What real estate wants from the Budget

Industry leaders have urged the chancellor to use tomorrow’s Budget to support decarbonisation in real estate, cancel April’s business rates rises and invest in the planning system. Experts called on chancellor Jeremy Hunt to provide a clear long-term framework ahead of the upcoming general election. Decarbonisation was at the top of the wish list for several industry leaders. The British Property Federation has called for Hunt to make VAT zero-rated on residential repairs to support green retrofit projects, as well as introduce an upfront “green tax credit” for projects to improve the energy efficiency of commercial buildings. The BPF warned that the UK would not achieve its 2050 net zero target without government intervention, so incentives to future-proof older and inefficient buildings should be prioritised. Green incentives Changes to REIT rules would additionally allow property companies to invest more in renewable energy for their tenants, according to the organisation. The BPF also pointed to the need for a better payment structure for property companies selling surplus energy back to the grid, to maximise the sector’s potential to deploy capital to renewables.  Melanie Leech, chief executive at the BPF, said: “Ahead of the Budget, we urge the chancellor to reinforce the government’s ambition to be a world leader in tackling climate change by setting a clear policy framework for decarbonising the built environment. He must acknowledge the scale and complexity of the challenge to decarbonise our older building stock in particular, and create tax and financing incentives that can unlock investment. “There is huge potential to use our commercial buildings to generate renewable energy, but we need to make sure those companies that invest to generate power that is sold back to the grid are properly rewarded to do so.” Similarly, the RICS outlined its hope of seeing “energy efficiency improvements incentivised alongside sustainable investment” in the Budget. It added that it would also like to see tax relief for residents downsizing alongside affordable housing supply, and support for conversions to “help regenerate vacant properties, the cost of which could be recouped from future rates”. A spokesperson for the RICS added: “Business rates should be looked at and we would suggest that business rate relief is applied to a wider set of sustainable actions. Local authority planning should also be radically resourced.” Ditch business rate rises The chancellor was also urged to cancel business rates rises due in April this year, or risk putting the high street “under even greater threat than it is already”. John Webber, head of business rates at Colliers, said: “If the chancellor does not take action to reduce this rates burden, we will see more retail chains going into administration. Retail, leisure and hospitality relief may have provided a temporary reprieve to the small shopkeeper or independent restaurant but gives no help to the big retail and leisure chains who are the anchor tenants in so many town centres and retail spaces and provide the opportunities for jobs.” Webber added that Hunt should reduce the multiplier, reversing the decision made in November last year when he increased the standard multiplier using the September 2023 rate of inflation figure of 6.7p, since inflation now stands at 4%. Colliers called for Hunt to renew reliefs and extend retail, hospitality and leisure relief until the next revaluation in 2026. “The Conservatives won the general election in 2019 promising genuine reform of business rates and to ‘cut the burden of tax by reducing business rates’,” said Webber. “So far they have spectacularly failed their election pledge. “Instead, we have a system that hinders businesses from expanding and deters prospective investors from overseas avoiding making new investment here in the UK because the business rates burden is so high.” Calls for reform to the stamp duty land tax system also grew. Alex Michelin, founder and chief executive of developer Valouran, said “the present system is not working” and is “gumming up the housing market”. “It is preventing people from moving, stopping first time buyers getting on the housing ladder, affecting older generations because they cannot afford to move from their big old houses and is therefore reducing social mobility – the very bedrock of how society improves, and how the population moves forward,” he said. “It is a massive problem, and the government needs to act to free the market and allow transactions to proceed without so much friction and tax burden.” More focus on BTR The planning system also took centre stage. Brendan Geraghty, chief executive at the UKAA, said  the Budget provided the government with the prime opportunity to invest in and simplify the planning system to deliver new homes. Geraghty called on the government to encourage more local authorities to support the role of build-to-rent homes in communities as an alternative housing tenure. “The planning system remains the biggest obstacle to new home delivery and urgent reform is required, said Geraghty. “But we must provide homes of all tenures, to meet all needs, thus furnishing households with real choice regarding where and how they live. This includes delivering more build-to-rent homes across the UK – not to replace home ownership but as a housing tenure that promotes choice and delivers additional new, good-quality homes.” James Dickens, managing director of Wavensmere Homes, backed the call for increased support for BTR as another type of housing tenure. He said that while the market accounts for less than 2% of the UK’s housing market, up to seven people compete for each available BTR home. Dickens added: “It is no surprise we have therefore seen rent hikes of 24% at our Belgrave Village scheme in central Birmingham, and similar increases of 22% at Nightingale Quarter in Derby city centre.” Mike Derbyshire, head of planning at Bidwells, urged the chancellor to “look beyond the next election”. “We want investment in infrastructure, the gummed-up planning system to be fundamentally reset with growth and productivity at its core. You don’t get significant private investment in sustainability without this,” said Derbyshire. He added that such moves would be a “boon” to some of the UK’s highest potential industries, such as life sciences and renewable energy. Derbyshire said: “The chancellor must signal intent, we need long-term solutions needed to boost the UK’s growth and productivity and he needs to look beyond the next election.” Photo by James Veysey/Shutterstock