Planning and Infrastructure Bill
Labour has committed to building 1.5 million homes within this parliament, with an updated National Planning Policy Framework (NPPF) due in the first 100 days. The new NPPF is expected to set out some of the more detailed commitments around targets and land use.
Many of the reforms included in the Planning and Infrastructure Bill will be familiar from Labour’s manifesto and involve improving resources and funding for local planning authorities, reintroducing planning targets and extending powers to bring forward stalled housing and infrastructure projects. Separately, Labour has committed to 300 additional planning officers to boost capacity. Local councils will be given greater compulsory purchase powers, with new rules on purchase compensation for landowners (promised to be fair but not excessive) where significant infrastructure or affordable homes are delivered.
Renters’ Rights Bill
This (mild) rebrand of the Renter’s Reform Bill follows similar principals. The bill will abolish Section 21 ‘no fault evictions’, with new clear and expanded possession grounds for landlords, to reclaim properties when they need to (the need to sell or move back into the property likely to stay but beyond that we’ll need further clarity).
To improve the quality of privately rented homes a Decent Homes Standard will be applied, seemingly much needed as the RICS suggests that in certain areas of the country a third of homes currently wouldn’t comply. In addition, Awaab’s Law, already in place to ensure social housing landlords are held to account on issues including damp and mould will be introduced to the private rented sector, setting clear legal expectations on landlords to rectify dangerous hazards within their properties.
Rent controls do not form part of Labour’s strategy, but tenants will be given additional powers to challenge rent increases. In addition, new laws will be introduced to end rental bidding wars, but this may prove difficult to enforce.
A new digital database will be introduced to allow tenants and their landlords to access key information when entering new tenancies. A property ombudsman service will be established to deal with disputes. Tenants will also be officially given the right to request a pet, which a landlord can’t unreasonably refuse. In turn, landlords will be given the right to request an insurance policy to cover potential damages.
Leasehold and Commonhold Reform Bill
The government has committed to implement the Leasehold and Freehold Reform Act 2024. Existing leaseholds will not be abolished, but leaseholders will be given more rights. This includes the banning of forfeiture clauses, ensuring leaseholders are protected from losing their homes over small unpaid debts. New rules to simplify leasehold enfranchisement, right to manage and tackle unregulated and unaffordable ground rent charges will also be introduced. This will include a new legal framework to protect leaseholders’ rights.
Labour will look to restrict the sale of new leasehold flats (they will consult on the best way to do this) and look to promote commonhold. This may prove a challenge, as despite being introduced 22 years ago the government itself acknowledges that there are fewer than 20 commonhold blocks operating nationally. An overhaul of the legal framework and new rules around the transition from freehold to commonhold means agreeing an approach to align commonhold with modern building methods will require work.
What wasn’t included?
The King’s Speech is never intended as an exhaustive list of government intentions. Beyond these three bills we’ll need to wait a bit longer for information of a few other key manifesto pledges.
The focus of the King’s Speech appeared to be on increasing delivery rather than fuelling demand. For first time buyers it is likely that the nil-rate band will return to £300k (from £425k) in April 2025. There was no sign of Help to Buy 2.0; instead, Labour is promoting Freedom to Buy. The scheme, designed to make it easier for first time buyers to secure a deposit, is similar to the current mortgage guarantee scheme. Labour has previously stated the scheme will help 80,000 young people onto the housing ladder over this parliamentary term. A big number, but far lower than the 52,000 Help to Buy completions recorded in just one year in 2019.
No mention yet on when, but overseas buyers will likely face and additional 1% stamp duty when buying UK homes in the future – an additional expense for those looking to buy in the UK but one which on its own is unlikely to have a significant impact on buyer activity.
Of greater importance for those falling into the non-domiciled (non-dom) group is Labour’s plans on income and inheritance taxes. Non-doms paid £8.9billion in tax in 2023, the highest since 2017 and not far off the £11.7billion raised in Stamp Duty Land Tax from residential sales. There was no reference made in the King’s Speech to non-doms, possibly meaning this has been filed in the ‘too difficult’ pile for now. More clarity will likely appear in the autumn budget.
But is economics more important than politics?
The outlook for the housing market, at least in the short term, has more to do with factors which fall outside government control. The cost of debt remains a key challenge. We’ve seen more competitive rates begin to enter the market in recent weeks, but the first official drop in the bank rate (whether that comes in August or September) will be a clear signal on the direction of travel. As we saw earlier in the year even modest falls in mortgage rates have the potential to drive activity. The latest house price data from the ONS shows an annual increase in UK house price of 2.2%, with prices rising (on an annual basis) for the third consecutive month. In London prices rose annually for the first time in a year, up 0.2%.
The June inflation figures give little away on the prospects for a drop on 1st August. CPI remains at 2.0%, slightly higher than the 1.9% forecast but still in line with the BoE 2% target. Services inflation, which has remained a thorn in the side of the MPC, remains high at 5.7% though, meaning those already on the fence could justify a stick rather than twist position. Similarly, wage growth in the three months to May slowed to 5.7% from 5.9% in April but remained higher than the Bank forecast back in May.
The outlook for the UK economy is improving too (not necessarily helping when we are considering cutting rates). The International Monetary Fund (IMF) has upgraded its outlook for the UK economy this year, now expected to grow by 0.7% this year, up from the 0.5% estimated in April. The upgrade means the UK has a higher growth forecast than Germany this year and is expected to grow at the same pace as Italy and Japan.
