Spring Budget – did it go far enough?

Chancellor Rishi Sunak revealed all the details yesterday…

Spring Budget – did it go far enough?

The 2022 Spring Budget was revealed on March 23 by Chancellor Rishi Sunak, who announced a £1 billion household support fund for local councils to assist vulnerable people.

This means that low-income families will receive extra financial support, which is expected to be in the form of vouchers, in order to navigate the cost-of-living crisis.

Among other reforms, homeowners will now pay 0% VAT on home insulation, solar panels, heat pumps and other energy saving materials. In addition, Sunak revealed the National Insurance threshold is set to increase to £12,570 from July 2022.

Read more: Rishi Sunak Spring statement – what were the repercussions for the housing industry?

However, did it go far enough and how did it compare to recent years?

Reflecting back, Roxana Mohammadian-Molina, chief strategy officer at Blend Network, outlined that many in the property market believe the Chancellor’s stamp duty cut was the main factor fuelling UK house prices over the past 12 months. “However, what last year’s budget failed to do was tackle the alarmingly tight supply side of the housing market equation,” she added.

Although Mohammadian-Molina noted that with the government’s commitment to building 300,000 new homes reiterated in a recently published report presented to the House of Lords’ Built Environment Committee, she was looking forward to seeing concrete actions to address the complex challenges of a housing shortage.

“Despite one of the most pressing housing crises in decades and the shortage of supply, housebuilding starts and completions both have continued their decline in recent months,” said Mohammadian-Molina.

According to data by the Department for Levelling Up, Housing and Communities (DLHC), the number of homes completed in England in Q4 2021 was down by 11% compared to Q4 2020. The data also shows a decline in the number of dwellings where work started in Q4 last year - 41,600 between October and December, 3% down from Q3 2021 and 3% down from Q4 2020.

“Last year’s Spring Budget left us, and arguable other participants in the housing market, fairly disappointed as the Chancellor failed to provide any visible boost to the housing supply,” Mohammadian-Molina revealed.

Back then, Mohammadian-Molina said Blend Network urged the Chancellor to consider measures that, alongside tackling the demand side of the market, also helped ease the supply side of the equation.

“We warned that the failure to do so would risk further deepening the affordability gap. Fast forward 12 months, we once again appeal to the Chancellor to support the national housebuilding effort,” she added.

Mohammadian-Molina went on to say that, from her side, she was hoping for some creative ideas from the Chancellor. In particular, she was hoping for the Chancellor to bring specialist lenders into the fold to help unlock much-needed funding to SME property developers.

A survey of SME housebuilders conducted last year by the Home Builders Federation found that 18% of respondents in the north of England and 24% of respondents in the Midlands saw development finance as a major barrier to housebuilding.

Second, she was hoping the Chancellor would take urgent action to support property developers, particularly those in the SME space, deeply impacted by the rising cost of energy and construction material.

According to the Home Builders Federation, material shortages and other cost pressures have hit SME developers, who do not have the necessary cashflow to cushion the effects of higher prices and who are also unable to buy materials in bulk, hard. Data collected by the Royal Institute of Chartered Surveyors (RICS) shows that timber, steel sections and steel for reinforcement rose annually by 79.4%, 60.4% and 80% respectively in September. In addition, imported sawn or planed wood increased by 73.3% and particle board by 65.4%.

Thirdly, Mohammadian-Molina said she would have liked the Chancellor to consider different tax relief schemes for SME developers who are building schemes that included affordable and sustainable homes.