Housing Headlines from Budget 2016

Article

17 March, 2016

The government's new 'sugar tax' on soft drinks may have stolen the limelight in this years' Budget, but it also contained a number of new housing measures that seek to bolster the commitments to affordable housing made in last years' Autumn Statement - developments that Forbes commented on at the time.

Last October the government pledged to deliver over 400,000 affordable housing starts by 2020-21 with a mixture of Starter Homes and Help to Buy Shared Ownership properties. The Budget seeks to provide for this through a number of new initiatives:

  1. the launch of a Starter Homes Land Fund Prospectus, which will provide local authorities with £1.2bn of funding to make existing brownfield sites fit for housing;
  2. the acceleration of affordable home building via the bringing forward of £250m of capital spending to the 2017-18 and 2018-19;
  3. a streamlined planning system designed to minimise the delays that can hinder the planning process and reduce the number of hoops developers have to jump through. Changes include encouraging local authorities to signal their development strategy from the outset and an increased use of permission in principle ("PiP") powers.
  4. releasing public sector land for house building purposes, including a specific partnership between the HCA and Network Rail to provide land surrounding railway stations.
  5. a commitment to legislation making it easier for local authorities to collaborate in the creation of new garden settlements - this appears to be very much in the 'ideas stage' only for now.

The reform of Stamp Duty Land Tax (SDLT) on non-residential property transactions is also notable. Although the reliefs Registered Providers can already claim on SDLT significantly limits the impact of the changes on them, in circumstances where the relief cannot be claimed the reforms will mean lower SDLT bills in almost every non-residential property transaction. This is becoming more relevant for RPs which are diversifying and would be applicable for example where a non RP, non-charitable subsidiary is buying non-residential land/buildings for development.

The SDLT bands on freehold transfers and lease premiums in respect of commercial property set out below are unchanged. However, whereas the current regime operated on an 'all in basis' whereby a £250,000 transaction would incur a 1% bill and a £250,000.01 transaction would incur a 3% bill, from 17 March only the portion of the transaction in the relevant band will be subject to the corresponding rate of tax.

Band

Rate

Not more than £150,000 (in the case of a lease, annual rent is under £1,000)

0%

Not more than £150,000 (in the case of a lease, annual rent is £1,000 or more)

1%

More than £150,000 but not more than £250,000

1%

More than £250,000 but not more than £500,000

3%

More than £500,000

4%


So where a £275,000 transaction would previously incur a £8,250 tax bill, from 17 March 2016 the SDLT will be calculated as follows:

  • Up to £150, 000 = 0% (£0 payable)
  • £150,001 - £250,000 = 2% (£2,000 on the £100,000 within the band)
  • £250,000+ = 5% (£1,250 on the £25,000 within the band)
  • Total SDLT = £3,250

A potentially less positive development for landlords who do not qualify for relief is the SDLT hike on additional residential properties, which will now be 3% higher than the previous applicable rates. Although this policy is primary aimed at discouraging the accumulation of housing stock by high net worth individuals and companies, uncertainty currently abounds as to whether larger landlords will also be affected and we hope that the government issues further guidance on this point.

Whereas the impact of the SDLT reforms on the commercial property market is almost guaranteed to be significant, the extent to which the affordable homes initiatives announced by the government yesterday will boost the operations of Registered Providers remains to be seen. The focus on unlocking land for development to ease the housing crisis will nonetheless be welcomed. We also focussed on the impact of starter homes at our recent fully booked seminar on s106 Agreements and off plan sales.

If you are looking for any more information with regards to our services view our Housing & Regeneration section. You can also contact Lucy Worrall in our Housing & Regeneration department via email or phone on 01254 222393. Alternatively send any question through to Forbes Solicitors via our online Contact Form.

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