The Politicians Are Talking About Housing… And That’s No Bad Thing

Date Published: 25 October 2023

It is hard to get away from politics these days, in any part of the world. And, while the tragedies playing out in the Middle East are heartbreaking and have dominated the news agenda, what is happening closer to home is not without interest. For the housing market, it could be rather important.

Sir Keir Starmer, the Labour leader, set the ball rolling with his speech at his party conference in Liverpool, in which he pledged 1.5 million new homes over five years, saying that he would “bulldoze” through restrictive planning rules and local opposition, if necessary, to achieve it.

There is not, as I have written before, much chance of 1.5 million new homes being built over five years, something that was last achieved in the 1960s, barring a supercharged council housebuilding programme.

When the 300,000 average was last achieved, local authorities accounted for 40 per cent of new homes built.

Given the state of the public finances, while many might argue for a re-run of that policy, that is unlikely to happen either.

The best hope lies with insurance companies and pension funds, who could see rented properties as the kind of stable long-term investment they need.

So far, however, only a small number have dipped their toes in the water.

Even so, there were suggestions that Starmer’s bold words would backfire.

Would “Nimby” voters in the shires react against a Labour party promising to bulldoze through restrictions?

Conservative party members canvassing in Mid Bedfordshire, if not Tamworth, reported some disquiet on the doorsteps.

Mid-Beds, it seemed, could remain a Tory seat, though with a sharply reduced majority, because of this factor.

As you will know, if there was such disquiet, it was not enough to prevent Labour achieving stunning victories in these “safe” Conservative seats.

Voters know that, while they may not like the noises Labour has been making about building on the edges of the green belt – which official figures show has been expanding, not shrinking – their children will need somewhere to live and a chronic shortage of housing, to buy or to rent, does nobody any good.

After a surprise victory in the Uxbridge by-election a few weeks ago, attributed by many to a protest against the extension of the London mayor’s ULEZ scheme, the prime minister decided to go more slowly on net zero measures.

Had the Tories held on in Mid Beds, the government might have decided that all was well with its housing policy and that there was no need to be more adventurous.

Fortunately, that was not the case.

Labour’s victory has renewed talk, which many in the industry have been talking about, of a “retail offer” to voters either later this year or in the November 22 autumn statement, or next year in the March budget.

There are, according to The Times, two candidates for this retail offer.

One is stamp duty, though it is not obvious on the face of it what that offer might be.

The temporary increases in stamp duty announced in November last year are still in place and will be until April 2025.

These, to remind you, were a zero rate up to £250,000 (though not for landlords) and an increase in the nil rate threshold for first-time buyers’ relief from £300,000 to £425,000.

That meant total relief in this category of a maximum of £625,000.

The other candidate for this retail offer is of less direct interest to the housing market, though of indirect interest.

This is said to be an increase in the inheritance tax threshold, or even a more dramatic move on the tax.

This would be a U-turn.

In his autumn statement in November last year Jeremy Hunt extended the freeze on the £325,000 inheritance tax threshold until April 2028.

Rishi Sunak, when chancellor, had frozen it until 2026.

The Sunday Times has suggested a variation on the first-time buyers’ theme, including extending the government’s mortgage guarantee scheme and introducing a new kind of individual savings account (ISA) to assist potential buyers in building up a deposit.

The mortgage guarantee scheme, helping buyers to purchase with a deposit of only 5 per cent, is due to expire at the end of this year.

Housing market participants may wonder at this potential flurry of activity.

It is good that housing is getting some attention.

It would be better if politicians devoted time to long-term thinking about the sector and the kind of tax reform which would stop penalising transactions and allow the market to operate more efficiently.

That may be too much to hope for.

Source: Property Notify