As we near the announcement of who the next Conservative Party leader and Prime Minister will be, I have been spending some time going through the main points that each of the two remaining candidates outline when it comes to housing and the rental sector.
Any change in government can be somewhat of a nail-biting time for property investors, as there does tend to be a refresh of policy and direction. Whilst this can be the case, it’s also a good opportunity to review what is and what is not working (although not always in landlords’ favour).
I’ve compiled an outline summary of the main policy points for each candidate and, probably as you would expect, Rishi Sunak takes a slightly more reserved approach to Liz Truss.
I’m not going to get into political judgement and will leave you to draw a conclusion, but it does appear that Liz Truss’ reforms appear slightly more progressive than those of Rishi Sunak. That’s probably no surprise given Sunak’s previous position as Chancellor; however, the key is always in the delivery and overall economic success!
What Does Liz Truss Pledge?
- Reform of the mortgage market to include rental payments in affordability for purchasing a property. Several articles outline that this is for people looking to buy ‘their first home’.
Whilst this does not get over the need for a deposit, it could mean that buyers will be able to borrow more whilst also providing landlords some degree of ability to verify affordability on rental payments.
- Truss has gone on record saying that she is concerned by the levels of regulation faced by landlords, which is certainly a good thing given the huge forthcoming changes (such as the review of Section 21).
Within this, Truss has also explained how she is against rent controls, which she said would result in fewer properties being available to rent. A slowing down in regulation certainly is a welcome thing!
- A radical change to top-down, Whitehall set housing targets. Truss proposes to let councils set their own housing targets, scrapping national targets.
This could lead to a more realistic target at a local level, considering things such as infrastructure in more detail for example (such as where building is limited in areas of London due to National Grid capacity).
What Does Rishi Sunak Pledge?
- A renewed focus on developing brownfield sites, stopping the practice of land banking and blocking residential property from being built on the green belt.
A focus of building on brownfield sites certainly is a positive (but not a particularly new) policy, however blocking residential property from being built on the green belt has been criticised as it would drive up the overall cost of housing.
- LandlordZone outlines that there has been a lot of talk about helping social renters to move towards home ownership, however I have not been able to find much more detail on this point. I guess this would be revealed at a later date!
Certainly, the recent policy along the lines of enabling more social housing tenants to purchase their home is in this vein. However, whether this would be at the expense of the private rented sector is another factor to consider!
- Unlike Truss, Sunak has not called for any immediate tax cuts. The argument for this is that doing so would further drive-up inflation and is not affordable at the present.
My understanding is that one criticism of Truss’ policy of tax cuts, for example, is that it would lead to increased borrowing, simply pushing the COVID-19 debt burden down the line to the next generation.
- Sunak has made a big statement about needing to improve the energy efficiency of housing stock. There has also been a hint that insulation for low-income households will be prioritized over things such as heat pumps.
- In general, article outline that Sunak appears to be likely to take a very similar approach to regulation and reform as Boris Johnson.
This could, for example, increase the chances of widespread rental reforms actually happening. This includes things such as section 21 reform passing through parliament without any (or very minimal) changes.
Regardless of your political persuasion, the coming 6-12 months are certainly going to be interesting. A time where property investors will be glued to their news alerts, ready to adapt, strengthen and continue to thrive come what may.
Certainly, with the Bank of England base rate expected to continue increasing and mortgage rates going up for personal as well as limited company mortgages, the coming year could realistically set a new standard for the next decade.
Will increased mortgage rates coupled with house prices push more to rent for longer, driving the UK to become a nation of renters, will reforming legislation continue to punish landlords and favour tenants, will expectations around margins and rents need to be adjusted due to economic and policy pressure? We will certainly see!
What will be interesting however, will be to look back on this article in August 2023 and see what changes have actually taken place.