"There's unlikely to be too much change. The reason for this is that the housing crisis is an incontrovertible fact, it's getting worse rather than better, and it's impossible to fix unless the government of the day is prepared to ignore the squeals of objectors across the land and start building lots of new houses"
- Ritchie Clapson - propertyCEO
After a long period of speculation about when a General Election would be called, the campaign is now in full swing. Some of us have already made up our minds which box will receive our cross on 4 July, and some have yet to be persuaded. Polls have had a lead for Labour for some time, and the Conservatives have seemed determined to keep it that way.
From Rishi Sunak’s Old Testament-themed announcement of the date of the election onwards, there has been no shortage of unforced errors by the Tories, with perhaps the most damaging being the more-than-mere-gaffe decision to have the UK Prime Minister cut short his time at the international celebrations of the 80th anniversary of D-Day.
Unsurprisingly, pollsters, pundits and bookies all lean towards it being Keir Starmer meeting King Charles to receive royal assent to form a new government on 5 July.
While it is not yet a done deal—as Neil Kinnock and Theresa May know all too well, defeat has been snatched from the jaws of victory before—it does seem likely that there will be a removal van parked around the back of 10 Downing Street in the near future.
So, what would a Labour government mean for the property sector?
Landlords shouldn’t get too excited
I don't expect a sea change in how property investors are treated. The current government has belatedly worked out that pushing landlords to sell up through increased taxation or regulation doesn't actually help anybody. This means there are now more properties for sale, but unfortunately, tenants can't afford to buy them.
Consequently, there are now fewer rental units on the market, which means that rents have gone up, thus making it more difficult for tenants to afford to rent anywhere.
And then we have the now-shelved Renters (Reform) Bill, the mere threat of which was enough to scare thousands of landlords out of the sector. I'm afraid I can only see any new iteration of the Bill being more draconian for landlords under a Labour regime. Labour has also started mentioning rent caps, yet another policy guaranteed to scare the horses.
A big rental myth
The rental market is not short of stereotypes, with one of the biggest misconceptions being that all landlords are wealthy.
Granted, the man was generally accepted as the UK’s richest landlord. 33-year-old Hugh Grosvenor, 7th Duke of Westminster, is worth in the region of £10 billion, but according to the government's 2021 English Private Landlord Survey (updated in March 2024), 45% of individual landlords own just one buy-to-let property, with a further 40% owning between 2 and 4 properties. The report states that the average earnings for ALL landlords' (EXCLUDING rental income) is just £24,000 per year and that their median age is 58.
What happens if we add in their rental profit? The median gross rental income was £17,200, from which they would need to deduct mortgage repayments, agency fees and running costs to arrive at a pre-tax profit.
Obviously, each landlord's costs will be different, but we're clearly not looking at a king's ransom. And many such landlords are accidental – perhaps they kept a flat when they married or inherited a house when their parents died. Super-rich?
No, just ordinary people. How much more regulation and taxation are these types of landlords likely to accept before chucking in the towel?
If Labour forms the next government, they need to think through plans that impact the “regular” landlord; if new policies further take the shine off renting out properties, many houses and flats could be sold, depleting rental stock even more. Can the sector take Labour being even less landlord-friendly than the Conservatives have been?
Better prospects for property development?
As more and more landlords have felt the pipes squeaking on their buy-to-let portfolios, many have moved into small-scale property development to offset the pain. For many, the type of projects they undertake are just one step up from those they've done previously, such as creating an HMO or doing a refurbishment.
Simply putting flats above a shop or converting a small commercial building can be expected to generate a six-figure profit, so no wonder there's a healthy appetite. It certainly puts the average landlord's buy-to-let profits in the shade.
So, will Labour's approach to property development differ from that of the Tories, who have actively encouraged it by creating many new permitted development rights in England?
In my opinion, there's unlikely to be too much change. The reason for this is that the housing crisis is an incontrovertible fact, it's getting worse rather than better, and it's impossible to fix unless the government of the day is prepared to ignore the squeals of objectors across the land and start building lots of new houses.
Late last year, Keir Starmer declared himself a YIMBY and insisted he would take a dim view of any Labour MPs opposing new housing in their constituencies. It would be refreshing to hear YES, in my backyard, but, as governments of all hues have discovered, when there’s the suggestion of construction work at the bottom of our own gardens, few of us can contain our inner NIMBYs, and they are force to be reckoned with.
We need to build around 4 million new homes (the equivalent of around 15 Oxfordshires) which means we’re not going to be able to avoid the green belt or stick them all somewhere out of the way where no one will notice.
Green, brown and grey
Labour reckons it could build some new towns—around 1.5million homes—using what it calls the 'grey belt'. This is green belt land that already has something built on it, such as car parks or petrol stations. They’ve stipulated that 50% of grey belt development must be affordable housing, but it’s not clear how the economics of this will stack up for developers who clearly are going to want to make a profit.
This focus on the grey belt hasn’t gone down that well with the countryside charity CPRE, who argue that we should instead turn this grey belt back into the green belt. Which you might think is rather ignoring the housing crisis until you realise that we could build 1.2 million new homes using existing unused brownfield land.
These are existing commercial properties and land not in the green belt, which could be converted to residential use. CPRE, not unreasonably, believes we should be starting with unused brownfield land first instead of targeting the grey belt.
These brownfield sites are a rare political win-win. They positively impact the house-building numbers, plus voters are generally happy for these sites to be converted. It also gets more people living in our town centres, which benefits local economies. On that basis, I can't see
Labour deciding that brownfield conversions are a bad idea. It should also be good news for landlords and investors because larger housebuilders won't touch small commercial conversion projects since most lack the skills or appetite to do them. This leaves more opportunities for first-time property developers.
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Final thought
Whoever forms the next government, it would be good to see the office used by the Minister of State for Housing, Planning and Building Safety lose its revolving door; since 2010, there have been sixteen Ministers of State for Housing. Over the last 14 years, the housing portfolio has been to politicians what a role on The Bill used to be for the acting profession – everyone gets a go eventually. The property sector deserves better.
