Election watch: UK property & infrastructure

Our blog will cover all the UK property & infrastructure announcements in the run-up to the vote as and when they are made. We will update this page as more detail emerges

Monday 1 July 2024

Labour announced more detail around their plans to boost housebuilding over the weekend. Election-watch wonders if Labour is reading… and more on stamp duty.

In our blog of 17 June (below),  we noted that Labour’s manifesto mentioned building 1.5 million homes, with little detail on how this would be achieved, and we said  “Unless the Labour party has transformational legislation ready to go in their first 100 days to make these changes, or unless it unveils a large central pot to fund building thousands of council or social homes,  delivering this pledge will be a very tall order.”

Over the weekend, Labour revealed that it did have plans ready to go. In an interview with The Times, Kier Starmer, the party leader, and Rachel Reeves, the Shadow Chancellor, indicated that at least three housing announcements would be made in within two weeks of a Labour Government gets into power, which could happen on Friday.

Labour is going to:

• Publish a draft national planning policy framework before the end of July

Creating a new planning policy framework (NPPF) is no small job, and suggests Labour has been working behind the scenes to ensure their plans will be adopted by local authorities immediately. The last NPPF was published in December 2023, and it made local housing targets ‘advisory’ only. It is believed this happened after political pressure was applied by Conservative MPs.

• Announce a housebuilding programme in early July

This could take many forms – from plans for new towns, to funding programmes to help unlock development.

• Instruct local authorities to start a process of ‘regularly reviewing’ their green belt boundaries to ensure they are hitting housing targets during July

The plan is to encourage local authorities to identify green belt areas which will be reclassified for development – it could produce up to 738,000 new homes, according to research by Searchland reported by The Times.

It will be a busy policy month for local authorities, housebuilders, affodable housing providers, funders and all stakeholders in development if Labour win the election. The devil will be in the detail. Only a sea-change in current policy will move the dial on housebuilding in the UK.

Stamp duty update

Labour have also announced that they will allow the current stamp duty threshold at which the property tax becomes payable for first-time buyers – currently at £425,000 – to fall back to £300,000 in April 2025.

The rise in the threshold was introduced as a permanent change by Liz Truss, and then changed to a temporary move by Jeremy Hunt, the current Chancellor. The Conservatives have said they will make the change permanent if they get into power. But Labour are saying they will stick to the temporary change, and allow thresholds to fall back to pre-Liz Truss levels for first-time buyers in April next year.

If Labour get into power, expect a flurry of activity in the more expensive first-time buyer markets in London and the South East over the next six to eight months as first-time buyers take advantage of the higher threshold before it disappears in 2025.

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Monday 17 June 2024

As the dust settles after manifesto week, we look in detail at what the Labour party are promising if they get into power.

Why are political manifestos important? These documents are pledges that parties make for action they will take if they get into power. It sets out their mandate, and parties will often refer back to their manifesto.

A new Government is not obligated to pass all their manifesto promises into law and may in fact focus on some other areas of legislation not covered in the manifesto.

But one of the key reasons why the manifesto pledges are important is that under The Salisbury Convention, the House of Lords will typically not vote down government legislation that was outlined in the winning party’s manifesto. This is because the view is that the country voted the party into power based on these promises, so the second house should not intervene.

What are the key promises from Labour?

• Replace the business rates system

Labour’s manifesto says the current rates system disincentivises investment, creates uncertainty and places an undue burden on our high streets. However, there is little detail on how Labour would reform the system, other than it promises to raise the same revenue each year (£30 billion) but ‘level the playing field’ between the High Street and online retailers. Any reduction in business rates would be welcomed by firms, especially SMEs, but the lack of clarity on how the system would change so close to the election suggests this will not be a move delivered quickly should Labour get into power.

• Private rented sector: immediately abolish Section 21 no fault evictions

This move was on the brink of happening anyway under the Renters Reform bill which ran out of time to pass into law because the prime minister made a surprise election announcement. There was a clause which meant there would be a review into the county courts  to ensure that the overburdened courts system could cope with the tenancy reforms – whereas Labour will push through the change immediately.

• Increasing stamp duty for non-UK residents purchasing property by 1%

Under the current stamp duty regime, those buying a second property already pay a 2% stamp duty surcharge, and this will rise to 3%. This means for non-UK residents purchasing a home worth £1.5 million or more, they will pay 15% stamp duty, rising to 18% if it is not their primary residence, up from 17% at present.

The change will primarily affect the prime central London market, where there is a higher volume of non-UK resident buyers. However, the 1% surcharge is slightly lower than the additional 2% promised by Labour quite recently. Also, as mortgage rates come down, buyers who have held off buying in London are likely to return to the market – as the lifestyle, education and amenities offered in London still make it a draw as a global city for international residents. However, there is another Labour tax change that could also impact this market:

• Abolition of non-dom status

Under current non-dom rules, those who live in the UK can be domiciled elsewhere for tax purposes, and pay tax only on income which comes into the UK. Labour will change this rule, meaning that, in time, all income and assets worldwide will be taxable in the UK. The Conservatives have also pledged to scrap the non-dom rules, but with a transition period and a four-year ‘grace period’ for some non-domes.  Labour have said the change if they were in power would happen much more quickly.

So far the impact on the prime residential London market has been muted, with many recent buyers already factoring these changes into their decisions. There has also been relatively more interest from US buyers – these moves will have little effect on these buyers due to the US tax regime and tax treaties between the UK and the US. However, this move, combined with Labour scrapping VAT relief on private school fees (given education is such a large draw for families living in the UK) could mean some non-dom buyers either scaling down their budgets or choosing to base themselves elsewhere.

• Build 1.5 million homes over the course of the next parliament

Labour are not alone in printing large numbers next to their homebuilding pledge. But as has been examined in the other parties’ manifestos below – there needs to be large-scale change in the planning system, local plans, allowances for local infrastructure and amenities, presumption in favour of development, skills in the housebuilding sector and much more if these targets are to be met. The Labour party keep referring to the ‘grey belt’ – but simply re-naming some areas of the Green Belt that are more industrial or brownfield than rolling green fields won’t be enough to move the dial.  Unless the Labour party has transformational legislation ready to go in their first 100 days to make these changes, or unless it unveils a large central pot to fund building thousands of council or social homes,  delivering this pledge will be a very tall order. Ramping up housebuilding in a couple of years amid the swathes of red-tape and planning constrictions currently at play is simply not possible otherwise.

• New, permanent, mortgage guarantee scheme “Freedom to Buy”.

This scheme will provide government guarantees to mortgage lenders so they can offer homeloans to first-time buyers of when they only have a smaller deposit of only 5%. This is welcome news, as the ‘deposit-gap’ is a key part of the challenge of buying a home, especially for first-time buyers. Labour have also said that local people should get first dibs on new developments to stop international buyers purchasing the bulk of some new schemes.

• Renewed push to deliver gigabit broadband nationwide by 2030

It is good that Labour recognise that a renewed push is needed here. As we outlined our recent research on the UK’s digital connectivity, based on a large survey of MPs, signalled that NO Labour MPs were confident that the UK would meet its own target to have gigabit-capable broadband available nationwide by 2030. Our research outlines some ways a new government could accelerate progress – including an information campaign and digital champions, as well as changes to the planning system.

And what wasn’t in the manifesto?

Capital Gains Tax – there was no mention in the manifesto document, but the headlines have been dominated by questions over whether CGT will be raised under Labour. They haven’t ruled this out, but what does seem to have been ruled out now is the idea of CGT being levied on the sale of primary residences.

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Friday 14 June 2024

The Conservatives released their manifesto on Tuesday.

Why are political manifestos important? These documents are pledges that parties make for action they will take if they get into power. It sets out their mandate, and parties will often refer back to their manifesto.

A new Government is not obligated to pass all their manifesto promises into law and may in fact focus on some other areas of legislation not covered in the manifesto.

But one of the key reasons why the manifesto pledges are important is that under The Salisbury Convention, the House of Lords will typically not vote down government legislation that was outlined in the winning party’s manifesto. This is because the view is that the country voted the party into power based on these promises, so the second house should not intervene.

What are the key announcements in the Conservative and Unionist Party Manifesto?

• Deliver 1.6 million homes and permanently abolish stamp duty for homes up to £425,000 for first-time buyers and introduce a new Help to Buy scheme.

In 2019, the Conservatives promised to build 1 million homes in five years. This hasn’t been achieved, with Covid and lockdowns impacting on delivery. But also, the Government did not make any effective changes to the bottlenecks stopping housebuilding, especially planning. In fact last year the Government stepped back from local housing targets. Raising the delivery of new homes from around 200,000 to 320,000 is a very large ask, and will take years under the current regime. A very large overhaul of the system will be needed – but during the last Parliament, progress on a new planning regime was pretty glacial.

In this manifesto, the Conservatives are promising to abolish nutrient neutrality rules, and replace it with a one-off mitigating fee for developers to address any pollution created. This will be a popular move among housebuilders who have said this rule is delaying delivery on many sites around the country.

The Conservatives have also promised ‘fast-track’ planning for brownfield urban sites. Any plan to speed up planning is a good plan, but little detail on how it will be achieved.

The manifesto also promises that a Conservative government would require Councils to set aside land for small builders, and make sure local authorities use the Infrastructure Levy to deliver GP surgeries, roads and other infrastructure. The main questions here is – shouldn’t’ this all already be happening?

Help to Buy, the scheme to help those with a small deposit buy a new-build home was introduced in 2013, and ended in March last year, and some 375,000 properties were bought using the scheme. The Government has promised to re-introduce the scheme. Developers will be asking why they haven’t done this already.

There is also a plan to permanently abolish stamp duty for first-time buyers who buy a home valued at up to £425,000. This is currently in place as a temporary measure – it was introduced a permanent move by Liz Truss in 2022, but Jeremy Hunt, the Chancellor appointed in 2023, made it a temporary measure. Any cut to stamp duty is welcome, but making this a permanent change when they made it temporary in the first place seems convoluted.

• Private Rented sector: CGT break, and leasehold and renters reform

The Conservatives have also said they will give a 2-year temporary Capital Gains Tax relief for landlords who sell to their existing tenants, in order to boost homeownership.

The party also promises to complete the process of leasehold reform – ie capping ground rent to £250 a year and pass the Renters Reform Bill which did not get passed into law because of the sudden Election announcement.

• Digital connectivity

The manifesto says that the UK is on course for nationwide gigabit coverage by 2030. Our recent research on the UK’s digital connectivity, based on a large survey of MPs, signalled that only 44% of Conservative MPs surveyed in March were confident that this would actually happen.

• Cut the cost of net zero for consumers by taking a more pragmatic approach, guaranteeing no new green levies or charges, while accelerating the rollout of renewables

The Conservatives pledge to cut the cost of tacking climate change for households and business – and they say they will do this by “sticking to our pragmatic, proportionate and realistic approach that eases the burdens on working people”. There is no actual mention of deadlines for upgrading properties as measured by EPC ratings – the Government had been pledging to raise all residential rented properties to EPC C ratings for new lets next year, and commercial property by 2027, but last year stepped back from these targets. So there is no information for property investors on what the new timetable would look like.

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Wednesday 12 June 2024

It’s manifesto week – and the Liberal Democrats were first out of the blocks on Monday with theirs.

Why are political manifestos important?

These documents are pledges that parties make for action they will take if they get into power. It sets out their mandate, and parties will often refer back to their manifesto.

A new Government is not obligated to pass all their manifesto promises into law and may in fact focus on some other areas of legislation not covered in the manifesto.

But one of the key reasons why the manifesto pledges are important is that under The Salisbury Convention, the House of Lords will typically not vote down government legislation that was outlined in the winning party’s manifesto. This is because the view is that the country voted the party into power based on these promises, so the second house should not intervene.

Highlights: key promises from the Liberal Democrats

• Ensure gigabit broadband is available to every home and business, including in rural and remote communities, and support bespoke local communities so that no property is left out

This is a much-needed promise for the UK, as highlighted in our recent research report on digital connectivity, and the recognition that there will need to be some flexibility around how local authorities can deliver this is encouraging. But there are no timelines specifically outlined, and little more detail on how this would be achieved. However, the promise to reform the planning system would help – but again, little detail.

• Give communities more control over number of second homes and short-term lets in their areas

The Liberal Democrats would introduce rules allowing local authorities to increase council tax by up to 500% where homes are being bought as second homes, with a stamp duty surcharge on overseas residents purchasing these properties.

There have long been calls to overhaul council tax, with the current system based on valuations carried out in 1991. But the Liberal Democrats would not address this anomaly, but would instead create a separate planning class for second homes, and make them liable for higher council taxes. This would raise more money for local coffers in popular holiday home destinations, but there would be complex administration needed to apply council taxes at different rates to a property that could be a second property one month, and a main family home the next month depending on the buyer.

Some communities, especially in Wales and the South West of England, have already taken steps to create additional charges for new-build second homes, but for the Lib Dems, as for the main parties, the key will be striking the balance between local housing needs and the economic boost delivered by domestic tourism.

• Renters: immediately banning no-fault evictions, making three-year tenancies the default, and creating a national register of licensed landlords

Several of these pledges are already contained within the Renters Reform Bill (examined in our blog below on Thursday 30 May 2024) – which didn’t pass into law before the General Election was announced, but which we can expect to see in the new Parliament, regardless of who is in power. The Lib Dems call for three-year tenancies, but under the bill, periodic tenancies – with no specific end date – would become the norm. Under the bill, landlords would also be required to join a government-approved Ombudsman scheme.

Einar Roberts who heads our residential consultancy team and who has recently chaired the British Property Federation working group into tenure reform says: “I hope the sensible concessions accepted in principle by this government will also be accepted by the next, including importantly ensuring the Court system is ready to take on the additional workload that can be expected to follow the removal of Section 21.  I am heartened to see the Bank of England are monitoring Landlords’ responses to economic and regulatory pressures and understand the implications for financial stability if government doesn’t get this right.”

• Increase building of new homes to 380,000 a year across the UK, including 150,000 social homes a year through new garden cities

All the main parties are likely to make pledges about housebuilding – promising large volumes of homes. The issue is that it isn’t easy to deliver. In the post-war period, government-sponsored building programmes ensured very high levels of housing delivery – peaking at 350,000 in 1954. The system now relies on private housebuilders in the large part – and this means the economic and policy conditions need to be conducive to building – which many housebuilders would argue is not the case at the moment, especially around planning. Around 190,000 homes were built in the UK last year, down from 214,000 in 2019.

Addressing all the issues blocking new homes being delivered will take time and focus, but it will be necessary to lift the housebuilding numbers. For social housing, funding will need to raised considerably.

• Abolish business rates and replace them with a Commercial Landowner Levy

As with housebuilding, the Lib Dems won’t be alone in calling for reform of business rates. The non-domestic rating act which came into force last year was the start of this, but even Conservative MPs say more needs to be done to simplify the system. The Lib Dems first proposed this levy in 2018 – it would be paid by landlords, and calculated on the value of the land their tenants occupy. 

• Achieve net zero by 2045 – and as part of this, reintroduce requirement for landlords to upgrade the energy efficiency of their properties to EPC C or above by 2028. Also by removing restrictions on solar and wind power, and building the grid infrastructure required, and investing in energy strorage including battery capability

The current government has already introduced rules which mean that residential and commercial landlords cannot rent out their properties unless they are rated EPC E or above. But policymakers backed away from their target to increase this to EPC C next year for new residential tenancies and 2027 for commercial property.  It is likely that all parties will have a view on the timetables for re-introducing these targets, as the UK has pledged to achieve net zero by 2050.  Residential and commercial landlords who are not already factoring this into their plans will need to start considering how they upgrade any property which isn’t at the highest EPC ratings.

The focus on grid infrastructure is welcome, as the UK’s current system is struggling with increased demand and capacity.

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Monday 10 June 2024

Labour pledge permanent first-time buyer mortgage guarantee

What has been announced? Under “Freedom to Buy” scheme, the government will provide guarantees which will allow lenders to offer mortgages to first-time buyers who have a 5% deposit. The plan appeared in the media late last week.

What does this mean? Labour recognises that the housing market is a key election issue (see blog below from 3 April).

This pledge is really a continuation of the current Mortgage Guarantee Scheme (arguably Labour have improved the name of the scheme) which the Government introduced in April 2021 and is set to run to the end of June next year. The reason behind this scheme was that as credit conditions became more challenging as interest rates started to rise, the number of mortgages available for those with smaller deposits fell sharply.

Labour says making this scheme permanent would help 80,000 young people onto the housing ladder over the course of the next Parliament.

We are entering manifesto week – so stay tuned for all the latest housing, property and infrastructure pledges from the main parties.

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Thursday 30 May 2024

Leasehold & Freehold Reform Act passes

The Renters Reform bill has been kicked back into the long grass as the legislation was not passed in time before Parliament was dissolved today ahead of the Election on 4 July.

However, another bill concerning homes did make it into law. The Leasehold & Freehold Reform Act has been passed, justified on the basis it would make it easier and cheaper for leaseholders to extend their lease and buy the freehold to their property.

One key aspect which did not make it into law was capping ground rents payable. Michael Gove, the Secretary of State for Levelling Up, Housing and Communities had promised to do this, but it is not included in the final Act.

Key features of the Act are:

• A simplified valuation regime is provided
• Leaseholders will not have to own the property for 2 years before they can apply to extend the leasehold or purchase the freehold
• Ban on creation of new leasehold houses, except in exceptional circumstances
• Greater transparency on service charges
• Removal of the freeholder’s entitlement to any of the marriage value released on enfranchisement for properties with leases of less than 80 years

If you would like more detailed information or advice on how the changes affect you, our residential consultancy team can help.

Meanwhile there is increased speculation about what Labour will announce in its manifesto around its replacement on Business Rates. In the meantime, our Business Rates team have issued an update on the 2026 Revaluation which you can find here.

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Thursday 23 May 2024

Early Election announced – what does it mean for the UK property industry?

Yesterday evening, Prime Minister Rishi Sunak took many politicians (including some in his own party) and observers by surprise as he made an announcement outside Downing Street.

What has been announced? In a rather damp press conference Mr Sunak said he had requested permission from the King to hold a general election, and the polls to elect the next Government would open on Thursday 4 July.

What does this mean? Parliament will be prorogued on Friday 24 May, and there will then be a week where business continues before Parliament is dissolved on Thursday 30 May. Any bills not voted through during this time will not pass into law until Parliament re-commences after the Election.

Campaigning will then start in earnest among political parties in the run up to the vote on 4 July.

What do we know about the parties’ pledges on housing, property, and infrastructure? There is no set time when parties release their manifestos, which set out their policy pledges in detail. The Institute for Government says that since 1997, manifestos have typically been released between 18 and 29 days before election day, which would suggest they will be out in the next 2-3 weeks.

What does this mean right now? For the economy, an earlier election will mean markets will know what to expect during the second half of the year once a new Government is installed. At that point, it’s about policy and direction, but having the certainty of a Government with a five-year term will provide a more stable backdrop (barring any surprise announcements) as interest rates start to fall, and the economy hopefully slowly grinds into gear.

There is always discussion about elections disrupting the homes sales market, and there is some evidence that this can happen. At present, mortgage rates are the primary consideration for UK buyers, so the question of when the base rate will start to fall is the main concern.

Stickier than expected inflation data out earlier this week means that the chances of a June rate cut are slimmer, but the first cut could still come in August. If the election is done and dusted by then, and there are no shock housing policy changes, this could provide momentum for a pick-up in the housing market during the rest of the year. Those hoping to sell might consider listing sooner rather than later to be ahead of the curve.  

What we know so far: The two main parties have already made some pledges, although in some cases the detail is still missing. We review what they have said so far, below.

Rental property

Landlords have been monitoring the progress on the Renters Reform Bill, and the lack of time left for Parliamentary business may mean it is delayed unless the Government pushes it through in the coming week.

Rachel Reeves, the shadow Chancellor, recently said she would be in favour of allowing local authorities the power to apply rent controls. But there is no more detail on this. 

Stamp duty

Labour have said they will increase stamp duty by a further 2% for overseas buyers if they get into power, which means the those looking to buy will be keen to transact before 4 July to minimise the risk of higher charges.

The Conservatives have floated the idea of raising the threshold at which stamp duty is charged from £250,000 to £300,000 – there is more detail in the blog below this one.

Stamp duty is devolved in Scotland and Wales, so these changes would only take place in England and Northern Ireland.

Non-dom tax status

UK residents whose permanent home is outside the UK for tax purposes are described as ‘non-doms’.

This means they only pay tax on income earned in the UK, while other worldwide income is not taxed in the UK.

The Conservatives said they would phase out this tax status from April 2025, with a four-year grace period for new arrivals, and a two-year transition period for non-doms currently resident in the UK.

Labour have also said they would scrap the non-dom status, but in a quicker time-frame than the Conservatives – and it would not offer a 50% discount in the first year of the new rules for those who aren’t eligible for the four-year grace period.

Some 69,000 people claimed non-dom status in 2022, and there is a strong weighting towards London and the South East. The changes to the rules could lead some to reconsider their residency in the UK, and could impact the prime central London property market. However, there are other ties to the UK, not least the lifestyle, time zone, education and family ties.

Housing

Labour has said they will free up ‘grey belt’ for more housing – this is examined in more detail in our first blog below. Angela Rayner, the deputy leader of the Labour party, also pledged this week that Labour would build more ‘new towns’ – like Milton Keynes, Stevenage and Welwyn Garden City – and that the sites would be announced by the end of Labour’s first year in power. This would contribute towards the 1.5 million new homes Labour has pledged to build.  She also said that homes would be ‘buildings with character, in tree-lined streets that fit with nearby areas” and planning “fit for the future”.

However the detail on how this will be achieved is still vague, and the manifesto may have more information.

The Conservatives rowed back from their promise to build 300,000 homes a year by the mid-2020s (some 231,000 were built in England in 2023) back in 2022. Despite some attempt at planning reform, with a revised National Planning Policy Framework (NPPF) delivered late last year, Michael Gove, the Levelling Up Secretary also scrapped housing targets for local authorities.

Business Rates

Labour has pledged to replace business rates with a new system of business property tax, but there is little detail on how this will be achieved.

Energy

Labour has pledged to make the UK a ‘Green Energy Superpower’, and will set up Great British Energy, a publicly-owned clean power company headquartered in Scotland, which it says will lower energy bills for households.

At the Conservative party conference in 2023, Mr Sunak said the UK would seek a “pragmatic, proportionate and realistic” route to net zero.

The manifestos will have more detail around each party’s approach.

Digital infrastructure

Both parties believe there is work do be done to ensure that the UK meets its own targets for 5G and fixed-line broadband connectivity, as outlined in our latest research.

We await the manifestos to see if either party will commit to funding, or information campaigns, or planning reform to ensure the UK has the infrastructure it needs to be a global leader for connectivity – and benefit from the additional economic growth that would result.

We will continue to monitor key pledges from all parties in this blog as they are released.

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Monday 22 April 2024

The Stamp duty promise

Saturday’s Times led with the front-page headline “Tories consider cutting stamp duty in autumn statement”.

Changing stamp duty, the tax paid by those buying a home, has become very popular among politicians.

It is a lucrative tax, with stamp duty charged on residential property sales bringing in £11.7 billion for the Treasury in the year to March 2023. Raising stamp duty boosts the coffers. In turn, cutting the rates means politicians are appealing directly to those who aspire to own a home or move home.

Stamp duty started out as a low flat-rate tax on housing transactions. Back in 1997, stamp duty on the purchase of homes worth more than £30,000 was charged at 1%.

Since then, higher stamp duty rates have been introduced, thresholds have been changed, stamp duty holidays used to boost the market, and then separate additional stamp duty charges introduced for certain types of buyers, including non-domiciled buyers and those purchasing a second home, and more modest charges introduced for first-time buyers.

The current rates of stamp duty for those moving home are 0% on transactions up to £250,000, then 5% up to £925,000, 10% up to £1.5 million and 12% over £1.5 million.

For example, someone buying a home worth £350,000 would pay 0% on the first £250,000 of the purchase, then 5% on the remaining £100,000, resulting in a stamp duty bill of £5,000.

First-time buyers pay 0% stamp duty on homes worth up to £425,000, although this 0% rate can only be applied if the home is worth less than £625,000.

The increased complexity of the stamp duty rates mean that the HMRC calculator is a useful resource.

What has been announced? The Times story said that the Conservatives are considering raising the threshold at which stamp duty becomes payable on the purchase of a home from £250,000 to £300,000. Such a move would save those moving to a home worth more than £250,000 around £2,500. It is expected to cost the Treasury around £3 billion by 2028.

The change would not affect first-time buyers purchasing a home worth up to £625,000.

The Times news story said that the autumn statement would likely be held in September, another indicator that the party is planning to ‘go long’ on the election date – in November or later.

These stamp duty changes would be for England and Northern Ireland only as the tax is a devolved issue for Scotland and Wales.

What does this mean? Homebuyers will welcome any sign of a cut in the stamp duty payable on the purchase of their home.

The average UK home value is £261,000 according to Nationwide, and under the change, a home at this value would not incur any stamp duty. Average property values in every region in the North of England and Midlands, and Northern Ireland, are below the £250,000 threshold. If it were to rise to £300,000, average-priced homes in East Anglia and the South East would also be stamp duty-free.

The Conservative say that the change would mean around half of home-buyers would pay no stamp duty. However, official data shows that in the year to 2023, under the current £250,000 threshold, 48% of buyers already paid no stamp duty.

What is difficult to understand about the Conservatives making their plans public is the impact they think it will have on the market right now.

An active housing market is key for the UK economy. This was clear at the start of the pandemic when policymakers bent over backwards to get the housing market open and operational within a month, introducing new rules to allow house viewings, and then introducing a stamp duty holiday to encourage activity. At that time, they made it clear that the knock-on impact of people being able to buy homes, and move home, had a strong ripple effect on the consumption of goods and services – eg buying new kitchens and household goods, and employing tradesmen to change their new home, which contributes to economic activity and growth.

If the above is true, it seems odd to announce a change that might happen in five months’ time which could encourage some buyers to ‘wait and see’ before moving ahead with their purchase. This is why, in the past, stamp duty announcements are made in and around a Budget or Autumn Statement, and take effect almost immediately, in order not to distort the market.

Activity in the housing market was muted in 2023 as buyers and movers absorbed the impact of much higher interest rates, amid a cost-of-living crisis.

The market is just gaining some momentum which is expected to continue as we move closer to rate cuts in the second half of the year. If many buyers of homes worth more than £250,000 decide to ‘wait and see’, it will impact that momentum. It is also worth considering that average home values rose by £1,600 in Q1 this year, so those who do hold off may be entering a market where stamp duty savings are eroded by higher prices.

There are some key questions around timings:

What’s stopping the government just introducing the change?

Why didn’t they make the move in last month’s Budget?

The answer is politics. It’s a big headline for the Conservatives on housing in an Election year. And Labour will likely have to respond in their manifesto to show they are also keen to reduce the tax burden on those buying a home.

We welcome any cut to stamp duty bills for buyers. We would encourage further rises to thresholds and cuts to stamp duty rates to increase liquidity in the housing market. Sadly, announcing a stamp duty cut that might happen in five months’ time is not the same as cutting stamp duty.

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Wednesday 3 April 2024

Housing a top issue in Labour’s constituencies

Housing will be a key issue for the main political parties in the run up to the General Election, with a YouGov poll on 1 April showing it is the fourth most important issue for voters, after immigration, health and the economy.

No date for the election has been announced yet, and no manifestos have been printed, but a front-page article in The Times today has started to ramp up issue of housing with voters. The story says that the Labour party is targeting voters who are pro-housebuilding, and that this will strengthen the party’s move to build more on the greenbelt – something they first alluded to late last year. Housing is reported to be the top issue in a quarter of Labour’s 100 ‘most-winnable’ constituencies.

The major issue for voters is the difficulty of finding housing, especially younger people hoping to purchase their first home. At the same time, some constituents are vocal in their opposition to new development in their area, especially when it is not accompanied by the amenities needed to support many new residents, such as new roads, schools and healthcare facilities. These communities have been dubbed ‘NIMBYs’ (not in my back yard). Those in favour of development are now called ‘YIMBYs’ (yes in my back yard).

What has been announced? Nothing firm yet, but a Labour spokesman says that Labour will prioritise the release of ‘grey belt’ land within green belts while protecting high-quality green belt land, echoing what Labour leader Kier Starmer said late last year.  

What and where is the green belt? The green belt is a planning tool to prevent urban sprawl by keeping land around key cities undeveloped, wild or in agricultural use, rather than building. It covers 12.5% of the land in England.

The map shows the rough outline of green belt.

Source: Hellerick, own work based on data from http://data.london.gov.uk/datastore/package/area-designated-green-belt-land

What is the grey belt? This is a term used by the Labour party to indicate green belt land which is essentially ‘brownfield land’ – previously developed land which has fallen into disrepair – eg car parks, or wasteland.

What does this mean? Labour have pledged to build 1.5 million homes in the next Parliament – to meet that target, the delivery of homes would need to hit an average of 300,000 a year. This is a tall order under current conditions in the construction and planning landscape, as well as the economic backdrop. Labour would have to make some major changes to achieve this – hence mooting building on the green belt, creating a point of difference with the Conservatives who have pledged to protect it.

Pledging far more housebuilding, which would boost the availability of housing (ideally where it is most needed) as well as the knock-on economic benefits that come with new housing (e.g. employment in the building sector, sales of new kitchens and big-ticket items such as furniture etc) will be popular move among potential Labour voters, the Times says. It also comes at a tricky time for the Conservatives, after large-scale planning reforms proposed by Housing Secretary Michael Gove to boost housing delivery were watered down in the face of opposition from his own MPs worried about NIMBYs in their constituencies. 

However, this is just the starting pistol when it comes to housing – from new development to stamp duty and new rights for renters. Stay updated on all the latest news here.  

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