Budget measures supporting the housing market left commentators disappointed, many of whom expected more. But the extension of the stamp duty holiday and a programme to build new homes on vacant development land provided some good news.
Stamp duty
The stamp duty holiday that has been in place since September last year will continue until the end of 2009. It was to have expired in September this year, but remains limited to transactions under the value of £175,000. Chancellor Alistair Darling says that 60% of property sales fall under this limit.
By making clear that there is no intention to continue the stamp duty holiday beyond the end of the calendar year, the Government is putting pressure on buyers and sellers to conduct transactions during 2009. This is intended to create a short-term stimulus, but risks damaging any recovery in the residential property market beyond the end of the year.
New home building
Widespread speculation in advance of the Budget had discussed a £1bn package of measures to kick-start house building. This left the Chancellor's actual announcement of support seem rather disappointing. Not least, proposals for a public private partnership for a major programme of new social housing that had been predicted in the press appear to have been dropped at the last minute.
Instead, the Chancellor unveiled a £600m scheme for new house building on sites held in land banks, where development had halted. It is intended that the scheme will lead to the construction of about 10,000 new homes in England over the next two years. Additional finance will be allocated to the devolved governments in Scotland, Wales and Northern Ireland to enable them to carry out similar schemes, if they wish to do so.
However, the social house build programme is small scale compared to the Government's aspiration of building an extra 240,000 homes each year by 2014 to meet demand. Achieving that objective is now looking very unlikely, increasing pressure on the housing market in the future.
Council housing
As expected, councils are to be encouraged to build new homes for the first time in many years. Some £100m will be available to local authorities for new-build council housing. All the new properties will comply with high standards of energy efficiency.
Existing tenants of private and other landlords will have their Local Housing Allowance - a benefit to cover the cost of rental - reformed. Those receiving LHA will no longer keep any surplus above the actual rent paid, thereby creating incentives both for tenants to negotiate the lowest possible rent and to move away from welfare into work.
The Government is also allocating an additional £80m towards the Homebuy Direct shared equity housing scheme - through which households and social landlords jointly own a home, with the household gradually increasing their equity stake in the property. The Chancellor also announced that £50m will be spent improving the quality of Ministry of Defence housing stock. Similar improvement schemes to council housing and other social housing rented stock have been carried out in recent years.
Help for mortgage borrowers
Other Budget measures will assist mortgage borrowers in difficulty. Eligibility criteria under the Mortgage Rescue Scheme are being relaxed, so that the increasing numbers of borrowers in negative equity can take advantage of it. Some £20m will be made available through local authorities to households at risk of becoming homeless through repossession, who will now be able to borrow from councils to maintain repayments in the short-term.
It has been confirmed that the Government will proceed with guarantees for the securisation of mortgage loans, to help banks and building societies obtain capital to free-up the availability of new lending.
But while there are a number of initiatives in the Budget, their impact is limited and have disappointed many housing professionals.
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- Budget 2009: What it means for you at ThisisMoney.co.uk
By making clear that there is no intention to continue the stamp duty holiday beyond the end of the calendar year, the Government is putting pressure on buyers and sellers to conduct transactions during 2009.
