The Chancellor made housing one of the priorities of a “breathing space” Budget, with more grant for social rent, a new equity loan scheme for first-time buyers and a VAT change for land bought by housing associations. Much of the bigger reform, however, has been held back for the Government’s 10 Year Plan and the 2027 spending review. Here are the measures as we see them for the social housing and wider living and real estate sectors.
“This Budget points firmly towards councils and mayors being a key part of delivering the next wave of social housebuilding, with more grants, continued cheaper borrowing and new local funding powers. Councils cannot do it alone, though, and the real test will be how quickly they build partnerships with housing associations, developers and funders to turn that money into homes. Much of the detail, and the bigger reforms, are still to come.” Jon Corris, Partner, Devonshires
More grant, prioritised for council homes
The Social and Affordable Homes Programme gets a further £1.5 billion, taking total investment to more than £40 billion over 10 years and funding around 10,000 additional homes in England. It will be allocated between 2027-28 and 2030-31 and prioritised for Social Rent, “especially council homes”. Councils also keep the preferential Public Works Loan Board rate for housebuilding (40 basis points below the normal rate) for a further year, to 2027-28. With the emphasis on council delivery, we expect housing providers to look increasingly at partnering with councils through joint ventures, development agreements and delivery partnerships.
Zero rate of VAT on land sold to registered providers
From 01 April 2027, sales of land to registered providers will be zero-rated for VAT. Private registered providers in England and registered social landlords in Wales and Scotland will be able to qualify. This removes a cost that housing associations generally cannot recover, and follows the consultation announced in last year’s Budget. The detail will follow in secondary legislation early in 2027, which is likely to deal with apportionment, shared infrastructure, commercial units, changes in tenure and phased transfers. Registered providers with land purchases due around that date, or with deals currently structured around “golden brick” arrangements, should review their timing. We will publish a separate note on this shortly.
Your First Home
A new £4.7 billion equity loan scheme will help around 70,000 first-time buyers buy new-build homes in England. It offers 20 percent government equity loans, deposits from 2.5 percent and a five-year interest-free period. Household income caps are £110,000 (£140,000 in London). Price caps will be based on local median prices, up to £650,000 in inner London and £500,000 in outer London. Developers will pay a fee to take part, on a sliding scale to protect smaller developments. Pre-registration opens by the end of December, with first loans from April 2027. Housebuilders will need to price in the fee, and housing providers will want to watch how a 2.5 percent deposit product affects demand for shared ownership. Separately, a new First Time Buyer ISA will replace the Lifetime ISA for new savers from April 2029.
Planning and building regulations
The Government has promised no major changes to building regulations for the rest of this Parliament, other than continuing building safety improvements, including the Grenfell Inquiry recommendations. Residential brownfield sites of up to 1.5 hectares will be exempt from Biodiversity Net Gain, with the implementation timetable to follow. Planning authorities must publish key planning documents as open data by the end of 2027 to support AI planning tools. Wider reforms to build council capacity, cut the cost and complexity of development and release public land for affordable housing are left to the 10-Year Plan.
Construction and skills
At least 3 per cent of the workforce on large government construction and infrastructure projects will have to be apprentices, and £100 million will expand mayoral apprenticeship services. The National Living Wage rises by 3.9 per cent to £13.21 an hour from 01 April 2027.
“The Budget gives housebuilders some welcome certainty, with more funding for social housing and no major changes to the building regulations other than for building safety. But it does little to address the skills shortages holding back delivery. Apprenticeship targets are a positive but long-term step, and with labour costs rising, contractors will continue to face shortages, particularly in specialist areas such as fire engineering and fire risk assessment.” Michael Wharfe, Partner, Devonshires
Devolution and local finance
The Fiscal Devolution Roadmap gives mayors a 20 percent share of business rates from April 2027 and a share of income tax from 2028-29, and all strategic authorities will be given the power to introduce an overnight visitor levy. The aim is for local and regional government to retain 100 percent of business rates by the end of the decade, in place of central grant. There is £285 million in 2027-28 to set up Good Growth Funds, and a £1.5 billion borrowing facility for mayoral strategic authorities from April 2028, including subsidised lending. The Government is also exploring a greater role for mayors in decisions on the use of public land. Ten further devolution agreements are close to being finalised.
“Devolution is central to the government’s agenda and that has been reaffirmed by this Budget. This will see the role of local government in delivering housing significantly expanded. Given the deeper reservoirs of expertise in industry, a further expansion of joint ventures is probably the likeliest outcome when it comes to translating this into the delivery of new houses, but the crucial factor will be how this funding is delivered to and then spent at the local level.” Andrew Cromb, Partner, Devonshires
Private landlords
Income tax on property income rises by a further 2 percentage points from 6 April 2027, on top of the increase announced last year. The property basic, higher and additional rates will therefore be 24 percent, 44 percent and 49 percent (England, Wales and Northern Ireland). A £65 annual fee per property will apply to the new “Register your rental property” service from 15 December 2026, with around 4.9 million properties expected to be in scope. More positively, SDLT will no longer be charged on rent under assured tenancies in England, backdated to 1 May 2026 following the Renters’ Rights Act reforms. Taken together, these changes add to the pressure on smaller landlords and may bring more rented stock to market.
Tax treatment of sovereign investors
From 01 January 2029, the tax treatment of foreign sovereign wealth funds and similar foreign sovereign investors will be codified in a new statutory regime and extended to State Operated Overseas Pension Funds. Sovereigns are significant investors in UK real estate but are often not taxed in the UK at present, due to HMRC’s interpretation of international law. While the measure will largely preserve the existing tax benefits enjoyed by sovereign investors, certain income and gains from UK land will become subject to UK tax, with bespoke rules for investing through Real Estate Investment Trusts.
Other property taxes
There was no change to SDLT rates, or to the rule allowing purchases of six or more dwellings in one transaction to be taxed at non-residential rates, which had attracted recent press attention. SDLT group relief is tightened from 29 October 2026, so that relief is withdrawn where the purchaser leaves the group after the vendor has been wound up. The High Value Council Tax Surcharge on homes worth over £2 million in England (from April 2028) will include a deferral scheme, discounts and exemptions, and a 100 percent premium on homes left empty for 12 months or more. ATED charges rise by 3.5 percent for 2027-28.
Retrofit
The 0 percent VAT rate on energy saving materials installed in homes ends as planned, reverting to 5 percent from 01 April 2027, with heat batteries added to the list. The Warm Homes Plan loses £1 billion of capital grant, although the Government says most of the funding for low-income households and social housing, delivered by mayors and councils, is protected. Landlords planning retrofit works should factor the VAT change into their programmes.
Supported housing and homelessness
A licensing regime to enforce national standards for supported housing in England will be introduced in 2027-28, so providers should start preparing now. Additional rough sleeping funding now totals £874 million from 2026-27 to 2028-29. The Government’s value for money review of homelessness funding, including temporary accommodation and supported housing delivery models, will conclude in 2027.
What happens next
This was a Budget of targeted measures rather than wholesale reform. The extra grant, the VAT change and the Your First Home scheme are welcome, but much of the detail will follow in secondary legislation, guidance and scheme rules. The bigger questions on council capacity, the cost of development and public land have been left to the 10-Year Plan and the 2027 spending review. The direction is clear, though, that councils and mayors will play a larger part in funding and delivering homes, making partnership between councils, housing providers, developers and funders more important than ever. We will follow up with separate posts on this aspect along with the VAT change and some of the wider corporate tax measures included in the Budget.
If you would like to discuss any of the Budget announcements and how they may affect you or your organisation, please do get in touch.
