By Reece Mennie, chief executive of Hunter Jones Group
Last month’s General Election debate threw a number of key issues into the limelight, with housing [or lack of] among the most significant.
Having emerged victorious, it could be argued that the new Labour Government certainly has its work cut out following the unfulfilled Conservative pledge to build 300,000 new houses per year by the mid-2020s – a pledge scrapped by Rishi Sunak in April 2023.
As such, many thousands of first-time buyers have been left incapable of getting a foot on the property ladder, with renters also battling both uncertain and volatile rates.
Get Britain Building Again
One of the Labour government’s most notable promises in addressing the housing crisis is to ‘get Britain building again’ by achieving a target of 1.5 million new homes on previously developed land that is no longer being utilised, more commonly known as brownfield sites, across England over the next five years. To facilitate this objective, councils will now be expected to prioritise building in these areas, as well as on poor-quality land in the countryside, also known as grey land, where 50% of new homes will be allocated to affordable housing.
The party’s plans come with the promise to rule out building on ‘genuine nature spots,’ in turn, saving iconic landscapes across the picturesque English countryside.
However, there are potential issues surrounding Labour’s ambitious building pledge – which equates to 300,000 new homes per annum until 2030 – with tough planning departments likely to create roadblocks that will make it considerably more difficult for developments on brownfield and grey land sites to be approved. As such, the government must put substantial investment into resources and planning to expedite the process, and truly ‘get Britain building again.’
Freedom to Buy
Labour’s leading housing policy is the new ‘Freedom to Buy’ scheme for first-time buyers, which has promised to help 80,000 young people step foot onto the housing ladder over the next five years.
Similar to the Tory mortgage guarantee scheme, the new government’s plan is to incentivise lenders to offer high loan-to-value (LTV) mortgages by acting as a guarantor for first-time buyers who can’t afford a large deposit. However, the success of this scheme will be reliant on how the market both perceives and implements the proposed policy.
While it might be easier for first-time buyers to get low-deposit mortgages, more first-time buyers could end up paying stamp duty. This comes after Labour’s promise to reduce the first-time buyer stamp duty threshold from £425,000 to £300,000, adding an average of £3,675 more to their purchase costs. This is a move deemed negative for first-time buyers, with Rightmove calling for Chancellor, Rachel Reeves, to retain the £425,000 Stamp Duty threshold amid concerns over its impact on those trying to climb the first step of the UK’s property ladder.
The Rental Market
The rental landscape surrounding the rental market remains ambiguous under Labour’s rule. Before the election, legislation known as the ‘Renters Reform Bill’ was going through parliament with the premise to ditch Section 21 notices, more commonly known as no-fault evictions, which allow landlords to evict tenants without reason. Now renamed the ‘Renters Rights Bill,’ the new legislation will prevent private renters from being ‘exploited.’
Although beneficial for renters, no-fault evictions pose a significant threat to private rental landlords. Without proper support from the government, landlords may be stuck in legal battles for months, paying out-of-pocket fees to evict a tenant from their property.
Landlord Action has reported an increase in instructions for Section 21 notices, and there are forecasts of more before the legislation takes effect. This proposed change in legislation has seen landlords selling up, due to the uncertainty of their investment.
As a result, increasing numbers of Landlords have been looking into alternative property investment routes, such as property bonds. Working like a loan to fund part of a development project, individuals are able to invest in real estate without having to legally own the asset and subsequently deal with financial costs associated with maintenance, insurance and tax – all while benefitting from higher rates of return when compared to buy-to-lets (BTLs). This is fast becoming a viable and lucrative alternative to consider with everchanging legislation in the BTL market.
Leaseholders
During the King’s Speech (when?) a new bill for leaseholders was announced, bringing forward reform recommendations made by the Law Commission in 2020. Meaning, property owners stuck in leasehold homes, which are harder to sell or remortgage, could be set for new protections under the Labour government.
The bill proactively promises to “act quickly to provide homeowners with greater rights, powers and legal protections over their homes”, overall proposing to regulate ground rents for existing leaseholders, so they aren’t subject to the rising and unaffordable costs. Government statistics show 86% of leaseholders pay ground rent, averaging almost £300 per year in England.
What’s Next?
Although the government has announced these new policies, it hasn’t provided clarity on how it is going to achieve these newly proposed targets. After all, there are many parties with vested interests that need clarity on what is going on, from the construction and built environment sector, to landlords, investors and homebuyers. They need to see transparency and action, and time will tell whether or not Labour can do what the Conservatives weren’t able to do in delivering affordable housing and successful incentives for first-time buyers.
For Landlords, however, it seems challenges with volatile mortgage rates and tenant legislation will remain the same. As such, the sector will likely continue to see a shift in investment towards the alternative investment market – a sentiment echoed by Charlie Bryant, the leader of property listing site, Zoopla, who affirmed: ‘Being a private landlord in Britain no longer makes financial sense’.
