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What are the main parties' economic and housing policies?

Posted 2/07/2024 by Reeds Rains
Categories: Landlords/Lettings
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With much of the media coverage in the run-up to the election focused on the leaders themselves, immigration and other issues, we haven’t heard much at all about housing-related policies and the economic issues that impact this market.

There is some news and certainly some differences between the political party’s approach to the property sector, so, we’ve put together a round-up of eight key policy areas that could affect buyers, sellers, landlords, tenants and homeowners, and outlined what actions, if any, the main parties have pledged to take.

You can access more detail in their manifestos:

New housebuilding targets

The Conservatives promised in 2019 that 300,000 new homes would be built in England annually by 2025, they dropped this down from a ‘target’ to ‘advisory’ in 2022.

Last year, fewer than 250,000 homes were built across the whole of Great Britain, and the Construction Products Association is predicting that the government will be around 40% short of their housebuilding goals next year. So, boosting the supply of new homes is something the next government urgently needs to address.

The party’s main focus in this election is on home ownership and developing brownfield sites, i.e. land that’s previously been used, but is currently vacant or derelict. They pledge to deliver 1.6 million homes, mentioning areas such as Euston, Leeds, Liverpool and York.

Labour has said it would deliver 1.5m by the end of its first five-year term, with a push for development of ‘grey belt’ land – things like disused car parks or wasteland, rather than green fields.

Keir Starmer has also announced that his party would build the next generation of ‘new towns’: “New communities with beautiful homes, green spaces, reliable transport links and bustling high streets.”

Meanwhile, the Liberal Democrats announced to deliver the homes needed by expanding Neighbourhood Planning across England, building ten new garden cities and “allowing councils to buy land for housing based on current use value rather than on a hope-value basis by reforming the Land Compensation Act 1961.” They plan to deliver 380,000 homes which would include 150,000 social homes.

Planning reform

To achieve their housebuilding targets, the next government will need to make good on their promises to streamline and speed up the planning process.

According to official government figures for Q4 2023, only 39% of minor planning applications in England were decided within the statutory time period of 8 weeks, while only 20% of major applications were decided within the statutory period of 13 weeks.

Last summer, the Government held a consultation, in which they outlined their proposals for overhauling the planning system, with nation-wide reforms…including £24 million for hundreds of new planners to tackle the planning backlog.”

The Department for Levelling Up, Housing and Communities (DHULC) stated: “Measures in the consultation launched today will mean faster consenting, more effective consultation and more resources. Alongside this we have announced additional support for councils to help them speed up the delivery of vital infrastructure.”

The Conservatives current plan is to fast track planning and to build on brownfield sites, protecting the Greenbelt. They are looking to give councils the ability to control holiday lets.

Labour has stated that they will “update the National Policy Planning Framework…… including restoring mandatory housing targets.” And ensure planning authorities have up-to-date Local Plans, improve funding for more planning officers and that more funds will be made available by “increasing the rate of the stamp duty surcharge paid by non-UK residents.”. In addition, they pledge to “build a new generation of new towns, inspired by the proud legacy of the 1945 Labour government.”

The Liberal Democrats are focused on delivering more homes at a fairer price. They are very specific about their building too, pledging to build “ten new garden cities”. To deliver this, they would seek to encourage greater community engagement in the planning process and development of brownfield sites and propose introducing a ‘use-it-or-lose-it’ policy for developers if they don’t develop land when it’s been given full planning permission.

It’s worth noting that, in reality, this rarely happens because developers only make money once properties are built and sold, so there’s no reason for them to ‘sit on’ land and not develop it when they’ve been given the planning go-ahead.

In addition they plan to “Properly [fund] local planning departments to improve planning outcomes and ensure housing is not built in areas of high flood risk without adequate mitigation, by allowing local authorities to set their own fees.

Increasing the supply of affordable housing – especially in the social rented sector

The social rented sector has a serious shortfall of housing. Government figures reveal that at the end of 2023, in England alone, there were more than 112,000 households in temporary accommodation - an increase of 12% on the previous year.

And with many Local Housing Association (LHA) tenants who are eligible for social housing currently renting in the Private Rented Sector (PRS), that has exacerbated the shortage of private rented housing in general. So, building more affordable homes for rent is one of the key ways to solving the problem.

In 2021, the Conservative government announced their five-year £11.5bn Affordable Homes Programme, to deliver up to 180,000 new homes, of which 50% would be made available at a discounted rent and include affordable and social rent.

At the end of March 2023, the programme had delivered a total of 41,850 affordable rent homes and 16,808 social rent homes and was well on target. They pledge to continue this programme.

In addition, since the Conservatives launched their £1bn Build to Rent fund initiative in 2013, it has been a great success. As at Q1 2024, 208 local authorities have Build to Rent in their pipeline, and over the previous 12 months, the total sector pipeline grew by 4%, standing at more than 265,000 units.

Labour has stated that it will deliver “the biggest increase in social and affordable housebuilding in a generation”. They have promised to do this by prioritising “the building of new social rented homes and better protect our existing stock by reviewing the increased right to buy discounts introduced in 2012 and increasing protections on newly-built social housing.” And this will partly delivered by their ‘new towns’ of which 40% of new homes to be affordable. They have also stated they will review the Right to Buy.

And the Lib Dems have stated that they will “Help people who cannot afford a deposit to own their own homes by introducing a new Rent to Own model for social housing where rent payments give tenants an increasing stake in the property, owning it outright after 30 years.” And to end rough sleeping within the next parliament “Ensuring sufficient financial resources for local authorities to deliver the Homelessness Reduction Act and provide accommodation for survivors of domestic abuse.”

Helping first time buyers get on the ladder

First-time buyers have had some good support from successive Conservative governments. The Help to Buy equity loan scheme - which gave first time buyers (FTBs) an interest-free loan to supplement their deposit and ran for 10 years until 2023 - was a great success, helping FTBs buy around 330,000 properties.

Currently, there is a First Homes scheme, which allows eligible FTBs to buy a home for 30%-50% less than its market value. However, as the scheme isn’t yet widespread in England, it can be tricky for buyers to find a property in their area. The Government has pledged to add 10,000 properties to the scheme every year, but it will take time for this to develop.

And it has recently been announced that the Tory election manifesto will include a pledge to make the temporary extension of the nil-rate stamp duty threshold for FTBs permanent. It was raised from £300,000 to £425,000 in the September 2022 mini-budget and had been due to expire on 31st March next year, but Rishi Sunak is vowing to keep it.

In addition, there is a pledge to bring back a new version of Help to Buy and Meanwhile, the mortgage guarantee scheme that supports 95% mortgages is set to end in mid-2025.

Meanwhile, Labour has promised to move forward with plans for a 25-year fixed-rate mortgage called Freedom to Buy.

This would be of greatest benefit to FTBs, who tend to be on the lower end of the earning scale, as there wouldn’t be such pressure for lenders to stress-test customers – and the interest rates would be competitive.

They have also promised to give first-time buyers the option of buying homes on new developments, rather than properties being sold to international investors.

Rental reforms - particularly scrapping Section 21

There was not enough time before Parliament was dissolved for the Renters (Reform) Bill (RRB) to pass. So, although it had reached the 2nd reading stage in the House of Lords, it had to be abandoned.

Should the Conservatives win the election, they have pledged to resurrect this Bill and aim to progress it quickly. Although Section 21 will be scrapped, it won’t be until after the courts are reformed.

If Labour wins, we will see the RRB replaced with a renters' charter, which is quite similar, but goes slightly further with protecting tenants’ rights. It will include:

  • Abolishing Section 21 evictions
  • Extending ‘Awaab’s Law’ to the private sector
  • Ensure privately rented homes will meet minimum energy efficiency standards by 2030
  • Prevent discrimination by landlords – although it is not stated, this is likely to ban refusal to rent to those in receipt of benefits or with children
  • Allowing tenants to make reasonable changes to their rented homes
  • Scrapping rent review clauses in tenancy agreements and only allowing annual increases, which if ‘unreasonable’ can be challenged

It will also “seek to close loopholes that disreputable landlords might use to exploit tenants and jeopardise their security of tenure following the abolition of Section 21”.

And the Lib Dems have said they will keep fighting for a fair deal for renters who have been disastrously let down by this Conservative Government.” Their manifesto includes plans to introduce default three-year tenancies for renters and, similar to the other main parties, they intend to ban no-fault evictions and introduce a national register of licenced landlords.

Leasehold reform

The current government has made some good progress on leasehold reform, with the passing of the Leasehold Reform (Ground Rent) Act 2022, which restricted ground rents on new leases and extensions to existing leases to a ‘peppercorn’ (zero) rent. And when the Leasehold and Freehold Reform Act 2024 comes into force (date TBC):

  • It will be easier and cheaper for leaseholders to buy their freehold
  • Standard lease extension terms will be increased from 99 to 990 years
  • Leaseholders will have greater transparency over service charges
  • It will be easier for leaseholders to challenge landlords’ unreasonable charges at Tribunal
  • The sale of new leasehold houses will be banned (other than in exceptional circumstances)

On the other hand, Labour has long said that it would abolish the leasehold system entirely and enact mass commonhold. Although the party is still committed to this, in April it dropped its pledge to do so within the first 100 days of government, saying more time was needed to enact such a ‘radical’ measure.

Net zero and green energy initiatives

Despite reiterating the Conservatives’ commitment to Net Zero by 2050, the Prime Minister announced last September that he was scrapping or pushing back various targets, including:

  • The ban on new gas boilers in existing homes by 2025
  • The introduction of a minimum C rating on an EPC for new tenancies from 2028

The main reason he gave for delaying these changes was, essentially, the financial implications for people who are already struggling with the cost of living. He stated: “It cannot be right for Westminster.…to interfere so much in people’s way of life without a properly informed national debate.”

Nevertheless, the Conservatives are committed to continued investment in offshore wind farms, have lifted the ban on onshore wind and are backing the building of new nuclear power stations, which has not been done in the UK for 30 years. They have also announced a £2 billion financial injection for their Green Climate Fund.

The Green Party has said that £2bn is nowhere near enough and stated they themselves would spend £145 billion over 10 years to facilitate the retrofitting of homes with insulation. They would also have much stronger energy efficiency regulation and enforcement for the Private Rented Sector (PRS).

And the Lib Dems are pledging to cut greenhouse gas emissions to net zero by 2045 and make significant investment in renewable power so that it generates 80% of the UK’s electricity by 2030. They would also improve energy efficiency standards through a drive on insulation and a social energy tariff for those who can least afford their bills.

Meanwhile, Labour has doubled down on its commitment to Net Zero and stated it wants to move away from using fossil fuels in the power system by 2030 – that’s five years earlier than the Conservatives’ original target. It plans to create Great British Energy (GBE), a publicly owned clean generation company, which will harness green power to deliver energy security for the UK and cut energy bills.

Labour also intends to introduce a Warm Homes Plan to cut household bills by up to £500 a year, by installing energy-saving measures and giving local councils the power and funding to upgrade homes.

Public spending and taxation

When public spending increases, it tends to boost the economy. However, it needs to be kept carefully under control, otherwise inflation rises too quickly and then interest rates have to be put up to bring inflation back down again.

The big question is where the government gets the money from to spend on the public sector. It can only come from taxes and/or borrowing, so when investment is needed – as it is now – that means either reallocating current funding, raising taxes or increasing UK debt.

Given that the UK tax burden is currently at its highest since the second world war, all parties know that any rises would be deeply unpopular. Rishi Sunak is trying to appeal to voters by saying he eventually wants to axe all social security contributions paid by workers, and the Chancellor, Jeremy Hunt, has said he plans to make public spending cuts.

However, Labour – traditionally the party of increasing public spending - says cuts are unfeasible, and many economists are also of the same opinion, given the strain that so many public services are already under.

Labour’s strategy is to target the highest earners, by charging VAT on private school fees and taxing the overseas income of non-domiciled British residents. That will enable them to enact their promises to improve public services and end under-investment in things like infrastructure that are vital for economic growth.

General Election 2024 - At a glance

What should landlords do now?

The general feeling across the industry is that this election probably won’t affect the property market, because there simply aren’t that many differences between the Conservative and Labour housing policies.

Both are intending to build around 300,000 new homes a year with a focus on affordable housing, streamline the planning process and introduce similar rental reforms.

Really, the only thing that could have an impact is if Labour come to power and there’s an injection of public spending that causes inflation to rise again - although this isn’t predicted by most forecasters.

If it did happen, we could see the Bank of England hold the base rate where it is or even raise it – both of which could impact mortgage interest rates for borrowers across the board and cause the market to stagnate, then prices may start falling as those who need to sell compete for buyers.

However, as long as there are no unexpected economic shocks, what’s most likely is that the Monetary Policy Committee will start to bring the base rate down, possibly as early as August, which will encourage mortgage lenders to follow suit. And because of the continuing general shortage of housing versus demand in both the sales and rental markets, we’re anticipating seeing the usual cycle.

That’s a relatively quiet summer, followed by renewed interest in moving in the autumn – plus what often happens following an election, which is a ‘bounceback’ of activity once the new government and its policies have had a chance to settle.

So, as a landlord, if you’re currently looking at making a new investment and you find a good deal, we’d suggest there’s no reason not to move forward with it. Any policy changes that would affect lettings legislation will almost certainly take time to come into effect but, as always, make sure you ‘stress test’ your figures against things like interest rate rises and legal compliance costs increasing, before committing to buy.

That said, given that Labour is clearly keen to move ahead with scrapping section 21 sooner than the Conservatives, just make sure you understand the potential implications. We don’t anticipate it causing a real issue from an eviction perspective for good landlords, but do come and speak to us if you have concerns.

It’s also worth understanding Labour’s policies on taxation and things like Net Zero, which could potentially have a knock-on effect on your investment. In particular, whichever party wins the election, it is likely that in the next few years landlords will have to deliver homes with a minimum EPC rating of C (which was expected to come into law by 2028, prior to Rishi Sunak scrapping that deadline last autumn).

Really, what’s most important is that the next government – likely to be Labour, with a large majority of seats – makes good on its promise to boost the supply of housing across all tenures and make the right reforms to the PRS.

And, of course, every area is different in terms of prices, trends, supply and demand. So, if you’re thinking of investing or are currently letting property, do get in touch with your local branch. Our experts will be very happy to help you understand the local market and discuss what effect, if any, the election outcome might have on it.


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