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Tory housing pledges are not the ‘drastic reform’ needed, experts say

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  • 11/06/2024
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Tory housing pledges are not the ‘drastic reform’ needed, experts say
Tory manifesto housing pledges, such as revival of Help to Buy, could help the sector but may not be enough, experts say.

Prime Minister Rishi Sunak (pictured) announced the Conservatives’ manifesto earlier today, with some wider headline measures including another 2p cut for National Insurance, triple lock plus for pensions and 30 hours of free childcare. There were also several housing measures from the Tories, with the party saying that it would build 1.6 million homes in England by the next Parliament through a raft of measures, including abolishing nutrient neutrality rules, building on brownfield sites, increasing density levels for cities and supporting smaller buildings, to name a few.

The manifesto added that the Conservative Party would make the stamp duty threshold increase for first-time buyers permanent, bring out a “new and improved” Help to Buy scheme, launch a two-year temporary capital gains tax (CGT) relief for landlords who sell to tenants, and continue rental and leasehold reform plans.

John Phillips, CEO of Spicerhaart and Just Mortgages, said that the manifesto contained some “significant pledges to bring some much-needed support to the housing market”.

“The question is now whether they will be enough, along with other measures, to help turn the tide and overcome the considerable momentum and lead Labour has built in the polls,” he said.

Phillips continued: “Many across the industry have long called for a return to Help to Buy. While opinion is split on its legacy, there’s no denying its success in getting people on to the housing ladder.

“In its absence, shared ownership has become the only way for many to make their dreams a reality – especially in the current climate with clear affordability pressures. If successful, I’d like to see this include second-hand properties to increase the options available to first-time buyers.”

Nick Hale, Movera’s CEO, said that the proposed Help to Buy scheme could “give first-time buyers another boost”, but with today’s heightened house prices, a 5% deposit would be a “significant sum” for buyers to find, especially if they are renting.

Laura Suter, director of personal finance at AJ Bell, said that Help to Buy would be a “new and improved scheme”, but was “decidedly sparse on details as to how it will be bigger and better than before”.

“Most aspiring homebuyers will likely find this set of policies lacking in imagination and excitement. While they will help to get some people on the property ladder, it’s not the drastic reform that many would have been looking for. Likewise, once again the Lifetime ISA is overlooked as a key way to boost first-time buyers’ deposit savings,” she added.

 

Tory housing measure should be taken with ‘pinch of salt’

Hale noted that although the Tories had promised that they would deliver 1.6 million homes, it was “uncertain how this will be achieved”.

“The government has missed its annual housebuilding targets since 2019, and there is already a focus on developing brownfield sites.”

Philips agreed, adding that housing targets should be taken with a “pinch of salt”, as the government had failed to meet its annual 300,000 homes target since it was introduced.

“There’s no question that increasing supply is incredibly important and long overdue. The return of Help to Buy will certainly help, giving builders, developers and lenders a popular and proven mechanism to meet the demands,” he added.

 

Stamp duty reform offers ‘some relief’ but doesn’t go far enough

Phillips said that changes to stamp duty would “drum up demand and help with affordability”, but permanent removal was the “only way to avoid a cliff edge deadline like ones previously seen, which gummed up the wheels of the entire sector and caused incredible stress and strain”.

Suter said that the policies for first-time buyers did “little to change the situation”, adding that “rather than announcing new policy, the Tories have opted to rinse and repeal their previous policy and just extend existing schemes”.

She noted that the current stamp duty first-time buyer threshold of £425,000 was due to expire in March next year, and the manifesto doesn’t make clear whether stamp duty changes will also extend the relief for those buying a property worth up to £625,000 – who currently benefit from no stamp duty on the first £425,000 of their purchase.

Hale continued: “Today’s manifesto pledges by the Conservative Party sound promising on paper, but the devil will be in the detail. The abolition of stamp duty for first-time buyers on properties up to the value of £425,000 will give some relief but will not alleviate the significant and higher moving costs for other buyers, which are often a blockage in the rest of the housing market.”

 

Rental reform will need ‘balance’

Nathan Emerson, Propertymark CEO, said that any “renewed ambition” to pick back up on the Renters Reform Bill “must come with full disclosure and a workable timeline regarding vital court reform before aspects such as Section 21 evictions can sensibly be abolished”.

The Renters Reform Bill failed to become law as it was not passed in the wash-up period before the election was called.

Ben Beadle, chief executive of the National Residential Landlords Association (NRLA), said: “Reform of the rental market should have taken place in the last Parliament. As we said then, a balance between security for tenants and policies [that] retain the confidence of responsible landlords is crucial if we are to deliver much-needed homes for rent.

“That balance can only be achieved by fixing a broken justice system so that tenants and landlords can enforce their rights when Section 21 ends in a timely and effective way. As the Law Society has warned, reform risks being ‘in vain’ without investment in legal aid support and the courts.”

Dan Wilson Craw, deputy chief executive of Generation Rent, said that it was “reassuring” that the Conservatives remain committed to abolishing Section 21 evictions, as these can make “life intolerable for private renters, fuelling homelessness and making it difficult to complain about problems in your home”.

“But to enjoy genuinely fairer renting, tenants need stronger protections when evicted for reasons beyond our control, and from unaffordable rent increases that force us out of our homes.

“Most renters would prefer to be homeowners, but high rents make it hard to save, and high house prices mean many of us don’t qualify for a mortgage. These proposals won’t reduce either, and risk pushing prices up further,” he added.

Wilson Craw said that a portion of the tax break for landlords selling to tenants would need to go towards a discount on the price for the tenants, otherwise few would be able to buy out their landlord.

“But many tenants aren’t in a position to buy at all: 23,000 households faced homelessness between April and December 2023 because their landlord was selling up. Tenants should therefore have the option to nominate another buyer, such as a housing co-op or the council, who would allow them to stay. This would mean the policy not only boosted homeownership, but reduced homelessness too,” he noted.

Beadle agreed that tenants who want to become homeowners should be “supported to do so”.

“Whilst incentivising landlords to sell to existing tenants has the potential to help, it will not reverse the damage to the rental market caused by tax hikes under recent Conservative governments.

“As the Institute for Fiscal Studies has warned, changes to mortgage interest relief and the level of stamp duty paid by landlords have led to higher rents and stifled the supply of homes across the private rental market. This comes at a time when the number of tenants enquiring about every available rental property has more than doubled compared with before the pandemic,” he added.

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