Autumn Statement 2016: In the wake of Philip Hammond’s announcements, property lawyers have had their say on what his changes mean for various areas of the sector:
Business rates
Richard Wackett, partner at Montagu Evans, said that the chancellor did little to calm the nerves of hard-hit ratepayers: ‘’Last year’s commitment to exemption from rates for 600,000 small businesses can’t be true unless the government were automatically to exempt all assessments below £12,000 rateable value. This is not the intention of the government, although the additional relief expected for small business will still have to be paid for those businesses with a cumulative assessment beyond the £12,000 limit.”
He said that the government’s decision to deny ratepayers access to their correct liabilities following substantial decreases in rateable value and failure to offer any meaningful protection from considerable increases in liability will surely result in rates remaining the UK’s most unpopular business tax in 2017. “Transitional arrangements will be punitive for most tax payers and, against an increase is rateable value overall of 9.1%, the fall in the uniform business rate multiplier of just 3.5% will mean that the vast majority of businesses have waited seven years for very little. High occupational costs including rates will do very little for business confidence. Those unhappy with their business rate liabilities will need to turn to a bureaucratic and long-winded appeals process next year for the prospect of relief.”
Suzanne Gill, partner at Wedlake Bell, said: “Business rates are a significant expense and the increase elsewhere, especially in London and the South East, is set to exert downward pressure on rents as tenants struggle to cover the sharp increase in cost. Westminster Council receives only 4% of the rates it collects. A visionary chancellor would tackle this antiquated tax head on and we wait with anticipation for further announcements on business rates.”
Infrastructure
Martha Grekos, partner and head of planning at Howard Kennedy, said: “The chancellor was quite right to start his first Autumn Statement by clearly stating that the Brexit decision makes more urgent than ever the need to tackle the economy’s weaknesses. It shows us how this government sees the world, how it thinks that Brexit will affect the country and what it wants to achieve.
“It is therefore extremely welcomed that he has decided to prioritise high-value investment in infrastructure. However, this is quite a high level announcement as he has not listed out what these infrastructure projects are and by how much each will be funded by (apart from the £110m for East West Rail) and how these infrastructure projects are to be prioritised. He has merely left these decisions to the departmental minsters.
“Given the fact that UK infrastructure challenges are increasingly front page news, with politicians and businesses lining up to support new projects, practical solutions for new roads, rail, bridges, airports and other assets are needed in order to regenerate areas and unlock land for housing. In addition, he mentioned that there is a gap between the productivity of London and other cities, but no solution was provided as to how the government is to go about resolving this – apart from publishing a strategy to address this and an evaluation to allow the east Midlands rail hub to go ahead. We will just have to wait to see what these strategies and evaluations reveal. Some of the funding allocated to local networks, traffic pinch-points and the like appear to be part of the way the chancellor is aiming to address productivity problems, as workers and businesses are hampered by poor transport links.”
Matthew Jones, head of construction and engineering at Taylor Wessing, said: “In the immediate aftermath of Brexit, construction output (June to September 2016) is estimated by the Office of National Statistics to have decreased by 1.1%. Although there has been a slight increase in construction output of 0.3% in September 2016, the government’s announcement of a £1.1bn investment programme in local road improvements to by-passes and roundabouts to tackle traffic congestion is good news for the construction industry. At a time of uncertainty about opportunities and investment post-Brexit, and following on from the recent announcements on Heathrow and HS2, this will boost the confidence of employers to commit to capital expenditure and resources.”
Housing
Martha Grekos: “Most of the detail seems to have been left for the Housing White Paper. However, it seems that the chancellor has listened to calls for more housing for rent and affordable homes to buy given the funding proposed. The urgent challenge here is very apparent. Perhaps the government is facing the fact the golden age of home ownership might be over and so we need to come up with affordable products and change our cultural beliefs by learning to rent. We need to provide more affordable homes (to rent and to buy) and we need provide greater stability in the private rental sector.”
Paul Butterworth, head of housing at TLT, said: “The government has recognised that housing is a key part of the UK’s infrastructure. Therefore £2.3bn housing infrastructure monies and £1.4bn of grants to be released for housing will be cautiously welcomed if it provides the catalyst to deliver the badly needed additional affordable new homes estimated by these initiatives. The housing white paper to focus on structural housing deficiency in the UK will be interesting to see what is proposed to deal with this issue, where other governments have failed.”
Carl Dyer, head of planning at Irwin Mitchell, questioned whether the chancellor’s pledges would be enough, and at the right end of the market. He said: “Once again we see a chancellor targeting the wrong end of the housing market, and promising to spend a lot of money to little purpose.
“The government set a target of building 1m homes over the five years of this parliament. At the present rate of construction, they will be at least 300,000 homes short of the target. Even if this cash injection delivered an extra 140,000 homes, it would not bridge the shortfall from the target the government is already missing.”
“Disappointingly, there was no mention at all of retirement housing. Mr Hammond could have had a far greater effect on supply of housing if he had incentivised the construction of retirement living and care homes. If just half of the elderly people who say they want to downsize their property were to do so, that would release 3,500,000 homes onto the market. That is something like five parliaments’ supply at current rates of construction.”
Stamp duty
Rosie McCormick Paice, real estate partner at Pemberton Greenish, said: “It is disappointing that the government has chosen not to abolish the additional 3% SDLT surcharge on second homes. The surcharge has slowed down the housing market with revenue from SDLT reducing – revenue that could have been invested in housing schemes that would help ease the housing crisis.
“The banning of letting fees and the grant for more homes to be built still does not help long-term renters – especially in London where renters’ chances of raising a deposit is still limited by landlords increasing rents to cover higher acquisition costs due to the SDLT surcharge and the phased reduction in mortgage interest relief. None of this can be consistent with the government’s pledge to help the ‘just about managing’ families.”
Broadband funding
Alison Hardy, partner at Squire Patton Boggs, said: “The government has announced that it is investing more than £1bn in broadband infrastructure. I would support the proposal made by Colin Sharp of GVA that the government should grant telecoms companies tax relief for new telecoms masts in ‘not spots’. Not spots are areas of the country where there is no coverage. At the moment the government is apparently charging business rates of 65p on every £1 that the operator spends on a new mast. That, combined with the small rate of income from such remote masts, means that even with the £1bn incentive, operators will be reluctant to install masts which solve the rural ‘not spot’ issue.
“Not-spots are an issue in towns and cities too, and it is in those locations, where the government’s incentive won’t solve the problem that is being caused by the new telecoms code, which would see rents for telecoms sites drop off a cliff. The installation of telecoms equipment can make future redevelopment very difficult to achieve. At the moment, the income sometimes makes the inconvenience worthwhile. In rural areas this often isn’t a problem, but in cities, where land is in short supply and rooftop development is seen as the future, it is a problem. With rents dropping so significantly under the new code, landowners will become much more reluctant to allow telecoms operators to install their kit on land which might have future redevelopment potential. So while the government might well offer £1bn to improve coverage in rural areas, unless they drop business rates for those rural masts, and change the rent landowners will receive for telecoms sites, they won’t achieve their objective of universal quality coverage.”
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