Ritchie Clapson, co-founder, propertyCEO
For many, a weekend of sunny weather in May marked the start of summer. Yet, in characteristic style, the miserably grey and rainy week that followed prompted one to suspect that that was it, and we’d somehow fast-forwarded straight through to autumn, when we were all expecting the General Election to take place. And then to cement that feeling, the Prime Minister told us we’d be voting in a few weeks.
The rain had as little respect for Rishi Sunak as the tide had for King Canute, and things-can-only-get-wetter memes flooded social media. As the Conservative campaign stumbled from gaffe to gaffe, the facepalm emoji became de rigueur (unless you’re Lee Anderson, obvs.), with the coup de grâce (sorry Lee) perhaps having already been dealt via the 80th anniversary of D Day commemorations.
Are we likely to get a change of government? Probably. The public appears understandably miffed with the Tories’ uninspired performance in office. But, to borrow a metaphor from the world of entertainment, booing off one comedy act doesn’t guarantee that the next bunch of jokers will be any funnier. So, what would likely happen in the property world if Labour got in?
Rental
My first observation is that I don’t generally see a sea change in how property investors are treated. The current government has belatedly worked out that encouraging 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. If only someone could have told the government in advance that this would happen (if I had an ‘irony’ emoji, it would go here). 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.
Landlords
Are all landlords wealthy? Of course some are (we’re looking at you Hugh Grosvenor, 7th Duke of Westminster and your £10ish billion net worth), 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. So, we’re not talking big earners here. 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. So, how much more regulation and taxation are these landlords likely to accept before chucking in their towels? 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. Any policy aimed at ‘taxing the rich’ could end up forcing ordinary folk to sell up a property they may have hoped would help them survive I old age.
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 NIMBYs across the land and start building lots of new houses. Which no government will do because almost every homeowner is a NIMBY (to see if you’re a NIMBY, simply ask yourself whether you would like to have a new affordable housing estate built at the bottom of your garden).
New homes
We need to build around 4 million new homes, which is the equivalent of around 15 Oxfordshires, so we’re not realistically going to be able to avoid the green belt or stick them all somewhere out of the way where no one will notice.
Labour reckons it could build some new towns – around 1.5m 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 need 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 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.
So, overall, possibly a slightly worse climate for landlords if Labour wins, but most probably no major changes and business as usual in property investment.
