By Richard Cook, Senior Director of Economics, Pegasus Group

The Chancellor’s Autumn Budget was never likely going to be the moment that singularly solved the UK housing crisis. In many respects, it delivered exactly what the Government intended, which was to reaffirm its growth agenda commitment and to push many of the harder decisions around defence and welfare spending into next year.  

Some of the measures announced by the Chancellor will hopefully be positive for sectors like housing and energy. However, viability for housing development is still the elephant in the room. Nothing was mentioned about how the government is going to address this, especially in London where many developments are grinding to a halt because of the issue. It therefore remains to be seen whether the Government will ultimately get to grips with fixing the core ingredients of a thriving economy: namely, getting the housing market back on track and delivering the infrastructure the country needs.  

What the Autumn Budget represents is more of a promise from the Government to support the economy where it matters and to increase the role that mayors will play in delivering growth in their respective areas. It remains to be seen whether the measures announced will make any material difference to how the UK economy performs and the Government is going to have to do far more in 2027 to ensure growth does not stagnate.

 

The Government doubles down on Devolution

From a development perspective, one of the most significant positives in the Budget is a clear willingness from the Government to shift power away from Westminster into the hands of regional leaders. Combined Authorities have argued for years that local areas are better placed to identify where investment is needed.  

It is therefore welcome that the Government is planning for Mayoral authorities to retain a larger share of business rate revenues, alongside a new growth fund and a £1.5 billion boost in loans to support local investment and infrastructure.  

Whether every region makes optimal use of these new powers and funding is open to debate. However, the Budget demonstrates good follow-through on Labour’s Devolution Bill from earlier in 2026, especially since Combined Authorities like Greater Manchester and Liverpool City Region have already started to show the difference that a well-developed growth strategy can make. That said, other Mayoral authorities may still be finding their feet, and the Government’s next challenge will be to make sure that its devolution agenda delivers consistent growth across the sub-regions.

 

The Chancellor announced several measures that support housing delivery

There were various other welcome measures aimed at supporting housing delivery. These included: 

  • A £1.5 billion top-up in Government-backed funding for social and affordable housing 
  • Greater borrowing flexibility for councils 
  • VAT cut on social housing land 
  • Reduced biodiversity requirements on more brownfield sites – specifically residential brownfield developments on sites up to 1.5 hectares in England are exempt from BNG.  

Taken individually, these are sensible if not exactly revolutionary interventions. But when combined with the updated National Planning Policy Framework (NPPF), it is clear that despite an unforgiving economic environment, the UK Government is serious about making pragmatic changes to unblock housing development.  

 

Viability receives no mention and remains the most glaring challenge for housebuilders

Viability disappointingly received no mention in the Chancellor’s speech. While that is not entirely surprising, it is a problem that will not go away, and which sits at the heart of the UK’s housebuilding challenge. 

Across the country, viability is a roadblock to progress. With costs continuing to rise, unless developers see clear action and visible support from the Government, we could see housebuilding stall even further, particularly in London, where viability is an acute problem. London is a key piece for solving the UK’s productivity puzzle, considering the capital generates almost a quarter of the UK’s GDP. This makes boosting delivery of housing schemes in London paramount to the wider economy and employment market’s success.  

 The draft London Plan published over the summer has in fact reduced housebuilding targets by over 300,000 fewer homes than the Government’s original target. As our previous analysis shows, this shortfall will have widespread impacts on the capital, including London missing out on £41 billion of annual economic output as a result of the reduced targets.  

As a priority, the Government must therefore address the disconnect between planning policy objectives and the commercial realities of delivering development. Without addressing that imbalance, it is hard to see how policymakers will achieve the step change in housing delivery that they want to see.  

This matters far beyond the boundaries of the capital. If London’s housing market isn’t firing on all cylinders, then the national push for investment, labour mobility, and economic growth starts on the backfoot – when really, it needs all the help it can get.

 

The UK continues to be resilient 

The government’s positive rhetoric around the future path for development has been helpful, but we now need this to translate to concrete action. Once the government fully takes the regulatory handbrake off, and actively champions development across all regions, Britain can get building again and we will be able to see real tangible progress. Visible outcomes, such as planning approvals and construction starts, will go a long way to bolster the housing market in the final quarter of the year and into 2027. 

 

If you would like to discuss how this autumn budget may affect your development, please contact our team.

Richard Cook

Head of Economics

Other Property Updates from the Autumn Budget 2026 

Individual landlords and savers will see their income taxed an extra two percentage points higher from April, on top of the raid already planned by Rachel Reeves. The Chancellor’s announcement means landlords’ and savers’ income tax bills will rise by four percentage points under Labour, after Ms Reeves made the same announcement at the 2025 Budget. Property experts have warned that the tax raid on landlords was “incomprehensible” and risked crippling the rental sector. Some landlords may reassess whether to retain, sell or restructure properties. In addition, lower after-tax returns could influence the price a buyer is willing to pay for an income-producing asset. 

The Budget introduces a new Capital Gains Tax Founders’ Relief from 6 April 2027. Qualifying founders of high-growth, innovative companies will be able to access a 10% rate on up to £10 million of lifetime gains, subject to the scheme’s detailed conditions. The government is also reducing the lifetime limit for Business Asset Disposal Relief from £1 million to £500,000 from April 2027. 

Qualifying properties in England will benefit from higher Small Business Rates Relief thresholds. Qualifying retail, hospitality and leisure businesses will have a two-year real-terms freeze in business rates bills for 2027–28 and 2028–29. This may affect occupier affordability and landlord-tenant negotiations. Pubs, social clubs and live music venues will receive relief rises from 15% to 35% for qualifying properties. The government estimates that the higher relief thresholds will take around 70,000 additional high-street businesses out of business rates. For valuation and lease negotiations, business rates affect occupier costs and potentially rents, incentives and covenant strength. 

Residential brownfield sites in England up to 1.5 hectares will be exempt from Biodiversity Net Gain requirements, reducing costs and planning complexity for some schemes. 

  1. VAT zero-rating for land sold to social housing providers 
  2. No major changes to building regulations for the remainder of the parliament, except for improving building safety including implementing Grenfell Inquiry recommendations 
  3. Updated infrastructure pipeline exceeding £750 billion 
  4. Bring forward legislation to reduce the risk of legal challenges leaving critical infrastructure projects in limbo, enabling Parliament to designate and authorise certain projects 
  5. Tax treatment of pre-development costs being reviewed 
  6. Establishment of a Better Regulation Executive – a joint unit between Treasury and Number 10 – to implement the “government’s vision for a streamlined and proportionate regulatory system” 

Budget set out a roadmap for fiscal devolution that could help housebuilding by improved financial capacity to deliver infrastructure ahead of development: 

  • A further £1.5 billion in devolved loans for mayoral authorities 
  • A new Good Growth Funds for mayors, alongside incubator capital for areas without mayors. The Budget also includes examples of place-based investment, such as £10 million for Bristol’s Temple Quarter and new access to government borrowing for the Cambridge Development Corporation 
  • 20% of business-rates revenues will go to mayors from next year, with a commitment that 100% of business rates will be retained locally by the end of the decade. A share of income-tax receipts is also due to go to mayors from 2028. 
  • Mayors and other strategic authorities will be able to introduce an Overnight Visitors’ Levy from 2028 
  • New mayoral strategic authorities which could improve cross-council coordination on regional growth. The Thames Valley, Surrey, Hertfordshire and Wessex are among eight areas progressing 

Foreign sovereign investors will see a material change for international capital. From 1 January 2029, the UK government is modernising the traditional non-codified sovereign immunity from direct tax regime into a new statutory sovereign tax status. Key impacts on UK Real Estate (Resi Property) include: 

  • Tax and Rates: Foreign sovereigns will face a 15% tax rate on income and capital gains from UK real estate, alongside bespoke access to the REIT regime. 
  • Exemptions: State-operated Overseas Pension Funds and investment management activities by sovereign offices remain exempt. 

The main first-year capital allowance rises to 50% for qualifying expenditure from 1 January 2027, while the main writing-down allowance falls to 12% from April 2027. The Budget also promises changes to R&D tax relief administration and support for innovative companies. 

Includes the applicable charge in the cost of holding relevant residential property through a company. The 3.5% uprating reflects the inflation figure recorded in September 2026. 

The government will remove SDLT on rent paid under assured tenancies, effective from 1 May 2026 

Loan amount confirmed as 20% of the purchase price, interest free for 5 years, alongside a deposit of at least 2.5%. Eligibility: annual household income of £110,000 or less outside London, or £140,000 or less within London. A full list of price caps by local authority area will be published shortly, but they’ve given examples of £375k in Reading, £320k in North Devon and £650k in Inner London. These are primarily demand-side measures aimed to help the flat market and affordability crisis in tandem. 

The Budget includes a new deal for data centres. This is relevant to data-centre developers, landowners, infrastructure investors, energy providers and digital-property businesses. The opportunity depends on the detailed package, site eligibility, grid connections, planning and power availability. 

A further £1.5 billion for social and affordable housing, taking total capital investment above £40 billion over the next decade. 

The government will consult on expanding third-party reporting requirements for property income data, with the stated aim of improving tax compliance while reducing unnecessary interventions for compliant taxpayers. For PropTech, property managers and legal technology providers, this reinforces the importance of reliable, structured and auditable property data. This is a tax-reporting development, not an announcement of a new digital conveyancing system or a commitment to speed up HM Land Registry registration. 

The government has confirmed the introduction of a High Value Council Tax Surcharge in England for homes above £2mn, alongside deferrals, discounts, exemptions and a 100% premium for properties left empty for at least 12 months. 

The Office for Budget Responsibility acknowledged the tougher market conditions. For the five years to March 2031, it said Housing Supply will see 190,000 fewer net additions to the housing stock than forecast in March, reflecting higher interest rates and rising development-related costs.