With Theresa May announcing £2bn for new social housing last week, all things housing (and property) related were high-up on the agenda at the Labour Party conference which ended yesterday. In the event of a Corbyn-led Labour government anytime in the near future, what would the announcements over the last few days mean for property investors?

Tenants will have more powers

Labour’s shadow housing secretary Jon Healey announced 20 million pounds of funding for renters’ unions, during his conference speech. Unveiling the proposals, he said he wanted to to ‘put power in the hands of tenants.’ He added, ‘Labour’s new commitment is clear: we’ll give renters new rights to control rental costs, improve conditions and increase security.’

The new renters’ unions would provide advice and representation for the 11.5 million private renters in the UK. The idea is that the unions would mirror organisations such as the National Landlords Association, which represents the UK’s 30,000 private landlords.

Photo: Rwendland @Wikimedia Commons
Photo: Rwendland @Wikimedia Commons

Renters are an increasingly significant section of the electorate: a quarter of UK households will rent privately by the end of 2021, up 4% from the 21% who rented privately in 2017.

In Germany, where renters’ unions are more common than in the UK, less than a quarter of private renters pay over 40% of their income on rent, compared to almost a third of private renters in the UK.

The National Landlords Association (NLA) welcomed the announcement on funding for renters’ unions. However, they added that the unions should remain ‘politically neutral.’

Holiday homes will be taxed (but not if they’re rented out)

Healey also announced that properties used as second homes would be subject to an average tax bill of £3,200. The £560 million pounds raised by the proposed levy would be spent on tackling homelessness. The good news for investors is that this won’t affect second homes which are rented out. Nonetheless, the new tax could hit up to 174,000 properties in England, particularly in Cornwall and the Lake District.

Photo: Geof Sheppard
Photo: Geof Sheppard

It will be harder to evict tenants…

Section 21, which allows landlords to evict tenants without giving a reason, will be scrapped. According to research by the Joseph Rowntree Foundation, over 80% of home repossessions in recent years are due to section 21. The law has existed since 1988. However, the National Landlords Association says that section 21 is only used so frequently because courts are too full to process section 8 procedures (for which grounds are needed to end the tenancy) in an efficient manner.

…and to increase rents

Labour’s Shadow Secretary of State for Housing also announced that cities will be given powers to implement rent caps in an attempt to stall rent rises in major cities. Rental increases have slowed across the UK since the start of 2017. In London, rents have decreased slightly. London rents showed a 0.3% drop in the 12 months up to 2018. Nonetheless, UK rents are still expected to increase by 15% in the next five years due to a lack of rental accommodation and a rise in tenants.

Photo: Jordi Martorell
Photo: Jordi Martorell

Not everyone agrees that rent caps will prevent rent increases in the long run. Some argue that rent controls can make new private housing developments unprofitable, thus reducing supply and pushing up prices. The NLA criticised the proposals, saying ‘government intervention through rent controls would be counterproductive to encouraging supply at a time when it is so badly needed.’

On the other hand, IPPR’s report on German rental policy cites rental caps as one of the reasons less private renters in Germany spend over 40% of their income on rent, than in the UK. 

3 year tenancies would be enforced

Mirroring proposals announced by the Tories in July, Labour pledged to introduce three year tenancies. A public consultation on the Tories’ proposals ended last month and they are currently in the next stages of consideration. Many landlords have criticised the proposals, arguing that tenants aren’t demanding longer leases. Nevertheless, the proposals are still far less restrictive than those introduced by the SNP in Scotland last year, which effectively banned fixed term tenancies and made all leases open-ended.

Photo: Kim Traynor
Photo: Kim Traynor

Life will be trickier for HMO developers

A new planning commission, unveiled at the party conference, will look at more rigorous rules for HMO owners. The commission is being set up in response to concerns about the number of HMO applications declined by planning authorities because of poor living conditions, only for them to be overturned by the Planning Inspectorate.

The commission will also consider scrapping flagship Conservative policies such as permitted development rights, which allow certain changes of use to be carried out without a planning application.