The Office for Budget Responsibility (OBR) must assess each Budget measure for its impact on the housing market, according to an independent committee chaired by Sir Vince Cable.
In its latest assessment of the Government’s housing policy and delivery, the Housing Policy and Delivery Oversight Committee called for a series of measures to boost housebuilding, improve the movement of people through the housing market and reduce barriers facing small developers.
The committee said the Office for Budget Responsibility must ensure that government budget policies do not undermine housebuilding and housing transactions.
The committee’s recommendations include giving the Office for Budget Responsibility a formal role in assessing the impacts of budget decisions, reforming planning requirements for smaller developments, reviewing stamp duty and scrapping VAT on home extensions and refurbishment projects.
The committee also warned that the government is falling further behind its ambition to build 1.5 million new homes by the end of the parliamentary session, with its latest research suggesting the target will not be met.
Sir Vince said housing played a central role in economic growth, and said government decisions on tax, regulation and public spending should be assessed in terms of their wider market impacts.
“Housing can be a tremendous engine of growth in the economy, and we support all efforts to improve quality and delivery,” he said.
“In fact, it is so integral to so many aspects of the economy that we believe it would be useful to evaluate any budget measure for its market impact. The Office for Budget Responsibility is a natural place for this to happen.”
The committee expressed its general support for the government’s proposed Your First Home initiative, with more details expected in the budget on October 28.
Possible measures include price caps and the level of contributions required from housebuilders. The committee said that there is justification for reducing the expected contribution from small and medium-sized companies.
However, it warned that delays in establishing the scheme could disrupt the market if potential first-time buyers postpone purchases while waiting for the initiative to become available.
Sir Vince said the application process should be up and running as quickly as possible to reduce the risk of transactions being delayed.
He also highlighted the challenge of introducing a new digital system, comparing it to the previous Help to Buy scheme, which operated through an analogue system.
“The ‘Your First Home’ initiative could be a catalyst for the market and encourage builders to accelerate developments,” he said. “They need certainty and simplicity, and we hope the budget will fill in some of the missing details.”
He added that although he had previously opposed help-to-buy policies, he believed the new proposals could stimulate the building of more housing without creating inflation.
The committee said changes in planning and construction regulatory systems had made development more difficult, especially for small construction companies with limited resources.
Although she acknowledged that many reforms were necessary in the wake of the Grenfell Tower tragedy, she argued that a uniform approach to regulation could impose a disproportionate burden on smaller sites.
The committee called for consideration of exemptions from some of the more onerous non-safety requirements for small projects, while maintaining basic safety standards.
She said a more proportionate approach could help smaller builders deliver homes and allow planning officers to allocate more time to larger applications.
Sir Vince said the full effects of the planning reform would likely take more than one parliamentary term to work through, but the immediate impact was making SME development more difficult.
“This concentrates activity in the major homebuilders,” he said.
“Work should identify smaller developments with less onerous, non-safety requirements, to encourage the SME sector. This would also free up planning officers to focus on larger developments, resulting in quicker decisions.”
On taxation, the committee urged the Chancellor to reconsider the stamp duty land tax, arguing that the current system discourages people from moving home and restricts activity across the wider economy.
Her preferred option is to reinstate the stamp duty exemption introduced during the Covid pandemic, raising the threshold at which the tax becomes payable to £500,000.
The committee said the temporary measure helped keep the housing market moving and generate economic activity across a range of sectors, which could offset much of the lost tax revenue.
Sir Vince cited evidence from the London School of Economics, cited in a report available through the BDA, which he said suggested the holiday generated roughly the same amount of tax revenue as was lost through the reduction in stamp duty receipts.
He called on the Treasury to look beyond the immediate impact of tax changes on government revenues and consider their consequences for the broader economy.
An alternative proposal would exempt first-time buyers and people downsizing from stamp duty. The committee said this could encourage people to move, releasing their current homes to others, but warned that managing such a system would be more complex.
The committee also recommended abolishing VAT on home extensions and refurbishment projects, bringing the tax treatment of improvements in line with newly built dwellings.
She said the change could encourage investment in existing properties and support economic activity in the construction sector.
Sir Vince said the proposed measures could work together to increase housebuilding while making better use of existing housing stock.
“These measures can all help boost homebuilding and free up existing inventory,” he said.
The committee’s warning that the government is unlikely to achieve its ambition of building 1.5 million homes is contained in a separate summary prepared by planning expert Kelvin Macdonald, an adviser to various parliamentary committees.
The committee said its recommendations aim to support both new housing supply and a more efficient housing market, with the upcoming Budget providing an opportunity to address barriers to delivery.
The independent Housing Policy and Delivery Oversight Committee is funded by the BFA to research and deepen understanding of the UK housing market.
The committee is chaired by Sir Vince Cable. Its other members are:
- Mark Boogaard, CEO of the Family Building Society.
- Mr Damian Green, Chairman of the Social Care Foundation.
- Sarah Harrison, Chief Executive of the Building Societies Association.
- Neil Jefferson, chief executive of the Home Builders Federation.
- Vicky Price, senior economic adviser at the Center for Economics and Business Research.
- Ingrid Schröder, Director of the Faculty of Architecture at the Architectural Association.
- Maya Singer-Hobbs, Senior Research Fellow at IPPR.
- Professor Tony Travers, Director, LSE London.
