Saving for a home? The Budget has some bad news for you

This article was first published in LBC.

John Healey started his Budget as Chancellor by declaring it one ‘for the working people of Britain.’

But on closer inspection, it does little to help those workers with one of their most important concerns: housing.

For a start, savings interest will be taxed an additional two percentage points from April 2027, harming those saving for a home.

Rental profits will also be taxed an additional two percentage points. This comes on top of an identical rise announced by Rachel Reeves last year, due to take effect in April next year. For a basic-rate landlord, this means handing over 24% of rental profit to HMRC, up from 20% today.

This continues Labour’s self-defeating villainisation of private landlords. Most landlords in Britain are everyday people who own a small number of properties, such as a couple who choose to invest in property rather than a volatile pension.

Left-wing populists like to pretend that what is bad for landlords must be good for renters and first-time buyers. But this could not be more wrong. Tax burdens on landlords are rarely absorbed internally. They are mostly passed on to tenants in higher rents, many of whom are young people trying to get on the housing ladder.

Landlords have had a rough ride of late with stamp duty surcharges and the loss of mortgage interest relief, not to mention the onerous Renters Rights Act, leading many to either raise prices or exit the market. Yet this has done nothing to improve home ownership, as small landlords often simply end up selling to bigger ones.

Home ownership has barely moved in over a decade. By contrast, since 2010, single-property landlords have fallen from 40% of the market to just 20%, while larger landlords have increased their share. Punitive property taxes, coupled with runaway demand from immigration-driven population growth and continually missed housebuilding targets, have pummelled renters.

On top of this, the Lifetime ISA will be replaced by a new First-Time Buyer ISA, and a new equity loan initiative called Your First Home will replace the Help to Buy scheme. This may seem well-intentioned, but we have seen this before.

Subsidising demand for a product in short supply inevitably inflates its price. A 2024 study on the Help to Buy scheme by researchers from the London School of Economics found that in areas where supply was constrained (e.g. London), the scheme drove up housing prices rather than stimulate housing construction. As a result, developers were the real winners, while the scheme failed to help the buyers it was meant to support.

When you bring these two policies together, the reality looks bleak for the demographic personified by the viral “Nick, 30 ans” meme – that young professional renting in London or Leeds. As property taxes rise, so does his rent, stalling his savings and delaying his move onto the property ladder. When he finally gets the government top-up, artificially inflated house prices absorb the money anyway. As the Treasury taxes him on the way in and subsidises him on the way out, he is left with his head in his hands, right back where he started.

There is a better alternative. Rather than pouring more money into a demand-driven scheme, the government should expend effort on what actually works. That is, unlock land for development near major employment opportunities and transport links, make planning approvals easier and reform tax rules to incentivise housebuilding.

Britain’s housing issue is not due to a lack of homeownership schemes. It’s due principally to a lack of houses and ill-conceived burdens on landlords. Until a Chancellor is willing to address this directly, every Budget will continue this game of smoke and mirrors – giving cash with the left hand, whilst taking away affordable homes with the right.