The Chancellor has the opportunity to act on Labour’s homeownership goals, not just talk about them, and she must seize it
Wednesday marks the first budget of the new Government, one that has talked the talk, and must now walk the walk on its homeownership goals.
Throughout the election and since taking office, we’ve heard the Government talk of its aims for 70% of homes being owner occupied, and indeed of its goals to ‘get Britain building again’.
While this is to be applauded, the approaching budget has been full of rumours around changes that would make homeownership more challenging. Rachel Reeves finally has the opportunity to act, and she could seize it by implementing three changes around stamp duty.
That tax has been in the spotlight for some time now, ever since the previous occupier of No.11 Downing Street temporarily raised the threshold for first time buyers to £450,000. In my opinion, focusing on first time buyers (FTB), downsizing, and incentivising energy efficiency holds the key.
Firstly, with this temporary relief set to expire in March 2025, there is no better way for the Chancellor to fully show her and the Government’s support towards prospective homeowners than to make it permanent.
FTBs have suffered from continuous change for a long time, and cutting this exemption would send the wrong message. After the 2022 mini budget, transactions fell by 30% and remain well beneath their longer-term average.
At a point in time given higher mortgage rates and tighter affordability, any extra strain on first time buyers could end up being the straw that broke the camel’s back.
During a period of extremely slow and fragile recovery, change is unwelcome and potentially damaging, and I sincerely hope that the Government is serious about their goals for homeownership and keep this extension in place.
Secondly, encouraging downsizers and boosting family home supply would be a wise step. For many, the first step is tricky, but the second step - moving from a two-bed to a four-bed, for example - can be even tougher.
A lack of supply is one of the biggest hurdles to overcome, and removing stamp duty from those downsizing could open up a whole host of family homes that had previously been underoccupied. Although more homes still need to be built, the Government could tackle a lot of supply-side limitation in one fell sweep.
Recently, we at Mortgage Advice Bureau led a group of other lenders and brokers in writing to the Chancellor to express our concerns at the pace of progress towards decarbonisation of the UK’s housing stock.
Despite the previous Government setting a goal to ensure that most homes achieve an Energy Performance Certificate (EPC) rating of C or above by 2035, 60% of the nation’s housing stock remains below this standard.
Some 16 million properties in England and Wales will require retrofitting to meet this EPC benchmark. This undertaking is crucial if the UK is to fulfil its obligations under the Paris Agreement.
Direct emissions from buildings have exceeded 85 MtCO₂e, with a significant proportion attributed to the burning of fossil fuels for heating. Buildings are also responsible for nearly 60% of the UK’s electricity consumption. Any meaningful reduction in national emissions must include a robust strategy to decarbonise the buildings sector.
Moreover, our recent research showed 61% of prospective buyers said they would be more likely to make an offer on a property with a higher (above C) EPC. A reform to Stamp Duty to encourage retrofitting would not only help buyers, but also drastically improve the UK’s housing stock and help the Government to meet its obligations under the Paris Agreement. In other words: a win, win, win.
Whatever happens in the budget, we’re hoping for more treat than trick. However, the Government has the chance to act and not just talk. The housing market needs innovation and support, and doing so could result in a multiplier effect for the UK economy.
Danny Belton is head of lending, Mortgage Advice Bureau:
