In Phillip Hammond’s highly anticipated first Autumn Statement, the new chancellor outlined some key changes for the property sector, some not as welcome as others.
Industry experts had been appealing to the government to review the mortgage tax relief and Stamp Duty rules to better attract investors into the private rented sector (PRS) – investors needed due to the ever increasing demand for quality rental accommodation. However, these requests were ignored, and more financial uncertainty put in landlords as agent fees were banned instead.
Ban on Letting Agent Fees
The biggest shock to the PRS in the Autumn Statement was the Chancellor’s ban on fees for tenants. Whilst it has been assumed that this will apply to England only, Wales must be prepared for this to be brought in as UK-wide law, and/or for the Welsh Government to follow the example in due course.
While tenants will no doubt be pleased, the industry is less so. David Cox, Managing Director of the Association of Residential Lettings Agents (ARLA) said the decision was just a ‘crowd pleaser’.
“If fees are banned, the costs will be passed onto landlords, who will need to recoup them elsewhere, invariably through higher rents. So, this will end up most hurting the very people the Government intends on helping.”
He said the average ARLA lettings agency fee is £202 per tenant, and that between 14 and 17 hours’ work goes into compiling tenancy paperwork.
Shelter have long been campaigning for landlords to absorb this cost, but with all the other escalating tax costs for landlords, will they be able to afford to? The common theory is that rents will rise to accommodate the extra cost, so in the long term tenants will lose out as they pay more over a longer period of time.
A consultation is set to start in the new year with the ban likely to come into force sometime in 2018. Until more information is released regarding the details of how the ban will be work and the likely outcomes of it, it will remain a grey area.
The other big news in the Autumn Statement was the announcement that £1.4 billion will be spent on improving the levels of affordable housing stock, with 40,000 new homes coming into the market in the space of just 12 months. A further £2.3 billion is to be spent on a new Housing Infrastructure Fund to support up the building of up to 100,000 new homes in areas of ‘high demand’. This is all in additional to the previously announced £4.7 billion put towards the project, and it is believed that this additional funding should help the Government achieve its target of one million new-build homes by 2020.
Looking more long term, the Government wants to take a look at the areas deemed ‘high demand’ across the UK, and make changes to plans for infrastructure that would see these places targeted with more funding.
The Statement also addressed first time buyers. Hammond pledged to continue support for the Help to Buy ISA, which launched this time last year, and the equity loan element of Help to Buy (the mortgage guarantee element will be pulled, as planned, at the end of 2016).
Critics have pointed out that the Government is still focusing on home ownership rather than looking at the market trends and acknowledging the increase in the demand for quality rental accommodation. Details were left out as to how building 40,000 homes in such a short space of time would be achieved, nor were we given any indication of what the long term impact might be on house prices.
Carl Dyer, Head of Planning at law firm Irwin Mitchell, Middlesbrough, warned that at the current rate of construction, the Government will be at least 300,000 homes short. He said that, even if today’s cash injection delivered the promised total of 140,000 new homes, it would still not bridge the shortfall.