Rents, rents, rents
Mr Hunt confirmed that the increase in social rents in England will be capped at 7% in April.
This is good news for social landlords compared to the government’s preferred option of 5% during the consultation, and it means they will not suffer as much of an impact on their rental income as they feared. .
However, it is still a reduction in real terms of these revenues, which will put pressure on investment in their inventory and services as well as on the remuneration of staff.
At the same time, the value of the affordable housing program funding is reduced by inflation and even greater increases in construction prices.
“The rent settlement is bad news for tenants who do not receive housing benefit, as they will now face a bigger increase than they would have hoped for, even if it is not the full of the 11.1% implied by the rent formula”
The Department for Levelling, Housing and Communities’ capital spending plans remain as they were in the spring statement, but a £1.2billion underspend last year was not postponed. After 2025, capital expenditure will only be increased in terms of cash.
The rent settlement is bad news for tenants who do not receive housing benefit, as they will now face a bigger increase than they would have hoped for, even if it is not all of the 11.1% implied by the rent formula. Owners should keep in mind that the cap is “up to” 7%.
Tenants on Housing Benefit are less at risk of having their benefits capped thanks to the above decision, but the higher rent increase means the Department for Work and Pensions will now save less on Housing Benefit .
Curiously, the Treasury’s estimates of savings from a 7% cap are much lower than those that accompanied the consultation. The background papers for the autumn statement estimated them at £630m over the next five years, while the impact assessment estimated savings of £3bn over the same period.
Part of the difference could be due to other good news for registered providers – their supported accommodation will be exempt from the 7% cap and they will be allowed to raise their rents by the full Consumer Price Index plus 1% .
Well, this wasn’t part of the fall statement as such, but there was some good news for condo owners soon after, as the National Housing Federation announced that housing associations would also be capping their rent increases to 7%.
Without it, many faced increases double those for leases tied to higher retail price inflation.
Real estate market fears
Two fall statement announcements suggest that the Treasury has already priced in a significant downturn in the housing market over the next two years.
First, the supposedly permanent stamp duty reduction announced by Mr Kwarteng will now be temporary. Threshold increases will now only last until the end of March 2025, saving nearly £4billion over the next three years.
“A borrower who contacted me on Twitter said it only covered £160 of his monthly mortgage interest payments, leaving him to find £350 of his benefits”
Unlike the permanent cut, this at least makes some sort of sense and goes back to the familiar playbook of a stamp duty holiday supporting the market during a downturn by driving trades forward.
There was also help for homeowners who will struggle to pay off their mortgage. Support for mortgage interest loans (SMI) will now be available after three months instead of nine, and the government will abolish the zero income rule to allow them to continue receiving help while working and on universal credit.
However, this help only goes so far. In previous recessions, the SMI was a benefit rather than a loan and it is still paid on a standard interest rate of 2.09%, which is well below actual mortgage rates. A borrower who contacted me on Twitter said it only covered £160 of their monthly mortgage interest payments, leaving them with £350 of their benefits.
The Office for Budget Responsibility has predicted that house prices will fall 9% over the next two years. Given that mortgage rates are also expected to be much higher than in March alongside a recession, a decline in living standards at the fastest pace on record and the highest tax burden in over 70 years, this seems a surprisingly small drop. That’s less than half the rise in house prices seen since the start of the pandemic, for example.
“Rents are certainly not the bills that worry tenants the most”
However, as former Special Advisor No. 10 Toby Lloyd pointed out on Twitter, it also points to a depressing conclusion for first-time buyers: Homes won’t get much cheaper, and mortgages are sure to get more expensive. Although a recession represents an opportunity for some, it will not last very long.
Needless to say, the tax increases didn’t include any of the property tax reforms I dragged into my pre-fall column that could have helped improve a system that seems rigged against young people without access to family wealth in same time as they generated income.
Be careful at the edge of the cliff
Rents are certainly not the bills that worry tenants the most.
Under the energy price reduction guarantee, a typical household will now pay £3,000 a year instead of £2,500 from April, saving the government £14billion.
This will be accompanied by renewed support for the most vulnerable households, including a cost of living payment of £900 for households on means-tested benefits, £300 for pensioners and £150 for people receiving disability benefits.
However, many vulnerable people will still be left behind. The National Energy Action has pointed out that those who do not receive cost of living payments face an effective 40% increase since the energy bill support program paid to all households this year does not is not renewed.
This leaves many households facing a precipice of support as they lose all support once they earn £1 more than what qualifies them for means-tested benefits and cost-of-living payments.
Many of them will also be social tenants facing the full 7% rent increase and private tenants whose LHA does not cover their rent.
Isolate, isolate, isolate
Some hope on energy bills has emerged from the Chancellor’s announcement of a target to cut energy consumption by 15% by 2030, to be led by a new energy bills task force. efficiency and £6 billion in new funding from 2025 to 2028.
At first glance, this is a welcome sign that the government is finally taking energy efficiency seriously. Yes, this is long overdue, given the drop in home insulation since green energy programs were scrapped in the 2010s, but at least it represents progress.
A report on Bloomberg has suggested that millions more households in homes in municipal tax brackets A through D will soon be eligible for insulation subsidies in signal of further announcements to come.
However, on the face of it, this is more disappointing: there is an urgent need to make homes more energy efficient now, not in 2025, and the funding is just continuing what we have seen in this Parliament. Nor is there any sign of the urgent and comprehensive plan that the Climate Change Committee recently called for in a letter to the Chancellor.
Jules Birch, columnist, Inside Housing