How does the Labour Government affect the Housing Market?
Discover how the Labour government’s policies in 2024 are set to impact the housing market. From potential reforms in housing affordability, rent controls, and property taxes to plans for increased social housing, learn what these changes could mean for buyers, renters, and investors in the evolving real estate landscape..
How has the 2024 Election affected House Prices?
The 2024 UK general election, which brought Labour to power, has introduced significant expectations for change in the housing market. Labour’s housing policies, which include boosting housebuilding and reforming rental regulations, could impact both property prices and rental dynamics over the next few years. However, the immediate effect on house prices has been nuanced.
Labour’s victory promises some impactful housing reforms. Their pledge to build 1.5 million homes over five years and reintroduce housing targets aims to address housing shortages. However, this will likely take time to influence property availability and prices on a large scale. Meanwhile, the rental market may feel changes sooner, as Labour has pledged to enact the Renters’ Reform Bill, which could phase out no-fault evictions and restrict rent increases. This could reduce rental market volatility but may also influence landlords’ willingness to stay in the market, potentially affecting rental supply and prices.
Overall, while Labour’s housing plans are ambitious, immediate effects on house prices are likely to be limited, with broader economic conditions playing a more substantial role in shaping the property market in the near term.
Increase of Housing Supply
The UK Labour Party has set out ambitious plans to address the housing crisis, with a focus on increasing housing supply, improving affordability, and modernizing the planning process. Key points of their policy include:
1. **Building 1.5 Million New Homes**: Labour has committed to constructing 1.5 million homes over the next five years, reinstating mandatory local council targets to address the current housing shortage. This target would involve collaboration with private and public sectors and prioritize energy-efficient, affordable housing development on “grey belt” land—less sensitive areas within the greenbelt.
2. **Affordable and Social Housing Expansion**: The plan includes building the largest number of social and affordable homes in decades, emphasizing affordable units in new developments and directing funds to housing authorities to boost social housing stock. Labour aims to improve planning obligations to ensure that developers prioritize affordability in large projects.
3. **Reforming the Planning System**: Labour proposes updating the National Planning Policy Framework to make it easier for councils to approve housing projects and encourage brownfield redevelopment, which helps use previously developed land while preserving more ecologically valuable greenbelt areas.
4. **Renter and Leaseholder Protections**: Labour’s housing strategy includes eliminating “no-fault” evictions under Section 21, improving rental property standards, and abolishing the residential leasehold system. This reform seeks to make the housing market fairer and protect tenants from exploitative practices.
Labour’s housing strategy is a response to rising rent costs and homeownership challenges across the UK, aiming to deliver stability and affordability in the housing sector. However, the ambitious targets will require overcoming logistical and planning challenges, particularly given the shortage of skilled labor and existing supply chain issues in construction.
Property Investment & Taxation
Since the Labour government assumed power, several tax changes have influenced property investment. A core focus has been on altering tax structures to encourage property affordability while increasing tax revenue from property ownership, especially targeting high-value and rental properties.
**Capital Gains Tax (CGT) Adjustments**: The Labour government’s Autumn 2024 Budget raised Capital Gains Tax rates for most property sales, moving from 10% and 20% to 18% and 24% on standard investments, while residential property sales remain at 18% and 28%. These increases apply to disposals from October 30, 2024. Additionally, the lifetime allowance for Investors’ Relief has been reduced from £10 million to £1 million, affecting property investors seeking tax relief on larger asset gains, effective immediately.
**Stamp Duty Changes**: Stamp Duty Land Tax (SDLT) has increased for second homes and buy-to-let properties, adding to the financial load on landlords and investors. This hike is intended to curb investment demand that might otherwise drive up property prices, making it difficult for first-time buyers to enter the market. By limiting landlord acquisition of additional properties, the government aims to enhance housing availability for prospective homeowners.
**Rental Market Impacts**: The government’s Renters’ Rights Bill introduced measures like rent caps and enhanced tenant protections. Together with the tax changes, these reforms are expected to reduce profitability for landlords, leading some to exit the market. This shift could, however, increase rent prices as demand outpaces supply. Labour’s policies have also dedicated funding for new housing and faster construction, aiming to alleviate the housing shortage over time.
Overall, Labour’s approach combines immediate taxation changes with long-term housing initiatives, hoping to make housing more accessible but affecting the viability of property investments.
New "First Dibs Policy" for First Time Buyers
Labour’s 2024 manifesto introduces several proposals to help first-time homebuyers access the housing market, addressing affordability and availability challenges. Key measures include the “First Dibs” policy, which aims to ensure that newly built homes in high-demand areas are first offered to local buyers. This step is intended to prevent properties from being purchased by investors or foreign buyers before locals have the chance to buy. Labour also plans to launch a permanent mortgage guarantee scheme, offering extra support to first-time buyers by making it easier to secure mortgages, especially for those with smaller deposits.
Additionally, Labour aims to improve affordable housing supply by bolstering the Affordable Homes Programme and enforcing stricter planning obligations to ensure more new developments include affordable homes. This approach includes a commitment to work closely with councils to prioritize social and affordable housing construction, with the goal of reducing barriers for first-time buyers and supporting homeownership among low-to-moderate income earners. Labour’s manifesto further promises to tackle leasehold reform by banning new leaseholds for flats and making commonhold the default ownership structure to protect first-time buyers from high ground rents and restrictive terms.
These strategies highlight Labour’s approach to addressing housing inequalities, prioritizing access to ownership for local and first-time buyers, and supporting a more stable housing market overall.
