Emma Ramell, director of external affairs at the Home Builders Federation (HBF), discusses why first-time buyer support in the upcoming Autumn Budget will be make-or-break for the housebuilding industry
The lead-up to any government fiscal event is always an anxious time for business, but with this year’s Autumn Budget not taking place until 26 November, chancellor Rachel Reeves has set the stage for an extended period of uncertainty and scrutiny, especially for first-time buyers.
For the home building industry, the extended wait is especially unhelpful. Developers report that many potential buyers are postponing purchase decisions until after the Budget, injecting yet more uncertainty and risk into an industry already grappling with rising costs, an increasingly burdensome policy environment and a fragile market.
The long-term impact of this delay hinges on whether the home building industry is among the winners or losers on Budget Day. With the Chancellor’s fiscal leeway already limited, it seems almost certain that losers will far outnumber winners.
Yet, housing delivery and its crucial role in driving economic growth remain at the heart of the Government’s agenda. With both heading in the wrong direction, the chancellor must act boldly and decisively if housing delivery is to stand any chance of reversing the decline.
Viability is at a breaking point
One of the most significant challenges facing home builders is the worsening viability crisis, which is already stifling development and deterring investment in future sites across vast parts of the country.
It is little surprise that viability has reached a breaking point. In recent years, home builders have been confronted with a growing array of new policy costs, taxes, and regulations. According to recent research by Zoopla, building new homes is now financially unviable across almost half (48%) of the country.
While many of these individual policies, from Biodiversity Net Gain (BNG) and the Residential Property Developer Tax (RPDT) to the forthcoming Future Homes Standard, are well-intentioned, their cumulative impact and rapid introduction have placed intolerable pressure on the industry.
Given the pressing economic and fiscal need to accelerate housing supply, the chancellor must remain mindful of how development viability affects home builders’ ability to deliver. Alarmingly, however, following HM Treasury’s consultation on proposals to introduce a single rate of Landfill Tax aimed at diverting more waste from landfill, this pressure risks intensifying further.
Home builders already work hard to minimise the volume of waste sent to landfill, but are often constrained by factors such as site topography, previous land use, and planning requirements. If the Government proceeds with abolishing the Reduced Rate of Landfill Tax (which currently applies to the majority of landfill waste generated on new housing developments), the policy, while laudable in intent, risks having a catastrophic impact on the home-building industry.
HBF estimates suggest that costs could rise by as much as 3,000%, with the average additional cost per new home around £15,000. In some cases, this could even exceed £50,000, depending on site conditions.
The impact of these proposals on SME home builders would be particularly severe. Unlike larger developers, who can often offset costs by transferring materials such as topsoil between sites, smaller firms typically operating on single plots lack this flexibility.
Ultimately, these additional costs will further erode viability and constrain the overall supply of new homes, both private and affordable. We therefore urge the Chancellor to reconsider these proposals to avoid exacerbating an already critical situation.
The forthcoming introduction of the Building Safety Levy (BSL) next autumn, which is expected to raise £3.4bn from UK home builders to fund cladding remediation, is further adding to concerns.
The home building industry has long supported the principle that leaseholders should not bear the costs of remediation arising from historic regulatory failures or construction defects. However, home builders have already committed £6.4bn to these efforts (including £2bn through RPDT and a further £4.4bn through voluntary agreement), with product manufacturers and overseas developers yet to make any contribution.
The Levy, which adds an estimated £3,000 per plot, risks undermining development viability at a time when housing supply urgently needs to increase. Furthermore, the Government’s own data casts significant doubt on the Levy’s rationale. The original estimates underpinning the £3.4bn BSL were produced in 2021 and relied on weak assumptions, including an estimate that there were around 75,000 residential buildings in England between 11 and 18 metres in height.
Following a reassessment, the Government now believes there are fewer than 50,000 such buildings, and fewer than 4,000 mid-rise buildings likely to require publicly funded remediation, down from the previous estimate of 7,500. Despite this substantial reduction in scope, the Levy target has increased from £3bn to £3.4bn.
This clear mismatch between the evidence base and the scale of the Levy has not been explained. As such, the industry would welcome a reappraisal of the principles and details of the BSL.
First-time buyers
One area where the Government has consistently fallen short is in helping first-time buyers (FTBs) take that all-important first step onto the property ladder.
For aspiring homeowners, the barriers keep mounting. Stretched affordability ratios, limited access to mortgage finance, and punishing transaction costs have combined to make home ownership an increasingly distant dream, particularly for those without family wealth to fall back on.
The latest data from the Office for National Statistics, published in September, paints a bleak picture. In London, the average property is now unaffordable even to households in the top 10% of earners. Across the South East, South West and East of England, only those in the highest income decile can afford the average home.
Unsurprisingly, without a realistic market for new homes, investment in new sites and labour is being limited. To overcome these challenges, the Government could provide assistance for first-time buyers at the Budget in the form of a new equity loan scheme part-funded by home builders.
Not only would this generate positive outcomes for housing supply, home ownership and the wider economy by transforming demand into effective demand for new homes, but it would also give builders the confidence to invest for the long-term.
Independent economic modelling by Public First shows that an equity loan scheme for FTBs could unlock delivery of at least 19,700 additional new homes per year, almost 100,000 homes over the course of the Parliament. If interest rates ease, the benefits could be even greater.
For a Government serious about increasing housing delivery and widening access to home ownership, reintroducing targeted support for first-time buyers is surely not a matter of if, but when.
Time is running out
When it comes to housing and economic growth, the stakes of this Budget could hardly be higher. After all, housing delivery is in reverse, and the clock is ticking on the Government’s 1.5m target.
It is therefore vital that the chancellor’s decisions address the realities developers face on the ground. If Rachel Reeves can reverse plans for punitive taxes and rising costs, and instead introduce targeted support for first-time buyers, she will give builders the confidence to invest, families the opportunity to get on the ladder, and the country the homes it so urgently needs.
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