Budget 2013: £800m boost for build to rent housing
Chancellor George Osborne has announced a fivefold increase in funding available for new build to rent housing development
Featured in a raft of measures to boost housebuilding, the announcement enlarges the government’s heavily oversubscribed build to rent loan fund from £200m to £1 billion.
Welcoming the announcement British Property Federation policy director Ian Fletcher said: ‘Working in partnership with Government the sector should deliver an exciting and quality array of homes for renters.’
A further £225 million has meanwhile been announced to fund 15,000 new affordable homes in England by 2015 alongside a £3.5 billion commitment to shared equity loans for first time buyers.
Worth 20 per cent of a new build home’s value, the shared equity loan will be interest free for the first five years and repaid when the property is sold. The maximum value of eligible homes will be 600,000 and there will be no cap on applicant’s incomes.
A further £12 billion will be invested in a new ‘Help to Buy’ scheme for existing homeowners seeking to purchase new build or old homes. Running for three years from 2014, the programme is expected to leverage £130 billion worth of mortgages for buyers with a deposit of between 5 per cent and 20 per cent.
Other policies to boost housing include increasing the maximum right to buy discount to £100,000 in London. The government will also reduce tenants’ qualifying period from five to three years and simplify the application process.
Ben Adam of Ben Adams Architects said: ‘The 20 per cent shared equity loan to be offered to home buyers will help the housing market at the bottom where help is most needed to improve the affordability of homes, and the ability of first time buyers to buy them. As it is a loan, it will only help those willing to take on enough debt to buy a house in the first place and will not lower house prices or improve supply.’
Jestico + Whiles director Heinz Richardson said: ‘Those of us involved in housing have always maintained that the problem is not one of supply or opportunity to supply but relates to the accessibility potential purchasers have to mortgages and more importantly the ability to repay the borrowing. Encouraging the institutions to stimulate the former is vital and tax breaks are necessary to ensure the latter.’
Glenigan economist Allan Wilen said: ‘The additional support unveiled for the housing market should provide a more immediate lift to the industry’s fortunes and to the UK economy.
‘The Help to Buy programme promises additional support for house purchasers that should boost housing market turnover and new house construction. In addition five-fold expansion of the Build to Rent programme to £1 billion should also help to drive new housing activity and draw in institutional investors into the housing sector.’
Neil Blake, head of UK and EMEA research at CBRE was however sceptical:’Despite additional promised funding, not nearly enough measures have been taken in this budget to get institutional investment into infrastructure and ensure the delivery of more residential stock. Initiatives of this type have been announced before but have stalled. If they were introduced they would provide a win-win policy for the government as it could secure funding for its infrastructure programme and boost demand in the economy at the same time, whilst institutions could get liability matching assets. Further action is
He added: ‘There is a similar opportunity in residential development. W’hat the economy needs is a new way of getting funds into residential development, not just ownership. Multi-family housing is leading the recovery in the USA but it is practically non-existent here. Similarly, institutional investment in housing is prevalent in a number of other European countries, particularly Germany. Getting institutional money into residential development would not only boost demand but it would help to address the UK’s chronic housing supply problem - which saw house building barely match demographic trends at the peak of the boom, never mind in these depressed times.’