Key Property Changes in the Autumn Statement
The Chancellor announced two key changes for the property market in his first autumn statement on Wednesday – firstly new spending on housing projects totalling £3.7bn in England and secondly lettings agents will be banned from charging fees to tenants “as soon as possible”.
In the autumn statement Philip Hammond said £2.3bn would be spent on infrastructure – such as roads – related to housing developments plus an extra £1.4bn on affordable housing in England.
The chancellor said the money would support the building of up to 100,000 new homes, and amounted to a “step-change” in help for the industry. The Treasury estimates that the change announced in the autumn statement could lead to 40,000 more affordable homes being built.
Local authorities will be able to bid for the money under one of three existing schemes: Affordable Rent, Shared Ownership or Rent to Buy.
The money will top up the existing £4.7bn being spent on grants for affordable housing over the next five years.
The National Housing Federation (NHF), which represents Housing Associations, said it was delighted with the chancellor’s announcement in his autumn statement.
“Increased flexibility and extra investment will give housing associations the freedom and confidence to build even more affordable homes, more quickly, across the country,” said David Orr, chief executive of the NHF.
Earlier this month, figures from the Department for Communities and Local Government confirmed that only 32,110 new homes were built in 2015-16, compared to 66,600 in the previous year, which means that the number of affordable homes being built in England had sunk to its lowest level in 24 years.
The chancellor also used his autumn statement to announce a “large-scale” pilot of the right to buy scheme for housing association tenants.
He said it would involve 3,000 tenants being allowed to buy the homes they currently rent.
A white paper on house-building will follow “in due course”.
Lettings agent fees to be banned
Confirming that lettings agents will be banned from charging fees to tenants “as soon as possible” Chancellor Philip Hammond said during his autumn statement that shifting the cost to landlords will save 4.3 million households hundreds of pounds.
Currently tenants in England and Wales can be charged fees for a range of administration tasks, including reference, credit and immigration checks.
The move could spur competition as landlords, unlike tenants, can shop around for the cheapest agent.
In Scotland, lettings agency fees to tenants have already been banned.
In England and Wales since last year, lettings and managing agents have been legally obliged to clearly publicise their fees.
Fees vary widely, with costs in some big cities much higher than elsewhere.
Tenants face charges when agents draw up tenancy agreements along with the possibility of a non-refundable holding deposit paid before signing up to the deal.
Upfront fees have risen in recent years and the latest English Housing Survey shows fees typically cost £223. However, Shelter research in 2012 found that one in seven tenants pays more than £500.
The charity said renters had no choice over the agent they dealt with after finding a house or flat. Landlords, on the other hand, could choose between agencies to act for them when renting out their property.
Many tenants are angry that, with more competition for decent places, they are forced to pay to guarantee somewhere to live. Some argue that the fee for drawing up a tenancy agreement far outweighs the actual cost to the agent.
Overall, along with rent in advance and a deposit, the average upfront costs faced by renters using a letting agency are more than £1,000 nationally and over £2,000 in London, per Shelter.
The industry has argued that administration has a cost and has argued for stronger consumer protection through regulation of the sector, rather than a ban.
David Cox, managing director of the Association of Residential Letting Agents (Arla), said: “The ban announced in the autumn statement on letting agent fees is a draconian measure, and will have a profoundly negative impact on the rental market.
“It will be the fourth assault on the sector in just over a year, and do little to help cash-poor renters save enough to get on the housing ladder. This decision is a crowd-pleaser, which will not help renters in the long-term. All the implications need to be considered.
“Most letting agents do not profit from fees.”
Agents saw some of the biggest falls in company share prices in the wake of the announcement in the autumn statement, with Foxtons down 11%, Countrywide down nearly 6%, and Savills also falling slightly.
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