Labour's first month in government - What does it look like for property?

September 5, 2024

On Thursday 4^th July 2024 the Labour Party swept into government with a huge majority and Keir Starmer took over as Prime Minister. The change in government had been expected for a long time, but now it is upon us and we can begin to see what that means for the property industry.

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Highlights include:

• 1.85 million homes built in the next five years.

• Planning process to be overhauled

• Renting reform to introduce long-term stability into the sector

• End to extortionate ground rents

• End to leaseholds on new properties

• Greater stability leading to long-term gains for property buyers

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Housebuilding is always a central feature of any election campaign and this one was no different. Labour devoted a large chunk of time to laying out its property plans and it is fair to say that the industry has reacted favourably.

The big headline is that the new government plans to build 1.85 million homes over the course of the new five-year Parliament. This is a huge number and in line with the previous government’s estimate that 300,000 new homes are needed each year to meet demand.

However, until now that target has been missed by a wide margin. In the 2022/23 financial year, just 212,568 were built according to government figures and new starts fell by 16%.

To turn this around and deliver the houses people need, Starmer promised “shovels in the ground and cranes in the sky” to deliver “more beautiful cities [and] more prosperous towns.”

He added: “A future must be built.”

To do this, Labour will introduce the Planning and Infrastructure Bill as a main priority. Building targets were previously missed for many reasons, but chief among them was the inadequate planning system and the inability to build on any land designated as ‘green belt’.

Labour’s plans include streamlining the planning process by increasing the government’s ability to overrule local opposition, and redefining what counts as ‘green belt’. The party will designate much of the land as ‘grey belt’ and bring huge amounts of new space up for development.

Between this and the news that the projected building boom will be led by private developers rather than social housing providers, housebuilder stocks rose and the industry responded with confidence.

Neil Jefferson, chief executive of the Home Builders Federation, said: “The home building industry stands ready to support the [government’s] ambitious plans for housing with investment, job creation and the new homes the country needs.

“We can only build if we plan effectively and if councils take responsibility for the housing needs of their communities.”

For property investors and homebuyers, that means more developments will be built, offering more choice and more opportunities around the UK’s best property hotspots.

Where development had previously been held up by a variety of factors, the industry seems confident that the new Labour government is taking measures that will unlock the potential of property and provide greater opportunity for all.

In addition, the government is planning to bring two long-awaited pieces of legislation into law. The first is the Renters’ Rights Bill which will end ‘no fault’ evictions and offer greater certainty to both renters and landlords.

Longer, more secure tenancy contracts will bring an end to lots of the uncertainty around renting and create a better rental sector. More secure tenants means fewer void periods for landlords and a more predictable long-term income stream.

Another measure that should be welcomed by investors and homebuyers alike is the Draft Leasehold and Commonhold Reform Bill. This is the plan to reform the leasehold system which includes a ban on extortionate ground rents and leasehold terms on new flats.

In both cases, property buyers can be pleased with the upcoming law. Ground rents are a major expense for anyone who buys a leasehold property. The expense cuts into your monthly income, and also makes it more difficult to sell a property and release capital gains. In both cases, limits on ground rents are to the benefit of property owners.

Secondly, the abolition of leasehold tenures on new properties will be another advantage for buyers. Once this bill comes into force, buying a new property means that you also own the freehold and will not owe ground rent to a distant leaseholder.

Crucially, all of this will be possible thanks to the stability that the new government brings. Legislation is all well and good, but the biggest change for the world of property is likely to be the fact that the government is thinking long-term.

The previous Conservative governments managed to get through 16 housing ministers in just 14 years. Constant personnel changes led to unclear priorities and a lack of focus. House builders, home buyers, investors and everyone else connected with property couldn’t plan for the future with any certainty.

That has now changed, with the new secretary of state for housing, Angela Rayner, working directly with the Chancellor, Rachel Reeves, to provide clear leadership and direction for the sector.

That has made Labour’s first month in power a very promising and positive time for property. Stability in government and a long-term plan are already leading to good results, and we can predict that these circumstances will also provide a basis for continuing house price growth in the market as certainty becomes the most important feature in the sector.

Interested in investing in UK property and benefitting from the stability provided by the new government? Explore our investment opportunities here.