Brexit defined the last three elections. This time around, housing looks like the new talking point.
Labour has said it would no longer treat the greenbelt as sacrosanct, will stand up to Nimbys, will reportedly give the councils the power to compulsory purchase land at a fraction of the price for development, will build more social housing, and will make it easier for first-time buyers to own their own homes through government assistance. In the blue corner, the Conservatives are reportedly considering the reintroduction of Help to Buy, and recently published the Renters Reform Bill, but have turned their back on a prior pledge to abolish leasehold tenancies, with Labour responding that it would scrap them within its first 100 days in office.
What will the ultimate outcomes of these proposals be? First, the government’s leasehold climbdown is bizarre considering the arguments in favour of its abolition and cross-party support for doing so. And so the government may flip-flop again before long.
On Labour standing up to Nimbys, the question is whether restrictive planning really holds back development by housebuilders. Perhaps to some extent, but many are also sitting on vast land banks. The reason they are not developing right now is not because they can’t, but because it isn’t economical to do so when the housing market is in a slump.
Labour’s strengthened compulsory purchase powers for councils would threaten this land bank position, potentially enticing housebuilders to use more of the land they have more quickly, but local authorities will only have the appetite to develop if they have the funds to do so. Labour has pledged more social housing, so some cash will presumably be available, but the unanswered question is how much. Either way, expect a massive pushback from the housebuilders against the compulsory purchase policy.
How about first-time buyer assistance and the return of Help to Buy? Both have already been done with limited success, because ‘demand-side’ policies like these do not deal with the problem: a lack of supply. The government making it easier for people to buy homes ultimately helps housebuilders by pushing up house prices.
Labour’s social housing pledge and its pledge to unlock some of the greenbelt for development could move the needle on supply. The commitment is also a recognition that, while urban ‘brownfield’ development is popular with the likes of residential developer Grainger (GRI) and British Land (BLND) with its residential-led Canada Water development, it will not deliver the homes everyone needs. Some homes will need to be built in the countryside; not everyone wants to live in the city.
Meanwhile, the government’s Renters Reform Bill has made headlines for its bold proposals: indefinite tenancies, the end of ‘no fault’ evictions, and – yes – the right for tenants to have pets in their flats. This will no doubt make the job of being a landlord tougher, but it does not necessarily mean we will see a so-called ‘landlord exodus’. Potentially the opposite. More established landlords, who will find adhering to tougher regulations easier, could thrive. It’s notable that Grainger released a statement loudly voicing its approval on the day the bill was revealed.
Investors might find it tough to keep track of the pace of these announcements and pledges, but keep track of them they should. Any one of these policies, properly enacted, will have a big impact on house prices, housebuilders and residential developers. Better to be in the know now than to be surprised when one of these ideas becomes reality.
