The new Labour Government is promising a wave of housebuilding, more affordable homes and reforms to the leasehold system. Kay Hill examines the party’s promises.
Labour swept to power in the General Election on a manifesto promising improved rights for tenants, more new houses and an overhaul of leasehold. The election was swiftly followed by a speech by new Chancellor Rachel Reeves, in which she promised to “get Britain building again”, and the King’s Speech at the State Opening of Parliament, which set out immediate plans to reform the planning system, abolish no fault evictions and “bring the feudal leasehold system to end”. Looking at these policies in more detail, what are they likely to achieve to help first time buyers?
EXPERT COMMENT
Labour’s plan to build 1.5 million more homes is a welcome policy initiative that will surely get more people on the property ladder. The way these targets are delivered is crucial as there is a lack of affordable housing in many parts of the country. However, any planning reforms should ensure that communities are being supported by infrastructure rather than just housing estates. We do not anticipate any immediate changes to the mortgage market. The sticking point for mortgages is the current base rate, and while overall inflation is within target, inflation for core services remains high. The Bank of England is not in a rush to lower interest rates without knowing for certain that inflation won’t be at risk of ticking upwards again. Rate cuts are more effective in stimulating the market than mortgage guarantee schemes. Labour has teased that there may be a new version of the Help to Buy scheme on the horizon. The buy-to-let market may see the most volatility, as potential increases to Capital Gains Tax might cause more landlords to exit the market, or pass the increased costs over to tenants. A proposed ban on “no fault” evictions will be a safety net for some tenants.
Iain McKenzie,
CEO, The Guild of Property Professionals
TENANTS’ RIGHTS
The high costs of renting have been disastrous for those who are trying to save a deposit, and the uncertainty of renting may push people to buy before they are ready. Labour will introduce a Renters’ Rights Bill, which will make it harder for landlords to evict tenants, will allow tenants to “challenge rent increases designed to force them out by the backdoor” and will “introduce new laws to end the practice of bidding wars by landlords and letting agents”.
Greater security will be welcomed by tenants, but if too many landlords exit the business, prices could go up rather than down. “As landlords adjust to these changes, there could be a temporary reduction in the supply of rental properties,” says Charles Kelly in his Money Tips Podcast. “Some landlords might sell their properties, leading to a more competitive market for remaining rental units.” And the plans to end prospective tenants bidding against each other could also backfire, says Prof Alex Marsh, Professor of Public Policy at the University of Bristol. “Another possibility is that a ban on bidding wars results in a one-off upward adjustment in rents. Rather than advertise a property at £1,500 a month and use the bidding process to ratchet that up to £2,000, simply jump straight to advertising at £2,000 from the outset. That might bring greater clarity, but it won’t restrain rental growth.”
BUILDING MORE HOMES
Everyone agrees that a shortage of homes is fuelling house price increases, so Chancellor Rachel Reeves’ announcement that Labour will deliver 1.5 million new homes in the term of Parliament is good news for first time buyers. The Government won’t build the homes, but has reinstated (and in some cases increased) compulsory housebuilding targets for local authorities, and will recruit more planning officers and make planning decisions for major developments nationally.
Rachel Reeves also announced that the Government would reclassify some unattractive greenbelt areas as “grey belt”, suitable for development. Estate agent Knight Frank identified 11,000 of these sites, which, combined with the Chancellor’s pledge that all developments on grey belt would have at least 50% affordable housing, could create new opportunities for shared ownership or other housing schemes. Steve Wood, CEO of the National House Building Council regards the moves as positive, “We welcome the new Government’s policy to deliver 1.5 million homes over the next five years, even if our new build registration numbers show there is a mountain to climb. Scaling up will take time but we can be encouraged by the Government’s announcements on new homebuyer incentives, changes to the planning system and investment in infrastructure, including power grids, water supply and roads.”
LEASEHOLD REFORM
Labour’s manifesto said it would “finally bring the feudal leasehold system to an end”, banning new leasehold flats, tackling unregulated and unaffordable ground rent charges and making commonhold the default tenure for new apartments. It would also enact the package of Law Commission proposals to make it easier for leaseholders to gain the right to manage the property and a share in the freehold, and end “the injustice of ‘fleecehold’ private housing estates and unfair maintenance costs”. The King’s Speech confirmed that a Leasehold and Commonhold Reform Bill will be drafted to put these plans into action, giving both leaseholders and those buying homes on estates with service charges more control over their property.
OTHER PLANS
Labour has longer-term ambitions, announced in its election manifesto, that didn’t make it into the King’s Speech – for example, the manifesto stated, “Labour will work with local authorities to give first time buyers the first chance to buy homes and end the farce of entire developments being sold off to international investors before houses are even built”. Before the election, Sir Keir Starmer also promised to deliver Freedom to Buy – a permanent mortgage guarantee scheme that would enable eligible first time buyers to purchase a home with a 5% deposit. The party also pledged to charge an additional 1% Stamp Duty on residential property purchases by non-UK residents. These proposals are not off the table, but are further down the line. Taken as a package, the new Government talks a good talk about tackling the housing shortage – and industry experts have broadly welcomed the reintroduction of housing targets. Yet the policies announced so far are not especially radical or different to what has gone before, so it remains to be seen what is actually achieved in the coming term of Parliament.
Expert Comment
The new Government is prioritising homebuilding, promising to deliver 1.5 million homes during its first term of office. With a nationwide shortage of some 4.3 million homes, this still leaves a big hole, but it’s a start. There’s talk of building on “grey belt” land. Knight Frank has identified 11,000 grey belt sites, which could deliver 200,000 new homes – a fraction of the 1.5 million promised but encouraging nonetheless. New towns are also being discussed but these are likely to be longer term projects. Arguably, the most promising area being targeted by the Government is unused brown_ eld land. This is land that has already been built on but which isn’t being used, including the empty shops and offices that blight our high streets. According to countryside charity CPRE, around 1.2 million new homes could be built using redundant brown_ eld sites. This would not only account for most of the Government’s 1.5 million goal, it’s also a vote-winner as green_ eld land is untouched and it will help bring our town centres back to life. It’s the quickest route to hitting the target, but the Government must actively encourage people to get into small-scale development to take on these projects, as larger homebuilders won’t touch them.
Ritchie Clapson, Co-founder, propertyCEO
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