Skip to content

Budget expected to provide long awaited housebuilding stimulus

Alistair Darling is expected to announce a consultative initiative whereby the Government will seek expressions of interest from financial institutions interested in supporting the building of thousands of new homes to rent and so revive the moribund housebuilding industry.

Proposals are expected to be invited from pension funds and insurance companies, with the main concession likely to be a guaranteed 8% gross yield, for a fixed period, for delivering and managing high-quality homes for people to rent.

It is understood the initiative is in direct response to the slump in housebuilding and the thousands of jobs that have been lost in the construction industry since the downturn began.

Commenting on the plans, Andrew Stanford, head of residential professional at Cluttons said, "The ability to create a sizeable and successful professional rented build-to-let sector may have come a step closer.  However, as other government initiatives to stimulate the supply of housing have failed to produce anywhere near the number of properties that are needed, the government must listen closely to those in the industry that know what it will take to attract institutional funds. Otherwise the initiative is doomed to fail."

According to Royal Institution of Chartered Surveyors, the level of housebuilding in England in 2008 was only 110,000 units, lower than in the recession of the early nineties and this is set to worsen throughout 2009, with construction expected to begin on fewer than 80,000 homes.

One of Gordon Brown's first pledges when he became Prime Minister was to build three million homes in England by 2020 with a target of 240,000 new homes per annum by 2016. 

Other possible ways to stimulate the housing sector, and that maybe announced in the Budget, could be the lowering of VAT on home maintenance and repairs. European Finance Ministers recently voted to allow EU Member States to lower VAT to 5 per cent on home maintenance and repairs and this could be adopted by the Chancellor in two weeks time.  Such a move would benefit many small building firms struggling in the downturn and enable Councils to bring back into use many empty properties.

There are currently approximately 300,000 privately-owned homes in England that have been empty for six months or more, in addition to nearly 80,000 empty local council and housing association dwellings.