Chancellor Jeremy Hunt delivered his first Budget yesterday – but while there were big giveaways for parents and pension savers, there wasn’t much for property professionals to get their teeth into.
Despite supply lagging behind demand in the private rented sector, the 2023 Spring Budget did nothing to encourage investment. Taxes affecting the sector, like Stamp Duty Land Tax and Capital Gains Tax, were left untouched. There was no new money to help landlords upgrade their existing properties – despite the need to get rented homes to EPC C by 2025. Nor was there any announcement of more funding to enforce existing standards in the private rented sector.
Tenants in the private rented sector also got no direct help, such as an uplift to Local Housing Allowance rates, although the wider cost-of-living measures may help them to afford rent.
There was also very little in the Budget to address the wider shortage of housing – estimated by the Centre for Cities think tank last month as a shortfall of 4 million homes.
What the industry wanted
Many housing sector professionals will be disappointed by this Budget. In the lead-up, industry bodies including the Royal Institution of Chartered Surveyors and the British Property Federation called for new grants and tax breaks to help landlords improve the EPC ratings of their properties.
Meanwhile, Propertymark called for the government to bring back mortgage interest relief for landlords, allowing them to deduct interest payments from their rental income again when calculating their tax bills. The loss of the tax relief under Section 24 has been pointed to as a key reason for landlords leaving the sector. The professional body also called on politicians to peg Local Housing Allowance to median local rents, making it easier for claimants to afford to rent privately.
In turn, PayProp asked the government to fund the courts to speed up eviction proceedings, and also give councils more cash to beef up their enforcement of housing standards – giving the vast majority of good landlords, agents and tenants more confidence in the private rented sector. None of these suggestions made it into the Budget.
While property professionals welcomed this Budget’s sunnier-than-expected economic forecasts, they have also called the lack of new investment or reforms a “missed opportunity”.
On the other hand, the lack of big announcements might put some minds at ease. According to some industry commentators, no news is good news for the private rented sector. Complex rental regulations and tax surcharges are already putting off small landlords.
What they might still get
While not a direct benefit for the private rented sector, other measures in the Budget could have knock-on effects. If the Chancellor’s plans to get people back into work are successful, families could find it easier to pay rent. The three-month extension of the Energy Price Guarantee will also help renters to manage their finances.
The Office for Budget Responsibility forecasts that inflation will fall to 2.9% by the end of the year and that the UK will avoid recession, further restoring confidence.
Twelve new Investment Zones across England, Wales, Scotland and Northern Ireland will also be given more power to set up their Affordable Housing Programmes according to local needs – powers previously only given in London. If this results in more investment, it could help to reduce the supply shortage in the housing market, although the biggest impact would likely be on the social housing sector.
On the other hand, the top rate of corporation tax (paid by businesses with taxable profits of at least £250,000) has risen to 25% as expected, increasing the tax burden on some agencies and larger portfolio landlords. However, the overhauled Annual Investment Allowance will let them deduct all spending on IT equipment from their taxable profits up to a cap of £1 million.
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