Industry Budget wish list: Match housing policy with modern incomes and scrap second homes tax surcharge
Ahead of the Autumn Budget next week, Mortgage Solutions has asked the sector what policies they would like to see announced by the Chancellor.
With at least one housing-related announcement expected in the form of details on Your First Home, David Hollingworth, associate director of communications at L&C Mortgages, said the details would be key in “determining whether the scheme delivers lasting affordability for first-time buyers”.
Bring stamp duty back into the conversation
Aside from the known policy, many industry commentators recommended changes to stamp duty to stimulate the market.
Anthony Curtis, director of FORTO Finance, said he would like to see downsizers exempted from the tax. He added: “It wouldn’t cost a great deal and it would trigger a chain of further sales, each of which would be paying stamp duty. The cut pays for itself via all the extra transactions. Furthermore, this would free up large homes for families to buy.
“Given we aren’t building our way out of the housing crisis any time soon, expanding the supply of available bedrooms sounds like a pretty smart move.”
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Will Hale, CEO of Key Equity Release, echoed this view, saying this would remove current financial disincentives around downsizing. The firm said it would also like to see tax incentives for older homeowners to release property wealth to fund care in later life ahead of the potential launch of a National Care Service.
Hale added: “Government policy around funding retirement needs to be more holistic and joined-up, and the Budget is an opportunity to start that process.”
Hollingworth said there were growing call to support all buyers, particularly first-time buyers, so it would be interesting to see if there would be any relief to reduce the upfront cost of moving.
He added: “Downsizers may also be hoping that they may avoid stamp duty, which can gum up the market by putting them off a move altogether,” and continued to say that removing financial barriers to housing activity would be welcomed.
Nick Sanderson, founder of Audley Villages, said downsizing should be part of the solution to the housing crisis, and “retirement communities should be recognised as a vital part of the housing mix, not a niche product”.
He added that to improve chances for first-time buyers, the government must “stop looking solely at the first rung of the ladder and instead focus on the whole housing market”.
Sanderson said stamp duty had “long been a handbrake on the housing market” and a targeted incentive for downsizers, such as a 1% cap, could be a catalyst to get the whole chain moving.
He added that any policies should be balanced by incentives to encourage people to move “rather than creating another block”.
Real housing solutions for real challenges
Paul Adams, sales director at Pepper Money, said homeownership was still a strong ambition across the UK, and he wanted to see more help for people to reach this goal, as “the path to ownership is considerably harder than it was a generation ago”.
Adams said saving for a deposit was still one of the main obstacles, as the average adult has £13,200 in savings, a fifth of the typical first-time buyer deposit of £61,900.
“Anything the government can do to help buyers bridge that gap would make a real difference, particularly if it comes with the kind of stability that lets people plan ahead with confidence,” Adams said.
He continued: “We’d also like to see policy catch up with the way people earn their money now. One in 10 adults has started a side hustle to help manage financial pressure, and more than three-quarters of self-employed people feel their work status makes it harder to get a mortgage, so it’s important that housing support and eligibility criteria work for people with more varied incomes and not just those in traditional full-time roles.”
Adams also called for more focus on financial education to help people understand their options better, including knowledge of the support available through brokers and specialist lenders.
Hollingworth recommended a “smooth and flexible interchange” for those currently saving into a Lifetime ISA and considering the new First-Time Buyer ISA, highlighting the “removal of any charge on the withdrawal of savings, which may have damaged confidence in the Lifetime ISA”.
What landlords want
Hollingworth said many landlords already felt they were facing higher costs from tax and regulatory changes, adding: “If owning rental property becomes less attractive, it could see fewer landlords investing in property.
“At a time when rental demand remains strong, a reduction in supply risks putting even more pressure on rents and impact mobility across the housing market.”
Curtis said the Chancellor should “restore some relief on finance costs for landlords who meet EPC C” and push the Financial Conduct Authority (FCA) to ensure rent forms part of a person’s credit profile.
He added: “If rental payments inform a part of a tenant’s credit profile, then a landlord can ask to see it, to establish a new tenant’s track record. That would help landlords avoid nightmare tenants – tenants who currently hold too many of the cards.”
Other measures Curtis wanted to see were a removal of the 5% second home surcharge on purchases that add new homes: “That means new builds, conversions and empty homes being brought back into use. Again, that investment would go towards expanding supply.”
He also suggested bringing VAT on refurbishments and conversions in line with new builds, which are zero-rated.
“Cutting this to 5% or zero would bring tired and empty homes back into use faster than new building can. It would also help SME builders and small developers,” he added.
