UK Budget 2026: Breathing space for housing and high streets despite headwinds

Today’s Budget carries more political significance than most. It is John Healey’s first as Chancellor since succeeding Rachel Reeves in July, and the first fiscal event of Andy Burnham’s premiership, coming shortly after his first 100 days in office.

Before today's announcements, RICS set the Government a simple test: will this Budget improve viability, unlock investment and increase supply? We wanted to see practical measures that remove barriers to housing access, equip the built environment sector with the skilled workforce it needs, and reform business rates to encourage investment in property, regeneration and energy efficiency. At a time of economic uncertainty, businesses and developers need confidence and stability to invest, create jobs and deliver the homes and places communities need.

The Budget presents an early test of the new Prime Minister and Chancellor's economic strategy. Healey has promised an agenda that devolves power and moves money out of Westminster, while maintaining fiscal discipline and adhering to the Government's fiscal rules. However, his room for manoeuvre is arguably more constrained than that of his predecessor, Rachel Reeves. Elevated borrowing costs and the legacy of previous tax rises introduced under Reeves continue to limit his options.

Despite these challenges, the Chancellor has vowed that this Budget will provide both households and businesses with much-needed 'breathing space'. Healey will have to balance ambition against fiscal realities, as the Government seeks to maintain market confidence and deliver on its wider growth agenda.

Key announcements:

• First Time Buyer ISA:  The Budget supports first time buyers through additional assistance and the introduction of a new ISA product designed to help aspiring households build their deposits more quickly. To truly benefit first-time buyers, RICS have been calling for support to purchase both new build and existing homes, building on the recently announced Your First Home scheme.
• Business rates:  The Government has extended business rates support by increasing relief in targeted sectors, raising the Small Business Rate Relief threshold from £12,000 to £18,000, and freezing rates for leisure, retail and hospitality businesses. The Chancellor announced the removal of business rates relief from vape shops and Adult Gaming Centres, following announcements in the summer regarding government plans to improve high streets.
• High streets strategy: A new cross-government strategy to rejuvenate high streets, Hope on the High Street, has been published alongside the Budget, outlining ambitions including supporting strong businesses, vibrant culture, connectivity, safety and cleanliness, and active leadership.
  
• Planning and Building Regulation:  For England, the budget commits to reforming planning and regulatory barriers – including building regulations, to accelerate development and increase the delivery of new homes, and the removal of biodiversity requirements for brownfield sites. RICS stresses that any relaxation of building regulation, must not compromise building safety and quality.
• Data Centres: The built and natural environment will play an important role in the delivery of the UK’s significant AI ambitions. The Chancellor’s new deal for data centres will require their developers to invest in jobs and the local community through a new Data Centre Covenant that will have “strict tests that data centres must meet”.
• Direct energy support: A headline announcement in the Budget, was £100 in direct support for energy bills, paid to those in council tax bands A to D. This follows the cut to the gas standing charge, as well as the VAT cut on electricity announced in October.
  
• Biodiversity: The move to remove biodiversity net gain requirements from brownfield schemes up to 1.5 hectares in England is being offset by mandating it for Nationally Significant Infrastructure Projects from November 2026. 
• Devolution: future changes to how business rates are collected and distributed, with plans for local and regional government to retain 100% of business rates income by the end of the decade, aims to reenergise the devolution settlement, ensuring spending choices are delivered as locally as possible.
   

RICS Chief Executive, Justin Young, said:

“This is a budget that addresses some of the key challenges the built environment has been raising - from housing viability, to supporting first time buyers, and boosting the high street.

"We welcome the Chancellor’s acknowledgement of the financial pressures on developers and housebuilders. The Government’s decision to pause new regulations other than those for safety will be welcome news for housebuilders in the face of growing economic pressures. However, we recognise viability changes cannot come at the cost of building safety, quality or the environment.

"The announcement of a new dedicated First Time Buyer ISA could be very positive news for the wider housing market if it will provide support for first time buyers of existing properties, something RICS has been calling for in addition to the Your First Home scheme, which only applies to new build homes.

"As the Government publishes its long-awaited High Streets strategy, support for smaller businesses and high streets will be widely welcomed. Yet, fundamental reform of the business rates system to unlock investment and growth is still needed to ensure a more responsive system that supports long-term economic development in every part of the country.

"This Budget contains welcome steps in the right direction, and we look forward to working with Government to ensure they deliver real benefits for households, businesses and communities alike."

Simon Rubinsohn, RICS Chief Economist, commented:

"This was a Budget that looked to address the challenging macro-economic landscape that Britain finds itself in, with a number of small, direct measures to alleviate immediate challenges for the public and industry, from direct support with energy bills to targeted rates relief for small and medium sized businesses.

“However, for all the positive talk by the Chancellor, the overarching message from the Budget is a more cautious one. The growth forecast for next year was revised down to just one per cent and left at 1.3% for 2028. Meanwhile, borrowing is projected to be higher over the coming years, and the fiscal headroom has been lowered by around one-third compared to March. John Healey was keen to draw on the commendation from the IMF regarding the fiscal outlook for the coming years. These numbers are predicated on the Government sticking to the tight headline spending envelope contained in today’s statement as its looks to allocate department expenditures next year.

"The Office for Budget Responsibility’s estimates highlight the scale of the challenge the Government faces in addressing the housing shortage, a key focus of its strategy. Despite the introduction of the new incentive scheme, Your First Home, projected housebuilding has been lowered by 190,000 over the forecast period compared with the March assessment. The Government has introduced a range of measures including the passage of the Housing and Infrastructure Act, a revamped buyer assistance scheme, an additional £1.5bn into the Affordable Homes Programme and a moratorium on further regulation. Maybe this forecast from the OBR will prove to be an underestimate but with financial markets now seeing borrowing costs likely staying higher for longer, the financial arithmetic around both development viability and house purchase is likely to remain challenging.

“While the overall macro impact of the package will likely be modest, the direction of travel remains positive."