percentage of affordable homes, whilst ensuring communities get the infrastructure they want and need.
We have of course seen similar proposals being made by Government in the past, with varying results. Here’s hoping that The Growth Plan shakes up the housing sector and its objectives really do make a difference this time.
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