Budget 2018: Government confirms new Help to Buy scheme from 2021

29 October, 2018

The Chancellor of the Exchequer, Philip Hammond today unveiled his 2018 Budget, revealing that the Help to Buy Equity Loan Scheme will be succeeded in 2021 by a new first-time buyer Help to Buy scheme which will run for a period of two years.

With the current scheme due to end in April 2021 and the Government expecting to have invested around £22bn by this time, the Government stated it is keen to ensure that future support is targeted at those most in need. But no changes to eligibility for the existing scheme are intended to take place before 2021.

Therefore, from April 2021, a new Help to Buy Equity Loan scheme will be launched. This scheme will run for two years before closing in March 2023 and will be available for first-time buyers only, and for houses with a market value up to new regional property price caps.

The 2021-2023 scheme is intended to support 110,000 first-time buyers into homeownership. Table 1.8 in the Budget Red Book forecasts the cost to the Exchequer at £4.1bn in 2021-22 and £4.6bn in 2022-23. The Government also stated that it does not intend to introduce a further scheme after March 2023.

The new regional price property caps for the scheme from April 2021 will be set at 1.5 times the average forecast regional first-time buyer price, with a maximum of £600,000 in London. In London the maximum equity loan amount will remain at 40% of purchase price.

HBF will be working closely with Homes England in the coming months to establish the administrative and contractual details underpinning the new scheme which will need to be agreed well in advance of April 2021.

Help to Buy Evaluation

Alongside the announcement on the future shape of the Help to Buy scheme, the Government has published the long-awaited evaluation of the scheme authored by Stephen Finlay, Peter Williams, Christine Whitehead and the London School of Economics. The 150 page report estimates that 43% of the supply supported by Help to Buy in the period between April 2013 and January 2015 was additional, equivalent to contributing 14% to total new build output.

Letwin Review

Published alongside the Budget was Sir Oliver Letwin’s independent review of the gap between housing completions and the amount of land allocated or permissioned. The Review found no evidence that speculative land banking is part of the business model for major house builders, nor that it’s a driver of slow build out rates.

He recommends that the Government:

• adopt a new set of planning rules specifically designed to apply to all future large sites (initially those over 1,500 units) in areas of high housing demand, requiring those developing such sites to provide a diversity of offerings, in line with diversification principles in a new planning policy document; and
• establish a National Expert Committee to advise local authorities on the interpretation of diversity requirements for large sites and to arbitrate where the diversity requirements cause an appeal as a result of disagreement between the local authority and the developer.
• provide incentives to diversify existing sites of over 1,500 units in areas of high housing demand, by making any future government funding for house builders or potential purchasers on such sites conditional upon the builder accepting a Section 106 agreement which conforms with the new planning policy for such sites; and
• consider allocating a small amount of funding to a large sites viability fund to prevent any interruption of development on existing large sites that could otherwise become non-viable for the existing builder as a result of accepting the new diversity provisions.
• introduce a power for local planning authorities in places with high housing demand to designate particular areas within their local plans as land which can be developed only as single large sites, and to create master plans and design codes for these sites which will ensure both a high degree of diversity and good design to promote rapid market absorption and rapid build out rates;
• give local authorities clear statutory powers to purchase the land designated for such large sites compulsorily at prices which reflect the value of those sites once they have planning permission and a master plan that reflect the new diversity requirements (with guidance for local authorities to press the diversity requirements to the point where they generate a maximum residual development value for the land on these sites of around ten times existing use value rather than the huge multiples of existing use value which currently apply); and
• also give local authorities clear statutory powers to control the development of such designated large sites

The government will respond to the review in full in February 2019.

Other announcements

The Chancellor also unveiled a number of other measures to “fix the broken housing market”:

SME Housebuilders

The British Business Bank, working with Homes England, will deliver a new scheme which will provide guarantees to support up to £1 billion of lending to SME housebuilders. This follows a proposal from HBF to develop a housing guarantee for SMEs in the January 2017 report, Reversing the Decline of Small Housebuilders, and the announcement in last November’s Budget that money would be set aside for such a policy. Government has asked HBF to convey its appreciation to the handful of house builder members who contributed to roundtables and inputted into the development of this guarantee.

HBF will provide more information on the detail of the scheme in the coming days.

Housing Infrastructure Fund

The Fund will increase by £500 million to a total £5.5 billion, unlocking up to 650,000 new homes.

18,000 new homes will be unlocked in East London through improvements to the Docklands Light Railway. This is courtesy of £291 million from the Housing Infrastructure Fund, funded by the National Productivity Investment Fund (NPIF).

Housing Associations

The Government will provide £653 million to 2021-22 for strategic partnerships with nine housing associations to deliver over 13,000 homes.

Homes England

A new five-year strategic plan for Homes England will be published on 30 October 2018.

Housing Revenue Account

As confirmed previously, the Housing Revenue Account cap that controls local authority borrowing for house building will be abolished from 29 October 2018 in England, enabling councils to increase house building to around 10,000 homes per year. The Welsh Government is taking immediate steps to lift the cap in Wales.

Building Upwards

The Government has now launched its consultation on new permitted development rights to allow upwards extensions above commercial premises and residential properties, including blocks of flats, and to allow commercial buildings to be demolished and replaced with homes.

Land Value Uplift

The Government has confirmed it will “introduce a simpler system of developer contributions that provides more certainty for developers and local authorities, while enabling local areas to capture a greater share of uplift in land values for infrastructure and affordable housing”. The reforms include simplifying the process for setting a higher zonal Community Infrastructure Levy in areas of high land value uplift and removing all restrictions on Section 106 pooling towards a single piece of infrastructure. The government will also introduce a Strategic Infrastructure Tariff for Combined Authorities and joint planning committees with strategic planning powers.

Shared Ownership

A call for evidence will be launched inviting proposals from investors willing to collaborate with government to deliver a new wave of shared ownership homes.

The government will also extend first-time buyers relief in England and Northern Ireland so that all qualifying shared ownership property purchasers can benefit, whether or not the purchaser elects to pay SDLT on the market value of the property. This change will apply to relevant transactions with an effective date on or after 29 October 2018, and will also be backdated to 22 November 2017 so that those eligible who have not previously claimed first-time buyers relief will be able to amend their return to claim a refund.

Discounted Homes

The government will provide £8.5 million of resource support so that up to 500 parishes can allocate or permission land for homes sold at a discount. Neighbourhood plans and orders are approved by local referendums, and the government will update planning guidance to ensure that these cannot be unfairly overruled by local planning authorities. The government will also explore how it can empower neighbourhood groups to offer these homes first to people with a direct connection to the local area.

The Chancellor of the Exchequer also took action on:

Apprenticeships

Building on the announcements made at the Conservative Party Conference regarding the flexibility of the Apprenticeship Levy, the Chancellor today announced that the government will provide up to £240 million to halve the co-investment rate for apprenticeship training to 5%.

The Red Book containing all of the announcements in detail can be found here.

Emma Thomas, Policy and Public Affairs Adviser

David O’Leary, Policy Director