What the 2021 Budget means for affordable housing providers

Posted: 8th March 2021 Cassidy Curls, Consultant

The budget’s message to the housing sector – level up and keep moving (to new homes).

The budget contains little explicit new policy or funding for the social housing sector, however several announcements signal that government expects the housing sector to play a key role in efforts to “build back better” after the COVID-19 pandemic.

New policy announcements include a £4.8bn “Levelling Up” fund and initiative emphasising the role of investment into high value infrastructure across the UK which includes an extra £1 billion for the Towns Fund, £456m which will go to Northern towns. In the government’s “Build Back Better: our plan for growth” policy paper released with the budget, infrastructure is credited for its power to release housing. The paper sets out government’s desire to regenerate struggling towns and to see a “globally competitive” town in each region of the UK. To do so, government commits to invest in net zero carbon, broadband, roads, rail and cities and to crowd in private sector finance through a new UK Infrastructure Bank.

Other announcements include extension of some income replacement benefits put in place during the pandemic. While the extension of the Coronavirus Job Retention Scheme (CJRS or “furlough scheme”) and the £20 per week Universal Credit (UC) uplift to September 2021 and the £500 payment to eligible Working Tax Credit recipients were welcomed by housing providers as key mechanisms to support households to pay their bills and to reduce social housing arrears, many call into question what will happen after September when unemployment is expected to rise and the £20 per week UC uplift abruptly ends. While unemployment benefits may support those made jobless after the furlough scheme ends, another concern is a rise of underemployment – reduced hours and more part-time work, especially for those workers in the gig economy.

Government also reaffirmed a commitment to the March 2020 increase in Local Housing Allowance (LHA) rates for UC and Housing Benefit claimants so that it covers the 30th percentile of local rents.

But Government’s key message to the housing sector is not about the role of social and affordable housing but about maintaining a strong housing market by supporting home purchase.

The two key policies announced include:

  • An extension to the stamp duty cut: the nil-rate band on sales of up to £500k will continue to 30 June 2021 and will drop to sales of up to £250k from July to 30 September 2021. It will return to the original £125k band from October.
  • A new 95% mortgage guarantee scheme: Launching in April and available for new mortgages until 2022, this will be a guarantee to lenders across the UK who offer mortgages to first time buyers and existing homeowners with as low as a 5% deposit on homes with a value of up to £600,000. Under the scheme, buyers will have the opportunity to fix their initial mortgage rate for at least five years should they wish to. While helping buyers access homes in the private market, there is a risk that because this policy reduces the “deposit hurdle”, it could slightly reduce demand for shared ownership properties.

Supporting home movers, from 15 March 2021 government will also allow movers to add the legal costs associated with transferring their claim to a new property to the value of their loan.

To further promote new housing delivery, the Ministry of Housing, Communities and Local Government (MHCLG) will establish a Modern Methods of Construction (MMC) Taskforce, backed by £10 million of seed funding to accelerate the delivery of MMC homes in the UK.

Despite these, we do see in the budget the impacts of a winding down of Help to Buy, a programme once described as offering the “biggest hand to housebuilders”. For example, the MHCLG Housing and Communities capital budget in 2021-22 is lower than in 2020-21 due to “transitions in programmes” including “the transition from the current Help to Buy scheme to the new 2021-2023 scheme targeted at first time buyers only”.

Care and support providers will see little policy change apart from:

  • New funding for domestic abuse schemes: Domestic abuse schemes in England and Wales will receive an extra £19m from the government over the next two years. Some £4m of the new funding will help to pilot a network of so-called “respite rooms” to give specialist support to vulnerable homeless women in England in 2022-23.
  • Changes to how the shared accommodation rate (SAR) applies to care leavers: Care leavers up to the age of 25 and those under the age of 25 who have spent at least three months in a homeless hostel will be exempt from the shared accommodation rate (SAR) in Universal Credit and Housing Benefit from June 2021 (previously due to come into effect in October 2023). This policy should help care leavers to move on from temporary accommodation.

Overall, it is clear government sees housing providers playing a role in economic growth by creating more supply in areas which require larger scale interventions – perhaps through new town development but also through regeneration efforts, in particular in the North.

Even clearer is that government knows a strong housing market, and strong home prices, will be a key gauge for overall post-COVID-19 economic outlook.

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