12 NOV 2024
Mansion House 2024: How can the Chancellor boost investment for housing?
SUMMARY:
After an Autumn Budget where there was little focus on housing as an engine for growth, the Chancellor's Mansion House speech this Thursday is important - will it set out how the government plans to maximise investment into the UK's housing and housebuilding industries?
The Chancellor's Mansion House speech on Thursday 14 November 2024 is expected to outline important changes for pension funds in the UK.
There have been reports that local government pension funds may be merged – and that a proportion of investment will have to be allocated to UK assets.
In that context, the Pensions and Lifetime Savings Association (PLSA) have recently published a report on some policy choices that might support investment in UK opportunities: https://www.plsa.co.uk/Portals/0/Documents/Policy-Documents/2024/Pensions-and-Growth-Report-PLSA-2024.pdf
Over the last few decades, large scale Private Finance in social and affordable housing has topped £120billion. This has been made possible through a regulatory, financial, tax and legal framework that encourages and supports private finance investment into housing associations and other registered housing providers.
In relation to social housing, the PLSA report rightly notes that pension funds already invest significantly in social housing bonds and this is seen as an attractive investment by pension funds.
As is often said, there is a wall of money ready to be invested in UK housing – so it's important to understand the regulatory, financial, tax and legal framework that can help to boost investment.
The strategy behind mandatory investment proposals is clear – for pension scheme investment (particularly public sector pension schemes) to be used as a form of sovereign wealth fund for investment in UK assets. The extra investment, it is hoped, will lead to increased economic growth for UK plc.
The issue is the best way to encourage investment into the UK. Compulsory allocation to the UK may not be the best way and may even be counterproductive over the long term. A better way forward might be to make investing in UK assets more attractive. For housing that would mean creating a more sustainable and effective platform. To back a regulatory, financial, tax and legal framework that encourages more large scale investment and unblocks the barriers to faster housing delivery.
Housing is hugely capital intensive – getting the right environment for large scale and sustainable investment is critical. It's important to remember that while UK pension funds are big, global capital is enormous. If UK housing investment is made globally attractive there is a huge pool of investment to be tapped. This is why, after an Autumn Budget where there was little focus on housing as part of the engine for growth, the Chancellor's Mansion House speech is important to set out how the government plans to maximise investment into the UK's housing and housebuilding industries.
Housing Delivery Snapshot - August 2024
• The Bank of England cut interest rates to 5% in a move expected to begin to boost confidence. The close 5-4 vote of the MPC came with a cautionary message that the Bank was not going to cut “too quickly or by too much”.
• Mortgage lender Nationwide released its latest UK house price index report, with an annual growth in house prices of 2.1% in July, its fastest pace since December 2022.
• The latest NHBC housing pipeline figures for Quarter 2 2024 show the scale of the current housebuilding slump with a 23% fall in new registrations compared to the same quarter in the previous year.
• Latest MHCLG data reported a significant fall in residential Planning Permissions over 30%, another key housing pipeline indicator.
• Following the General Election, the new Government confirmed its 1.5 million new homes target for this Parliament.
• The Housing Secretary took immediate action to impose compulsory housebuilding targets on councils, with a warning of direct intervention if housing targets are not met.
• The Housing Minister confirmed on BBC Radio 4’s Today programme on 31 July that the Government’s New Towns programme is not expected to deliver any completed homes this Parliament.
HFI Housing Delivery Newsletter - August 2024
The Bank of England’s rate cut was a ray of light, but the housing pipeline remains a cause for concern. At the Housing & Finance Institute, we look at the latest news and developments in housing since the election, including in the Housing Spotlight and Delivery Snapshot.
Rate Cut Boost
Amid a challenging year for housebuilding and mortgages, there was a ray of light on 1 August, with the Bank of England announcing a long-awaited interest rate cut to 5%. The close 5-4 vote of the Monetary Policy Committee came with a cautionary message that the Bank was not going to cut “too quickly or by too much”.Ahead of the rate rise, the mortgage lender Nationwide released its latest UK house price index report, with an annual growth in house prices of 2.1% in July, its fastest pace since December 2022.
The latest Bank of England announcements will provide a little relief for some current mortgage holders and those needing to refinance. However, many first-time buyers are facing a continuing double challenge of finding money for a deposit while meeting stringent affordability criteria. So while generally mortgage market confidence may begin to rise off the back of the Bank of England interest rate cut, access to home ownership remains difficult for many, given the affordability and home deposit challenges.Housing Pipeline Concern
However, housing pipeline figures remain a cause for concern with the latest NHBC housing pipeline figures showing the scale of the current housebuilding slump. Latest MHCLG data reported a significant fall in residential Planning Permissions, another key housing pipeline indicator.Housing Policy Interventions
Following the General Election, the new Government has confirmed its 1.5 million new homes target for this Parliament. Immediate action has been taken by the Housing Secretary to impose compulsory housebuilding targets on councils, with a warning of direct intervention if housing targets are not met. However, the Government’s New Towns programmes is now not expected to deliver any completed homes this Parliament, the Housing Minister told Radio 4’s Today programme. This raises questions as to how the 1.5 million new homes target will be delivered, without these major new developments coming forward at pace.
Further Government intervention on the demand side to support new buyers and home deposit savers is likely to be necessary over the next period to reverse the current housebuilding slump, together with far-reaching interventions for skills and building materials to meet a housing target that hasn’t been met since mankind first landed on the moon over 50 years ago. The HFI’s purpose is to support increased housing supply, back councils and businesses working together to build more homes and promote new ways to finance housebuilding.
Do get in touch if you would like to share ideas and suggestions on building the homes our country needs.
Best regards
Natalie Elphicke Ross
Head of Housing Delivery
natalie@hfi.org.uk
December 2024
