Robert Trench in our Real Estate team highlights below just a few of the many changes that are likely to affect the real estate sector announced by the Chancellor, Jeremy Hunt, at the Autumn Statement on 22 November 2023.
Local Nutrient Mitigation Fund and Planning
In September, we saw the House of Lords reject the Government’s attempt to allow 100,000 new homes to be built by easing nutrient neutrality rules. It appears nutrient neutrality is still on the Government’s agenda as the Chancellor has announced £110m of investment over this year and next to deliver high quality nutrient mitigation schemes which he says will unlock the building of 40,000 new homes. This is good news for developers whose sites are located in river catchments and are experiencing stalled planning applications, although does not deliver anywhere near as much housing as the easing of the rules would have achieved.
Further good news for developers
Various initiatives should help speed up the development process and provide new development opportunities:
- £32m of additional funding to help ease the planning backlog and allow new housing quarters in Cambridge, London and Leeds resulting in many thousands of new homes being built
- £5m of additional funding for the Department for Levelling-Up, Housing and Communities (DLUHC) Planning Skills Delivery Fund for Local Planning Authorities (LPAs) to help target the planning application backlog, in theory resulting in stalled applications being processed
- The DLUHC will bring forward plans for Local Planning Authorities (LPAs) to offer guaranteed accelerated decision dates for major developments in England in exchange for recovering the full cost of considering planning applications. Automatic fee refunds will be issued where LPAs fail to meet deadlines for planning application decisions. This measure should incentive planning authorities to push applications through in order to secure full payment of their fees
- £5m to incentivise greater use of local development orders in England, in an attempt to end delays for businesses so commercial projects can secure planning permission faster
- The Government has announced that it is planning to respond in full to the National Infrastructure Commissions second infrastructure assessment next year, which will be followed by an updated National Infrastructure Strategy (NIS) to include measures to reduce consent times to an average of two and a half years. The NIS will also designate low carbon infrastructure as a national priority. Further, the Government will consult on updating the National Planning Policy Framework to ensure the planning system prioritises the rollout of electric vehicle charging infrastructure and introduce a new permitted development right to end the current restriction on heat pumps within one metre from a property boundary. All of these amendments should result in improved energy infrastructure for the country which undoubtedly will assist with developments
- An announced consultation on a new permitted development right to allow any house to be converted to two flats provided there is no change to the external appearance will commence in early 2024. If enacted following the consultation, this will provide further development opportunities and lead to the creation of additional housing.
Melanie Leech, Chief Executive of the British Property Federation (BPF) said “we know that two of the biggest blockers to delivering homes, workplaces and vibrant communities needed across the country are an inefficient planning system and delivery of the right infrastructure, and the Chancellor is right to focus on these as part of a wider plan to boost business investment and stimulate growth.”
The Chancellor has announced that the small business multiplier for calculating business rates will stay frozen at its current level for a further 12 months. The freezing of the multiplier provides a 75% discount on business rates over £110,000 for hospitality, retail and leisure businesses resulting in a £20,000 saving for the average independent shop.
Whilst the freeze is a welcome announcement, not all businesses will benefit. In response, Melanie Leech from the BPF also commented that “the Chancellor should have gone further and frozen the multiplier for all businesses to prevent the unsustainable burden on the high street rising even further” and “measures to provide relief for small businesses are welcome but only scratch the surface.”
Real Estate Investment Trusts (REITS)
Following the publication of draft legislation on REITS (publicly traded companies that own or finance income-producing real estate) in July 2023, the Government intends to make amendments to the rules to enhance the competitiveness of the regime with changes taking effecting following Royal Assent of the Autumn Finance Bill 2023. The changes will apply to accounting periods ending on or after 1 April 2023, or be deemed to have always had effect.
The Chancellor announced that the Autumn Finance Bill 2023 will see full expensing for Capital Allowances made permanent following the Spring Budget earlier this year. For companies, this will mean that investments made in qualifying plant and machinery, after 1 April 2026, will continue to qualify for a 100% first-year allowance for main rate assets and a 50% first-year allowance for special rate assets, including long-life assets. Assets such as cars, those for leasing and second-hand assets will be excluded from these first year allowances.
Whilst assets for leasing remain excluded from full expensing the Government will continue to consider whether there is a case for full expensing to be extended to leasing with its findings to be published in a technical consultation.
Unfortunately, there was no announcement in respect of stamp duty in the Autumn Statement. The lowering of stamp duty rates may have acted as a stimulus to the property market similar to that seen during the Covid pandemic but for now the current rates will remain.
Many property people are disappointed that some of the potential changes to Stamp Duty and other support measures for the housing market did not appear in the budget. Although there is a whole section of the budget dedicated to building and planning, which includes many welcome changes, there is an overwhelming feeling in the Real Estate sector that the Chancellor could have gone further. We will have to wait until the Spring Budget in 2024 to see what changes that may bring.