Latest in Lettings Issue 6
THE HOUSING GREEN PAPER
restated Government objectives in terms of new homes to be built during the next ten years but paid no attention to the Private Rented Sector which without subsidy and in the face of an inequitable tax regime is now the only source for new homemakers unable to afford to buy.
New builds are far below government targets, the share prices of the major developers are marked down since their profits are below forecast. Who will start new developments or continue with those in progress if completed houses remain unsold and sales "off plan"" are things of the past?
'Communities England' - the new housing quango formed from a merger of English Partnerships and the Housing Corporation and which will include same functions of the Department of Communities and Local Government (DCLG) will control £5 billion of government investment.
Margaret, Baroness Ford, formerly the chair of English Partnerships has spent months planning the three way merger and hopes it will be called not Communities England but the New Homes Agency.
Plans already announced include the ability to fund in advance the road and utility structure for new large scale developments and major disposals of land owned by national and local government, the NHS and MOD. Developers contribution to the costs of infra-structure are likely to be met by local authorities charging a "roof tax" on the lines the scheme operated first in Milton Keynes; although these will always be a temptation for local authorities to recoup their own expenditure in operating planning, building control and inspection departments.
THE PRIVATE RESIDENTIAL SECTOR
is exposed to a number of new risks that could not have been foreseen a year ago. Mortgage funds for investors in residential property may be harder to come by, shares in specialist lenders are under pressure as hedge funds short the stocks of Paragon, Bradford and Bingley and Alliance and Leicester who all rely to a greater or lesser extent on inter-bank lending to fund new mortgages. Assuming that enough new money can be found it will cost more so that interest costs must rise and the specialist lenders will look hard at borrowers financial status and credit records.
An attack this week by the Institute of Directors was unexpected and unwarranted. Displaying a total ignorance of the tax regime that applied to the PRS, the Institute demanded that mortgage interest costs should no longer be a deduction allowable for tax purposes. A strange occurrence since the members of the Institute of Directors - executives and directors of smaller companies and independent management consultants - are the very people attracted to residential investment.
Finally if the Capital Gains Tax rules are changed in April 2008 as proposed in the Financial Statement landlords may be tempted to sell since tax will be no more than 18.5% - not 40%.
LEGISLATION REMINDERS
Section 153 of the Commonhold and Leasehold Reform Act 2002 came into force on 1st October 2007. Agents and landlords who manage long leasehold properties should check their procedures are up to date.
Fire Risk Assessments must be prepared for the common parts of blocks of flats and adequate precautions - emergency lighting, fire exit signage and notices, and fire equipment installed and existing extinguishers and equipment checked.