Promises promises promises! What do the party manifestos mean for the property industry?

A general election is by definition about more than one issue; voters usually make up their minds on who to vote for based on a host of concerns that affect them. Of course, this election has been dominated by one fundamental topic which has polarised the country. I will however not touch on that particular subject in this piece and, like the arch villain in the Harry Potter stories, I will (try) not to mention its name.

The usual plurality of policies and promises may play a less significant part in this election than it has done in the past. But what the political players commit to in their manifestos remains hugely significant and will shape the future direction of the country in one way or another.

It is also quite right that people should scrutinise the policies that directly impact on themselves and the sector they are involved in.

Here, I will offer a brief overview of the pledges the political parties have included in their manifestos that relate directly to the property world. What are the key messages they will be campaigning on, when it comes to housing and the private rented sector, until the polling stations close at 10pm on 12 December?

Promises promises promises! What do the party manifestos mean for the property industry?

Whether they are in the position to deliver their proposals or even honour them when in power is a debate for another time, so I will not delve too deeply into the whys and wherefores at this stage. I will instead aim to outline the general direction of travel when it comes to the future of housing and in particular the potential impact on the private rented sector. Other wider policies such as those relating to the economy, taxation and investment will, of course, also have consequences for the industry, but I will leave you to absorb these in your own time.

Fortunately, in this analysis I do not have to begin from a standing start. The main political parties revealed a lot of their thinking over the last few months before the official publication of their manifestos. Through their conferences, press releases and spokespersons, we have had inklings of their thought processes and ambitions. In this piece, I am going to restrict my commentary to the English context, as the devolved nations have a different political dynamic, especially with regards to housing.

I have also benefitted from the opportunity of reading some very incisive commentary from those in the industry such as the article by Eddie Hooker, CEO of Hamilton Fraser, written in the run up to the manifesto launches. What follows, therefore, is a summary of the policies of the three political heavy weights who will be steering the direction of our sector if they gain power or influence in the next government.

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Conservatives

The Tories are in a strange place in that, although they are the incumbent government, due to their recent change of leader they are presenting themselves as a new proposition with a fresh agenda. This means that the proposals and policies of the past might not apply and the direction of their government may not be the same as before. It was therefore with a sense of anticipation that those with an interest in property awaited the release of the Conservative manifesto and looked to see what, if anything, had changed in regards to the still recent promises of the Theresa May administration.

In the event, if a change in direction was what people were expecting then this does not appear to have transpired. For all his talk of the need for stamp duty reform, Prime Minister Boris Johnson has now put this on hold. Instead his expressed priority is to deal with the cost of living for the ordinary person.

What is being offered to the house buyer is long term fixed mortgages that the Tories hope will have the effect of slashing the cost of deposits. In a pledge to enable local buyers who may be priced out of the market to get a foothold on the property ladder, house developers would, under a Conservative government, be compelled through Section 106 contributions to discount a third of all new builds.

A new Conservative government will however need to keep property developers on board to have a chance of fulfilling their house building programme, so how much pressure on affordability will ultimately be exerted remains to be seen.

There also appears to be a shake-up of shared ownership and Help to Buy on the horizon, which I think has been prompted by the relative failure of this type of scheme in the past.

There is no mention of the previously proposed New Homes Ombudsman, but this does not mean it isn’t in the pipeline; the document refers to providing the necessary mechanisms for redress. Leasehold is also a key reform area up for consideration and previous policies such as banning leases on new build homes and abolishing ground rent are confirmed.

The manifesto reaffirms the Conservative’s commitment to Right to Buy and, whilst a previous promise to offer the right to all social housing tenants has gone, the new manifesto states that housing associations can volunteer to adopt the practice and pledges to set up a number of new pilot schemes.

In terms of the private rented sector, the recent tax changes, namely Section 24 and capital gains increases, seem set to stay. The only upside of this decision for the sector is that it appears the other parties want to go further and harder on taxing rental income.

In the run up to the release of the manifesto there was much speculation in the industry as to whether the pledge to scrap Section 21 would feature. Rumours had been circulating that the Prime Minister was not as wedded to the idea as his predecessor and that a re-think may be on the cards. If this was the hope then there will be disappointment, as the commitment to ban no-fault evictions is clearly in the programme. There is however a caveat added to the pledge in the statement that, if you are a good landlord, your rights to possession will be strengthened. I can only deduce that this refers to proposed reforms of Section 8 and the introduction of a Housing Court.

A new commitment that has been flag-shipped in the manifesto is what is being called the “lifetime deposit”, which we know as tenant deposit passports. This is where a deposit is paid by the tenant at the start of their rental journey and then follows the tenant from property to property. The concept has been looked at by a working group set up by the Government, which includes the Tenancy Deposit Protection (TDP) schemes (including mydeposits, our sister company) and tenant groups. They were due to report this autumn but the Tories have jumped the gun and made this firm commitment. Of course, there will be many questions to answer before this policy can become reality.

One other thing that roused my curiosity by its absence, is the Tories commitment, or lack thereof, to property agent regulation. The RoPA report was being considered by the Government and the industry was welcoming of the expressions of support from the administration. It is therefore disappointing that this has not been acknowledged in their manifesto. It does not however mean it will not happen.

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Promises promises promises! What do the party manifestos mean for the property industry?

Labour

Jeremy Corbyn has stated that his party will deliver the most radical agenda for change in a lifetime and has targeted the housing sector as a key barometer for this change. I do not want to speculate on the feasibility of any parties’ commitment to build more housing, however Labour have been clear that the majority of their programme would come from publicly funded council houses. The plans include setting new rents for these homes based on their concept of local incomes and they promise to scrap Right to Buy completely for all social housing.

There is a lot of reference to Help to Buy and promoting this for people on ordinary incomes. There is little detail though and their idea of renter/owners buying increments of the property for amounts as low as one per cent are not spelled out in black and white in the document.

When it comes to Labour’s plans for the private rented sector, the “radical” idea of giving tenants the Right to Buy their private rented property has disappeared. A combination of the unworkability of such a scheme and the accusations that this was a Tory concept, have likely meant that this proposal did not make the cut.

What is in, however, is a commitment to rent controls, open ended tenancies and effectively the end of Section 21. Labour would also tighten up minimum property standards and empower tenants through renters’ unions. They want a property “MOT” and are now talking of fines up to £100,000 and rent repayment for landlords who rent out substandard property.

Despite the industry actively promoting this idea, the Labour concept is attracting some hostility from the sector. Part of this resistance is that enforcement of the current regulations is poor and there is a strong sentiment from many that further burdens are not needed.

Although the detail of Labour’s ideas remains to be seen, it is the headline grabbing subject of rent controls that will dominate the thinking of the sector and will be resisted by landlords and their representatives. This policy will however be very popular with tenants, and it is important to be aware that landlords are outnumbered on the voting front.

Another contentious policy is a call for wider licensing for landlords in the form of a national register. This, Labour maintain, would ensure standards are enforced. Some in the sector welcome the idea of a nationwide register, but Labour has not yet revealed whether this would be in addition to, or would supersede local licensing. Cost and red tape is the fear expressed by the landlord and agent associations when it comes to licensing in the form of a national register. They argue that additional pressures on good landlords could drive supply down, whilst allowing the rogues to prosper.

What might however be welcomed by the landlord community is the plan to scrap Right to Rent and the abolition of Universal Credit. The manifesto implication is that Labour will reintroduce direct payment of Local Housing Allowance, which they have also committed to raise.

The manifesto also promises wide reform of the leasehold sector, with the proposal to ban new leasehold homes and make enfranchisement affordable. Again there is no detail, but this pledge will no doubt prove popular and there appears to be a lot of cross over on the issue of leasehold reform with the aspirations of the other political parties, who have also been pushing for serious change to leasehold.

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Liberal Democrats

After a controversial, but on balance successful period in coalition government, the Lib Dems suffered a post coalition hangover where their electoral strength was significantly diminished.

What looked like being a slow recovery has picked up pace in the recent political climate. They have received a boost in popularity from across the political spectrum, and may well be pivotal in influencing the direction of the next government. The Lib Dems are clearly vying for the centre ground, but they are also seeking eye catching policies that appeal to the voter.

On housing policy, the Lib Dems have also got the Lego set out and intend to promote the building of new homes for the social sector. However they steer clear of calling it council housing.

They want to reform Right to Buy by devolving it to a local level and would release the cap on using the proceeds of any sales to fund new build.

In terms of getting first time buyers on the housing ladder, they will promote and support Rent to Own within the social sector to supplement Rent to Buy in the private market.

In the private rented sector, they too are pushing for longer tenancies and, whilst they do not call for external rent controls, they would want binding clauses in these tenancies restricting rent increases to inflation.

There is no indication that these tenancies will be mandatory, but landlords would need to have good reason why they are not offering this security.

In terms of deposits, the Lib Dems would offer a Help to Rent scheme, where deposit loans could be facilitated. The government would back these but would not necessarily stump up the cash.

The Lib Dems also want mandatory licensing and greater enforcement of current regulations. Finally, they too have called for the end of Section 21.