Propertymark: The new government must address the country’s housing crisis promptly

Propertymark responds to the result of the UK election, saying that the new government must address the country’s housing crisis promptly.

The UK General Election has returned the Labour Party to power with a parliamentary landslide, ending 14 years of Conservative government.

Aiming to channel the spirit of Clement Attlee with a proactive and strategic approach to housing, the party campaigned on a manifesto that promised significant changes to planning rules, strict targets for delivery of new homes, reform of the private rented sector (PRS), long-term schemes to help young people onto the housing ladder, and local powers for councils to take over empty commercial premises.

Tax and benefits:

Within their first six months in office, the new UK Government has pledged to consult on business taxation and publish a roadmap for change. They aim to replace the business rates system with a new regime that evens the playing field between online and physical businesses.

Additionally, the Labour Party promised to cap corporation tax at the current level of 25% during this parliament, as well as a review of Universal Credit. 

Propertymark will continue to call on the UK Government to look at landlords as small businesses and allow them to claim 100% of their mortgage interest when filing their tax returns. When George Osborne removed mortgage interest relief in 2015, the costs for landlords increased significantly, which acted as a disincentive for people considering investment in the private rental sector.

Section 24 of the Finance Act, the ‘Tenant Tax’ because the higher tax on landlords impacts their profit levels, increases their costs and results in higher rents for tenants. While many landlords do their best to keep rents down, the increased pressure from current interest rates has led many to raise rents to cover costs.

Housebuilding:

Starmer and Rayner have repeatedly positioned Labour as the party of home ownership, aspiring to reach an ownership rate of 70%, and committed to delivering the biggest boost in affordable and social housing for a generation. There is also a focus on reforming the planning system to speed up the building of their targeted 1.5m homes, making use of disused ‘grey belt’ land, and reintroducing compulsory local housing targets.

Labour has been clear that affordable, social, and council houses are a fundamental part of ensuring decent homes for all, stating they want to return social housing to the second largest form of tenure in the UK.

Propertymark encourages the UK Government to explore all viable methods of increasing the delivery of homes, and it will be pleased to see a re-introduction of local targets, something it lobbied for during the last parliament. However, the approach must not lose sight of the importance of creating decent homes that people want to buy in the places they want to live.

Planning:

Kier Starmer vowed to undertake an immediate blitz of planning reform during his first days and weeks in office, introducing fast-track approval and delivery of high-density housing on urban brownfield sites, and hiring more than 300 new planners funded by increased taxes on foreign property buyers.

Labour states their plans will give communities more say over how housing is built to best service local people while challenging those who question ‘if’ homes the homes people need should be built at all.

A package of devolution to Mayors, with stronger powers over planning and control over housing investment will be put forward, alongside strengthened requirements to approve new homes in areas that do not have an up-to-date plan. Poorly performing areas will face intervention from the central government, including using call-in powers in extreme cases.

Leasehold:

In May 2022, Lisa Nandy, then the Shadow Housing Secretary, said that Labour would step up and implement the Law Commission proposals for leasehold reform in full. Since then, the Leasehold and Freehold Reform Act has become law, banning most new leasehold houses in England and Wales, but there is much more work to do to implement all of its provisions, including a cap on ground rent.

In their manifesto, Labour recommit to enacting the Law Commission proposals on leasehold enfranchisement, right to manage and commonhold, and state they will take further steps to ban new leasehold flats and ensure commonhold becomes the default tenure.

Propertymark’s campaigning on leasehold reform stretches back to 2017, and Propertymark will continue to engage with politicians and UK Government officials to prioritise implementation and ensure that new regulations and secondary legislation are fair, practical, and fit for purpose. Propertymark supports abolishing leaseholds for flats and will work with Ministers and officials to develop their plans.

Commercial:

The new UK Government wants to give councils new powers to take over empty shops and reopen them without consent from the property’s owners. Empty Shop Orders would see councils work with owners to bring empty shops back into use after 12 months of vacancy. Councils would have the power to secure management rights, carry out works and put the property to use, with rent revenues being directed back to the owner. The premises would be offered to local small businesses for a discounted rent.  

Furthermore, communities will benefit from a new right to buy community assets to revamp high streets, which will include:

      • Doubling the moratorium on the sale of Assets of Community Value from six to 12 months
      • New guidance to encourage local authorities to take the designation of Assets of Community Value seriously
      • Looking at whether the definition of an Asset of Community Value should be updated to include land and buildings that provide wider opportunities and benefits to towns and villages across England, and how land and properties in significant disrepair can be bought and run by the community.
Energy efficiency:

As part of Labour’s Green Prosperity Plan (which will be funded by a windfall tax on oil and gas giants), the Warm Homes Plan would invest up to £6bn every year for ten years to give families the grants and loans they need to upgrade the energy efficiency of their homes, cutting energy bills and cutting emissions. Labour states this will save households up to £500 a year based on current energy prices.

Propertymark wants to see more energy-efficient homes, as long as new rules and requirements are realistic and achievable. It is positive to see a commitment to investing in sustained funding, although Propertymark needs to see more detail on who can access this and if the grants are generous enough to meet the actual cost of upgrades. 

Decision-makers must move away from a one-size-fits-all-all policy and develop energy efficiency proposals that work with the different ages, conditions, and sizes of properties, so grants and funding support can be targeted based on the archetype of a property rather than its tenure.

Mortgages:

Labour plans to make it easier for first-time buyers to obtain mortgages by launching a permanent Freedom to Buy mortgage guarantee scheme targeted at helping people who struggle to save a large deposit. Local people will also be given priority on the sale of new developments. Labour believes their plans will help 80,000 people onto the housing ladder over the next five years.

For existing homeowners, Labour will embed the principles of the Mortgage Charter which was agreed between the previous UK Government, principal mortgage lenders and the FCA in summer 2023. Lenders will be required to allow borrowers to switch to interest-only mortgage payments for a temporary period or lengthen the term of their mortgage period, and to reverse any support measures when the borrower requests. They must also wait six months before initiating repossession proceedings if a homeowner falls into arrears. As before, the plans appear to exclude buy-to-let mortgage customers.

The PRS:

Rental bidding wars

Labour proposes to require rents to be stated in all advertising and to make it unlawful for landlords or letting agents to initiate a bidding process to increase rent further, however, tenants won’t be prevented from voluntarily offering to pay more. 

There is minimal detail about how this will work in practice, or how it could be enforced, it appears to be a policy that addresses symptoms and not causes – and has the potential for unintended consequences which make things worse for tenants.

One risk is that, if price can’t be used to differentiate between multiple applicants, landlords may fall back on their perception of the lowest risk, which could disadvantage families with young children, people receiving benefits, and those with pets. Alternatively, the market could see a one-off upward adjustment in rents to compensate for the prices landlords may expect to achieve from a bidding process. When a similar policy was introduced in New Zealand in 2021, rents continued to rise strongly

Propertymark has lobbied politicians for several years on the issue of the chronic, long-term imbalance between supply and demand across homes of all tenures in the UK. Bidding wars are a symptom of this situation, where too many prospective tenants are forced to compete for too few properties.

What could be in a new renters (reform) bill

Licensing for letting agents and a new code of practice is part of the agenda for the new UK Government and is likely to be a central part of any new Bill. During the passage of the Leasehold and Freehold Reform Act, then Shadow Housing Minister, Matthew Pennycook, MP, tabled an amendment to implement the Regulation of Property Agents working group report, indicating there may be an appetite to carry forward those recommendations, which Propertymark has lobbied for extensively.

Labour has previously committed to producing a PRS White Paper within 100 days of taking office which would cover the removal of Section 21 and other familiar measures, including the right to have pets, the right to alter a rented home, rent arrears becoming a discretionary ground, and a national register of landlords.

Other proposals include a right to request speedy repairs, a four-month notice period for landlords, and making deposits portable between tenancies, plus a legally binding Decent Homes Standard which Propertymark would expect to include Awaab’s Law (requiring private landlords to act to eradicate mould and household hazards within a strict time frame). Labour also aims to make longer-term tenancies the norm, so steps to move towards this are likely to be part of their plans.

Courts:

As a former Chief Prosecutor and head of the Crown Prosecution Service, Starmer must be more aware than most of the issues in the UK court system.

However, despite their commitment to abolishing Section 21, there is no detail on how capacity in the legal system will be improved to cope with this. In their manifesto, there is only a high-level pledge to address the court backlog by allowing Associate Prosecutors to work on appropriate cases.

Currently, around a third of all possession cases are Section 21 (of the Housing Act 1988) notices which are ‘accelerated’ claims that bypass the court system. Plans to remove Section 21 and extend alternative grounds for possession will mean many more cases will go through the courts.

Landlords and letting agents have expressed fears that they could end up left in limbo, uncertain how long they will be expected to wait for a hearing and ultimately, possession of their property. The ability of landlords to access a swift, efficient, and cost-effective justice system is a key component of a successful lettings industry.

Propertymark supports a preventative approach to dispute resolution, which can potentially help more tenants stay in their homes and continue rent payments to more landlords. However, there will inevitably be situations where recovering possession of a property via the court system is the only viable option. However, the current system does not provide a reliable route to justice for landlords in these circumstances.

 

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