Property dreams – the key to this election?

Neil Chatterton, MD

Neil Chatterton, MD Caxtons Property Consultants, comments on the pledges that Conservative and Labour are making to win voters with property woes.

Centre stage

Millennials have taken centre stage during the election campaign, with both the main political parties targeting their housing policies at Generation Rent.

Younger people aged 28-43 years old feel locked out of the housing market to a greater extent than previous generations due to the housing shortage and spiralling property prices. Faced with a lifetime of renting, they are now struggling with hefty rent rises and the failure of the government to get its rental reforms onto the statute book.

Rishi Sunak’s snap summer election means the Renters (Reform) Bill, with its series of measures to strengthen renters’ rights, ran out of Parliamentary time and was scrapped. But there is hope in sight for this beleaguered generation as both Labour and the Conservatives have tailored their housing policies to woo Millennials.

House building boom

Both main parties are offering a major house building programme. The Tories are promising 1.6 million new homes in England over the next Parliament. They are offering a fast-track route through the planning system for new properties on brownfield land in the 20 largest cities.

Labour has vowed to build 1.5 million homes, including the creation of new towns, with the emphasis on affordable homes and social housing. They would adopt a “brownfield first” approach but also allow low quality greenbelt land to be re-designated as “greybelt” and used for house building.

 

Help for First-Time Buyers

The Tories have pledged a permanent increase to the house price level at which first-time buyers pay Stamp Duty to £425,000 (from £300,000). Plus, they are offering a two-year temporary Capital Gains Tax relief for landlords who sell to their existing tenants. Rishi Sunak has said this will give tenants “a chance to own the home they live in”.

They are also promising a new and improved Help to Buy scheme to provide first-time buyers with an equity loan of up to 20% towards the cost of a new build home. Plus first-time buyers would be offered a 5% deposit “on interest terms they can afford”, in a scheme funded by contributions from house builders.

Labour says it will help 80,000 young people get onto the housing ladder over the next five years. As well as giving local people “first dibs” on new homes in their area, the party is also promising to help first-time buyers and young people with a new Freedom to Buy low deposit mortgage guarantee scheme.

“As prime minister, I will turn the dream of owning a home into a reality,” Sir Keir Starmer pledged.

Plus, while many in the Labour party have long opposed Margaret Thatcher’s Right to Buy scheme – under which council homes are sold to tenants at a discount – the party says it would not scrap the scheme. Instead it would reduce the discounts and increase protections on newly built social housing.

 

Appeal to “Renter Ruth”

However, with an estimated just 30% of Millennials on the housing ladder by age 30, compared with 50% of their Baby Boomer parents, it is doubtful that either party’s offerings will counteract the effect of decades of house price rises far outstripping salary increases. The number of tenants in the private rented sector is estimated to have doubled over the past 20 years, and many of these voters look set to remain part of Generation Rent. Labour’s manifesto targets these voters who are seen as key to winning swing seats and have been given the epithet “Renter Ruth”.

The Tories have pledged to restore their Renters (Reform) Bill which they say would “deliver fairness in the rental market for landlords and renters alike”. Measures include scrapping Section 21 “no fault” evictions and strengthening renters’ rights, Labour has promised to match this and go further. They would also empower tenants to challenge “unreasonable” rent increases.

Both parties are also pledging packages of leasehold reform and action to curb ground rents, as well as support for leaseholders affected by building safety issues.

 

Landlords feeling the pinch too

While landlords have supported many of the recent rental reform proposals, some are nervous about this major shift in power between them and England’s 11 million tenants.

There is controversy over the move to end automatic evictions for tenants who fall into rent arrears and other measures such as allowing tenants to have pets. There were also affordability concerns over Government proposals – now scrapped but likely to be resurrected by Labour – requiring all rental properties to have an Energy Performance Certificate rating of C or better by 2030.

Landlords, like tenants, have felt the pinch from the cost of living crisis, especially the rise in mortgage rates. The original rental reform Bill introduced by the Conservatives, and which they would restore, recognises that “the vast majority of responsible landlords who provide quality homes to their tenants” have also faced challenges. It gives them new protections. These include making it easier to recover property for example to sell or when tenants “wilfully” do not pay rent. Plus there are stronger powers to evict “anti-social tenants” and a reduction in notice periods for “irresponsible tenants”.

 

It’s the economy, stupid

But perhaps the most important contribution to easing pressures on both renters, landlords and mortgage payers, is the wider economy. Although inflation has now fallen to the Bank of England’s target rate of 2%, it has cautioned: “we need to be sure that inflation will stay low before we can cut interest rates”.

Some High Street Banks have already reduced mortgage rates and there is hope that the Bank of England will reduce its Base Rate, and thus bring down borrowing costs, in the autumn.

Meanwhile skilled and careful management of the economy is at the heart of the election campaign.

The Tories say they are “restoring our economic stability after Covid and Ukraine”. They say inflation is down, real wages are up, growth has returned and they are cutting taxes to give working people financial security.

Labour says it will “kick start economic growth” and that: “We are the party of wealth creation”. It would deliver “economic stability with tough spending rules”. Plus it promises a new partnership with business and a National Wealth Fund to invest in jobs.

But whoever enters Number 10 on July 5th, they will be carrying the hopes of a generation on their shoulders, and woe betide any government which fails to deliver on its promises to Millennials.

 

We know that manifesto policies are typically general in nature and even when specific, take time to be implemented, some change over time and might not be successfully implemented at all. Whilst political uncertainty can cause short-term hesitations, the long-term impact on the housing market is typically mitigated by the time it takes for policies to be implemented and the broader economic context. This suggests that the period around elections is not necessarily more risky for the property market than other times. Ultimately, whichever party gets in, with inflation down and interest rates likely to fall, hopefully, it will be a better time for the property market.

 

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