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HBF Briefing: Budget 2014

Date: 19/03/14

Key Measures

For house builders, the two key Budget measures will be the extension of Help to Buy Equity Loan (HtB1) to 2020, with an estimated 120,000 sales during the additional four years, and a special £525m Builders Finance Fund targeted at smaller and medium-sized house builders to provide loans to unlock 15,000 housing units stalled due to difficulty in accessing finance. There are also HtB1 funds for Wales and Scotland, so we hope the Welsh and Scottish Governments will also extend their current schemes. Measures to encourage custom build are welcome in their own right, but they may also bring additional opportunities for smaller house builders.

Funds for a transport link to Barking Riverside are very welcome as this will open development of 11,000 new homes. The Garden City initiatives are also welcome, although these are only likely to contribute to housing supply over the medium to longer term.

It is also good news that the government will shortly publish its response to last year’s consultation on zero-carbon homes.

There is only sketchy detail available on some of the measures, most notably the £525m Builders Finance Fund. HBF will provide members with more details as they become available.

Economic Background

In his Budget Speech the Chancellor said:

“Although the OBR forecast that house prices will remain below their real terms peak until at least 2018, I have asked the [Financial Policy] Committee to be particularly vigilant against the emergence of potential risks in the housing market.”

The Office for Budget Responsibility (OBR) expects GDP growth to accelerate to 2.7% in 2014, slowing to 2.3% in 2015, then picking up to 2.6% in 2016.

Average earnings are predicted to rise by 2.5% in 2014, 3.2% in 2015 and 3.6% in 2016, in each case well ahead of the OBR’s predictions for inflation. This means that real incomes will grow after several years in which inflation has exceeded very weak earnings growth. Unemployment, both on the general LFS measure and the Claimant Count, is predicted to fall over the next few years, while total employment is expected to rise slowly.

The OBR predicts UK house prices will rise 8.5% in 2014, 7.8% in 2015 and 5.0% in 2016. It expects residential property transactions to reach 1.146m in 2013-14 (from 930,000 in 2012-13), 1.357m in 2014-15 and 1.407m in 20-15-16.

The OBR expects real investment in private dwellings to grow by 9.0% in 2014, up from 4.3% in 2013, with growth of 10.0% in 2015 and 2016.

The following are housing and planning extracts from the Budget 2014 Red Book.

Housing and Planning

1.139 As a result of government reforms to date, planning approvals and housing starts are at 5 year highs, and housing activity recently expanded at its fastest rate for 10 years.

Home ownership

1.140 The Help to Buy: equity loan scheme is expected to help at least 74,000 households buy a new-build home by March 2016. To help a further 120,000 households purchase a home and to continue to support house building as the market improves, the government will extend the equity loan scheme to March 2020. The Help to Buy: mortgage guarantee scheme will continue to support access to high loan to value mortgages until the scheme ends on 31 December 2016.

Housing supply

1.141 To support SME access to finance, the government will create a £500 million Builders Finance Fund, which will provide loans to developers to unlock 15,000 housing units stalled due to difficulty in accessing finance. [HBF Note: We understand the fund will be £525m and it will be available for unlocking viable sites in the 15-250 unit range. It will be available over the two years 2015-16 and 20-16-17. A Prospectus outlining full details of the scheme, including eligibility criteria, will be published in due course.]

1.142 For people who want to build their own home, the government will consult on creating a new ‘Right to Build’, giving custom builders a right to a plot from councils, and a £150 million repayable fund to help provide up to 10,000 serviced plots for custom build. The government will also look to make the Help to Buy: equity loan scheme available for custom build.

1.143 The government will establish a £150 million fund to kick start the regeneration of large housing estates through repayable loans, helping to boost housing supply. Bids will shortly be invited from private sector developers, working with local authorities on estates that might be able to benefit. Following the Autumn Statement, expressions of interest have already been made through the Greater London Authority relating to the Aylesbury Estate, Blackwall Reach and Grahame Park regeneration projects in London.

1.144 The government will work with the Mayor of London and the Greater London Authority (GLA) to develop proposals for extending the Gospel Oak to Barking Line to Barking Riverside, and to ensure that any public investment unlocks the construction of up to 11,000 new homes. It will also work with the GLA and the London Borough of Barnet to look at proposals for the Brent Cross regeneration scheme, subject to value for money and affordability.

New garden cities

1.145 The government will support a new Garden City at Ebbsfleet. Ebbsfleet has capacity for up to 15,000 new homes, based on existing brownfield land. To date, under 150 homes have been built on the largest site. The government will form a dedicated Urban Development Corporation for the area, in consultation with local MPs, councils and residents, to drive forward the creation of Ebbsfleet Garden City, and will make up to £200 million of infrastructure funding available to kick start development. This will represent the first new garden city since Welwyn Garden City in 1920.

1.146 The government will also publish a prospectus by Easter 2014, setting out how local authorities could develop their own, locally-led proposals for bringing forward new garden cities.

Reform of the planning system

1.147 The government has taken decisive steps to improve and streamline the planning system. To support businesses and households further, the government will review the General Permitted Development Order. The refreshed approach is based on a three-tier system to decide the appropriate level of permission, using permitted development rights for small-scale changes, prior approval rights for development requiring consideration of specific issues, and planning permission for the largest scale development. As part of this, the government will consult on specific change of use measures, including greater flexibilities for change to residential use, for example from warehouses and light industry structures, and allowing businesses greater flexibilities to expand facilities such as car parks and loading bays within existing boundaries, where there is little impact on local communities.

Local growth

1.148 Enterprise Zones are a key part of the government’s strategy for enabling growth in local areas. The government will continue to support Enterprise Zones to create even more new jobs and attract private investment to local areas. Availability of business rate discounts and Enhanced Capital Allowances will each be extended by 3 years as an incentive for new and expanding businesses to locate in Enterprise Zones.


1.149 The government will shortly take forward a Wales Bill that will devolve new tax and borrowing powers to Wales, enabling the Welsh government to raise more of the money it spends and providing it with further tools to support growth in the Welsh economy. In advance of implementing these new powers, the government has also agreed that the Welsh government can use existing borrowing powers to begin investing in improvements to the M4.


1.150 The government will commit £100 million to Greater Cambridge until 2019-20 to support their ambitious transport and infrastructure proposals through a Gain Share mechanism. This agreement could be worth up to £500 million over 15 to 20

years, dependent on the economic impact of their investments and, in addition to Greater Cambridge’s own plans, could deliver over £1 billion of infrastructure investment in the Greater Cambridge area.

1.151 Following the announcement at Autumn Statement 2013, the government is in detailed discussion with Glasgow to develop a city deal that will drive employment and economic development across the city region. Glasgow has identified infrastructure, strengthening the local labour market, and support for business growth as priorities, and good progress is being made in determining how best the government can support Glasgow to take forward this ambitious plan.

2.23 Zero carbon homes – At Budget 2013 the government committed to implement ‘zero carbon homes’ from 2016. The government will shortly publish its response to last year’s consultation.

2.25 Development benefits – The government will launch a government-funded staged pilot for passing a share of the benefits of development directly to individual households, including further research and evaluation of the approach.

Surplus Public Sector Land

1.73 The government has taken action to free up land for productive economic use. The Government Property Unit’s Strategic Land and Property Review has now concluded and identified scope to generate £5 billion of receipts from land and property to support growth and drive efficiency. A significant amount of this will be brownfield land. Departments have already committed to reforms which will release £3.5 billion of land and property. A further £1.5 billion will be identified through ongoing operational reviews. By Autumn Statement 2014 the government will look to quantify its housing and growth ambitions for this new surplus land programme.

Property in Corporate Envelopes

1.192 As announced at Budget 2012, the government has introduced a number of new measures to discourage placing property in corporate envelopes to avoid stamp duty land tax (SDLT). These apply to residential properties valued over £2 million, and include a new higher rate of SDLT when the property is first ‘enveloped’; a new Annual Tax on Enveloped Dwellings (ATED); and a capital gains tax charge on any gains on disposal of enveloped properties from April 2013.

1.193 ATED has raised 5 times the amount forecast for 2013-14, with significantly more properties above £2 million in envelopes than expected. As well as discouraging SDLT avoidance, ATED incentivises commercial activities by providing relief where, for example, a property is rented out.

1.194 The government believes that ATED and the associated measures can discourage the use of corporate envelopes to invest in high value UK housing which is left empty or underused while avoiding paying tax. The Budget therefore announces 2 new bands for ATED, to bring properties worth £500,000 to £1 million and £1 million to £2 million into the charge. The ATED-related capital gains tax charge will apply to properties in the new ATED bands. The 15% rate of SDLT that applies to acquisitions of properties by corporate envelopes will also be applied to properties valued above £500,000 with effect from 20 March 2014.

1.195 The government recognises that the structure of ATED can create some administrative burdens for genuine property rental, trading and development companies. The government will therefore stagger the introduction of the new ATED bands, with the £1 million to £2 million band coming into effect from April 2015, and the £500,000 to £1 million band coming into effect from April 2016. The government will also consult on possible simplifications to ATED administration to reduce compliance burdens for genuine businesses.

Reducing the Regulatory Burden on House Building

In the 2010 Spending Round the Government made a commitment to “reduce the total regulatory burden on the house building industry over the Spending

Review period”. DCLLG has today published a progress report, Spending Review 2010: Housebuilder Deregulation, available at:

HBF will need to examine this report in detail.

John Stewart
Director of Economic Affairs