The Chancellor’s announcements set out three key areas of spending cuts to achieve the Government’s £12bn welfare savings that will have the greatest impact on the housing sector.
As anticipated the emergency budget confirmed the reduction to the overall amount of benefit which can be claimed. Benefits will be capped at £23,000 in London (down from £26,000) and £20,000 outside of London (down from £23,000). We are awaiting further detail on the Right to Buy proposals, which will come on Friday.
Paul Tennant, chief executive of Orbit Group, said: “The changes today will have an impact on many of our existing and future customers, both in terms of the provision of homes and making ends meet.
“A one per cent rent cut per year over the next four years will also seriously undermine the sector’s ability to deliver the 40,000 homes for rent and sale it currently delivers. Orbit itself has committed to developing 12,000 homes by 2020 to meet need and aspiration and last year built 1,500 homes – almost half for ownership.
“This step could well result in a downgrade of the sector’s credit rating and a re-valuation of the homes we have as security against loans. In turn this will reduce our capacity to borrow to build more homes. It also makes the viability of new developments more challenging for housing developers.
“We have a housing crisis and need a long-term strategy for housing in this country to deliver a range of homes which are affordable and of the right quality. We have not seen that come through in today’s budget.”
A briefing from Orbit
The announcement of a 1% annual cumulative reduction in social rents over the next 4 years in yesterday’s Budget came as a real surprise and has sent shock waves throughout the housing sector. We have put together a short briefing of the headline announcements with some initial commentary on the potential impact on our business and communities.