Housing made the headlines in yesterday’s Budget, but the announcements on stamp duty will do little to tackle the sector’s underlying problems. First-time buyers will no longer pay tax on purchases up to £250,000, a move financed by a new 5% rate on homes over £1m. Politically, this is quite clever, since the rise affects only the top 1% of homes, but accounts for over 10% of the revenue.
This move will be popular – and there may be some positive effects on market confidence – but the only way to make housing more affordable is radical action to unlock new supply. Private housing will have to do the heavy lifting – the £340m of new savings from CLG are probably a foretaste of the department’s next spending settlement.
Credit conditions and market confidence will play an important role in boosting construction over the next few years. But the next government needs to confront conventional wisdom to tackle the house building challenge over the long-term. One example is the brownfield target, a policy that is highly popular because it appears to tick all the boxes. New houses are built, derelict land is revived and priceless countryside is saved.
But trying to funnel the majority of new housing onto brownfield has starved the market of land, meaning that less land was converted to housing use in 2007 than in 1995, despite prices rising by over 250%. At Centre for Cities, we think the time has come to drop the national brownfield target.
There is also a strong case for incentives for local authorities that promote development, going beyond the recent Conservative proposals on Council Tax matching. In our report last week we advocated piloting local land auctions to enable communities to capture a much greater share of planning gain.
Tom Aldred is an analyst at the Centre for Cities
