New research shows that many policy changes have already had an effect on the housebuilding sector, with experts advising that the full scale of the impact on some sectors is not yet clear.
The latest report from Savills estate agents, entitled UK Residential Development Land, advises that the limit on mortgage interest relief for buy to let investors will restrict the expansion of these investors’ portfolios, and that there is some evidence that this is having an effect in the new build markets, although the scale of the impact is yet unknown.
Citing the findings from a recent Home Builders Federation survey, the report from Savills notes that the number of investors for buy to let making reservations on new build sites fell in August of this year, and to a greater degree than for first time buyers and home movers, especially in London.
The Chancellor’s cuts to affordable housing rents of 1% each year for the next four years from April 2016 (instead of an increase of Consumer Price Index +1% per annum) is also highlighted as having an impact on housing development.
“Housing associations are offering to pay less for Section 106 housing on development sites and are likely to build fewer homes for sub-market rent than previously planned”,
the report states.
The government’s introduction of Starter Homes, as a replacement for affordable rented homes is said to be the latest strategy to ‘turn generation rent into generation buy’, but as Savills’ report states, it is not without risk.
While it is hoped that the plan will generate a higher land value on the sub-market housing, Savills’ concern is
“that new homes are concentrated in too narrow a section of the market and that Starter Homes displace market sales, including Help to Buy.”
Lastly, the report points to the confusion surrounding certain policies as having a detrimental effect on potential land development.
The requirement to provide affordable housing (Section 106) on sites of 10 homes or less has changed twice in the last year.
In December 2014 the requirement was dropped, but then in July 2015 it was reinstated following a High Court ruling.
“These changes, along with potential for appeals and the alternative affordable tenure of Starter Homes, has brought confusion and uncertainty to the market, potentially delaying development on smaller sites.”